Lawmakers in both chambers of Congress have introduced proposals to revise the Section 45Z Clean Fuel Production Credit, aiming to extend the credit through 2031 while making key adjustments to eligibility based on feedstock origin and carbon intensity scoring.

What’s Changing

On June 16, Senate Republicans introduced a bill that would extend the 45Z tax credit while reducing credit value by 20% for fuels produced from foreign feedstocks, compared to those made from U.S.-sourced inputs. This approach reflects a policy emphasis on supporting domestic agriculture and energy independence.

A separate proposal in the House goes further, calling for an outright exclusion of most foreign feedstocks from qualifying for the credit. Both versions would also remove indirect land use change (ILUC) penalties from carbon scoring—an adjustment that could shift how corn ethanol and other biofuels are evaluated under lifecycle greenhouse gas assessments.

Implications for the Industry

  • U.S. ethanol and biodiesel producers could see improved economics if domestic feedstocks are prioritized under the revised policy.
  • Importers and vertically integrated operations using foreign feedstocks may need to reassess credit strategy and supply chain alignment.
  • Lifecycle modeling and credit qualification processes may change, particularly if ILUC is excluded from carbon scoring.

These revisions may also affect how plants structure compliance and reporting if final rules shift the calculation or eligibility standards under Treasury guidance.

What to Watch

  1. Final policy direction: Will Congress align on a reduction or full exclusion of foreign feedstocks?
  2. Implementation timeline: How quickly would changes take effect if included in final legislation?
  3. Impact on credit markets: How will adjusted eligibility affect RIN markets and fuel qualification under 45Z?

While the House and Senate proposals differ in scope, both reflect a growing interest in tightening the connection between tax incentives and domestic production goals.

Source:
U.S. Congress – Proposed revisions to Section 45Z Clean Fuel Production Credit, introduced June 16, 2025.