New 45Z Credit Creates Opportunities for Soybean Farmers

By Scout Nelson

The new federal 45Z Clean Fuel Production Credit is creating new opportunities for the U.S. soybean industry by encouraging the production of lower-carbon transportation fuels. The incentive rewards producers of biodiesel, renewable diesel, and sustainable aviation fuel based on their ability to reduce greenhouse gas emissions.

Unlike the previous biodiesel tax credit, the 45Z program links financial benefits directly to a fuel’s carbon intensity. The policy applies to fuels produced domestically using feedstocks from the United States, Canada, and Mexico, providing an advantage for U.S.-grown soybeans.

Soybean oil has become an important feedstock under the new program because it can help lower a fuel’s carbon footprint. The removal of the indirect land use change penalty has also improved the competitiveness of soybean oil compared to some alternative feedstocks.

“While farmers aren’t claiming the credit, the policy creates an incentive through the supply chain to verify carbon reductions,” said Kate Shenk, Director of Regulatory Affairs for Clean Fuels Alliance America. “That’s creating a new market opportunity for producers.”

Growing demand for soybean oil is driving investment in processing facilities and fuel production capacity. These investments can support local economies by creating jobs and generating new opportunities in agricultural communities.

USDA recently finalized the Feedstock Carbon Intensity Calculator (FDCIC), a tool that measures the environmental impact of crops such as soybeans, corn, sorghum, and canola. The system considers practices such as no-till farming, cover crops, fertilizer management, and other conservation methods that help reduce emissions.

Although farmers do not directly receive the 45Z credit, they may benefit from increased demand for crops produced with lower-carbon practices. As federal agencies continue refining program requirements, maintaining accurate production and management records will remain important.

"45Z allows farmers to show off the benefits of practices they're already using to reduce greenhouse gas emissions. Now its being recognized through policy." -Kate Shenk, Director of Regulatory Affairs, Clean Fuels Alliance America.

Photo Credit: vista-mipan