NDSU research shows changes could shift biofuel economics
Changes could benefit U.S. ethanol and soy-based renewable diesel producers.
A new analysis by Matthew Gammans, NDSU Center for Agricultural Policy and Trade Studies and Ming Wang, NDSU Agricultural Risk Policy Center, explores the economic implications of proposed revisions to the 45Z Clean Fuel Production Credit, part of the 2022 Inflation Reduction Act.
As part of the One Big Beautiful Bill, the 45Z tax credit is extended beyond its original 2027 expiration and new eligibility requirements are introduced for qualifying feedstocks.
The analysis evaluates three key changes under the OBBB:
• Extension of the credit to 2029 or 2031
• Restriction of feedstocks to those produced in North America
• Removal of indirect land-use change emissions from carbon scoring
“These changes could significantly benefit U.S. ethanol and soy-based renewable diesel producers,” said Gammans. “But they also raise concerns about excluding international suppliers and weakening environmental accounting standards.”
The authors argue that the credit extension may improve project finance ability but may not be long enough to spur large-scale new investment. Meanwhile, the ban on foreign feedstocks aims to curb fraud in used cooking oil imports, which are often assigned unrealistically low carbon scores.
Removing Indirect Land-Use Change from lifecycle emissions calculations, they note, could boost the competitiveness of domestic biofuels, but risks undermining climate policy integrity.
“45Z’s future matters for farmers, investors, and policymakers alike,” added Wang. “The policy details will shape who benefits and who is left behind in the energy transition.”
For more information, contact Matthew Gammans at matthew.gammans@ndsu.edu and Ming Wang at ming.wang@ndsu.edu.