Biogas Tax Credit Market Remains Robust in 2025 | Husch Blackwell LLP
TL/DR –
The Inflation Reduction Act (IRA) of 2022 extended investment tax credits (ITCs) to renewable natural gas (RNG) projects in the US, spurring their development. After initial confusion over eligibility, clarified language specified that equipment used for converting raw biogas into pipeline-quality RNG was ITC-eligible. The market for ITCs generated by RNG projects subsequently grew substantially, with RNG operators generating and selling millions in ITCs, creating a steady deal flow into 2025 and attracting investors outside the industry.
The Inflation Reduction Act and Renewable Natural Gas Projects
Enacted in 2022, the Inflation Reduction Act (“IRA”) boosted renewable natural gas (“RNG”) projects by allowing them to generate investment tax credits (“ITC”) based on eligible project costs, under Section 48 of the amended Internal Revenue Code of 1986.[1]
Treasury Department Guidance and the RNG Industry Response
However, when the Treasury Department suggested that the Section 48 ITC may not include portions of biogas upgrading equipment, it caused confusion in the RNG sector. This led to industry groups like the Coalition for Renewable Natural Gas and the American Biogas Council seeking clarification. The finalized language confirmed that equipment used to convert raw biogas into pipeline-quality RNG, including gas upgrading equipment, is ITC-eligible.[2]
Significant Growth in the Market for ITCs Generated by RNG Projects
Following this, there has been significant growth in the market for ITCs generated by RNG projects. This growth extends to industry-agnostic market participants, including economic investors attracted to RNG portfolios by ITC value and federal taxpayers (corporate and individual) seeking tax mitigation strategies.[3]
Recent Deals and the Future of RNG ITCs
The interest in RNG ITCs has led to a slew of deals. In 2024, RNG operator OPAL Fuels Inc. sold $11.1 million worth of ITCs to a subsidiary of Apollo Global Management, Inc. Another RNG operator, EVENSOL LLC, sold ITCs worth $34.5 million from two projects. Furthermore, Virentis Advisors, an investment bank focusing on RNG projects, announced closing over $55 million in biogas ITC transactions in the same year. The trend continued in 2025, with Aemetic Biogas selling $7.7 million worth of ITCs.[4]
The Chairman and CEO of Aemetis, Eric McAfee, believes that RNG developers’ ability to generate and monetize these credits provides essential early-stage cash for future project development. He also anticipates more deals in the future, including for projects under construction slated to be completed in Q2 2025.[5]
Continued Demand for ITCs Generated by RNG Projects
The demand for renewable energy tax credits, including ITCs generated by RNG projects, seems set to continue in 2025. This demand comes from industry outsiders interested in economic investments and individual and corporate taxpayers looking to offset their tax liability with purchased credits.[6]
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