TL/DR –
Several groups have written a letter urging senators to reconsider the proposed expansion of the Clean Fuel Production Credit (45Z) in the Senate’s FY25 budget reconciliation package. They believe it will lead to environmentally and fiscally irresponsible spending on mature industries as it would eliminate consideration of indirect land use change (ILUC) that ensures accurate accounting of environmental impacts. The Joint Committee on Taxation estimates that the expansion and extension of 45Z will result in an additional $57.1 billion in lost revenue from FY25-34.
June 25, 2025
Open Letter to Senate
Dear Senator,
We, the undersigned organizations, urge you to reconsider the proposed expansion of the Clean Fuel Production Credit (45Z) included in the Senate’s FY25 budget reconciliation package. This bill proposes environmentally and fiscally irresponsible changes to the tax credit, resulting in unnecessary expenditures on mature industries.
The package seeks to remove the indirect land use change (ILUC) provisions tied to 45Z tax credit eligibility. Discarding these widely accepted provisions, which ensure proper environmental impact accounting, would drastically increase the tax credit’s scope and cost. The proposed changes would further subsidize conventional biofuels like corn ethanol and soy-based biodiesel, which would be produced even without the federal subsidies included in the modified 45Z.
The Joint Committee on Taxation (JCT) estimates that the Senate’s expansion and extension of 45Z would lead to an additional $57.1 billion in lost revenue from FY25-34, on top of the $8.4 billion from the current policy. This expansion would cost taxpayers roughly 20 times more than the original clean fuel credit, targeting next-generation fuels, which was estimated to cost $3 billion over 10 years after the Inflation Reduction Act was enacted in 2022.
We hope to collaborate with you in creating a more sustainable path for 45Z and U.S. biofuels policy.
Sincerely,
Clean Air Task Force Action
National Taxpayers Union
Taxpayers for Common Sense
Environment America
R Street Institute
U.S. PIRG
Friends of the Earth US
National Wildlife Federation
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