USDA issues climate-smart crop guidance for biofuels

Dive Brief:

• The U.S. Department of Agriculture (USDA) has launched guidance to aid farms in measuring emissions saved via climate-smart crops for biofuels, aimed at facilitating access to renewable fuel tax credits.
• This interim rule, unveiled in the final days of Joe Biden’s presidency, lays out standards for tracking the sustainability impact of corn, soy, and sorghum farming — key feedstocks for alternative fuels.
• While the guidance was anticipated to boost farm participation in biofuel tax credit schemes, future prospects are uncertain due to a Trump administration halt on recent federal regulations.

Dive Insight:

The USDA’s proposal is set to inform future regulations on climate-smart agriculture’s role in renewable fuel production and assist farmers in leveraging opportunities within the burgeoning biofuels industry.

Biofuel producers have been awaiting guidance on eligibility for 45Z clean fuel credits offered by the Inflation Reduction Act. These tax credits hold the potential to greatly extend opportunities for crop-based biofuels in passenger vehicles and sustainable aviation fuel.

The Treasury Department’s 45Z guidance, published shortly before the USDA interim rule, was criticized for vague qualification parameters by agricultural groups.

Intended to address gaps in the Treasury Department’s guidance, the USDA’s interim rule may shape future biofuel regulations. It responds to criticism from the 40B sustainable aviation fuel credit program, which necessitated specific farming practices for tax benefit qualification.

The revised guidance identifies climate-smart practices such as reduced till, cover cropping, and nutrient management improvement. Farms have the flexibility to adopt practices individually or collectively, a flexibility unavailable under the 40B program.

CEO of the Renewable Fuels Association, Geoff Cooper, praised the guidelines for providing a basic framework for assessing carbon reduction benefits, potentially leading to farmers’ active participation in carbon markets and new revenue streams for rural communities.

While the USDA’s rule provides some clarification to producers, the future of the 45Z tax credit is unclear, as President Trump enacted a freeze on all unimplemented federal regulations, including the Treasury’s guidance on IRA renewable tax benefits.

Without clear guidance, the Trump administration is exploring other methods to stimulate biofuel production, including a potential emergency fuel waiver for year-round E15 gasoline sales.

A group of senators introduced the \”Farm to Fly Act\” in Congress to incorporate sustainable aviation fuel into USDA programs, enhancing producers’ access to biofuel markets.

“Given the opportunity, corn growers are ready to meet market demand, ” National Corn Growers Association President Kenneth Hartman Jr. stated. “We look forward to collaborating with the Trump administration as this process progresses.”