Biden Administration Issues Clean Fuel Tax Credit Guidance

The Biden administration has released initial guidance on the clean fuel tax credit under Section 45Z of the tax code, a move anticipated by the biofuels industry but criticized for lacking critical details. The guidance outlines how companies can qualify for tax credits aimed at reducing greenhouse gas emissions from transportation fuels but leaves significant decisions to the incoming Trump administration, leading to disappointment among biofuel advocates. Notably, the U.S. will exclude imported used cooking oil from eligibility for the tax credit, a decision favoring domestic farmers amidst cheaper foreign competition. The new guidance is expected to limit the ability of ethanol producers to access subsidies crucial for sustainable aviation fuel production, further complicating the landscape for biofuel investments. The U.S. Treasury plans to propose regulations based on public feedback and is set to release a climate model that will dictate emissions reduction criteria for the credits. As the administration transitions, uncertainty persists regarding the future of biofuel incentives and investments in the sector.