Clean Fuel Tax Incentives

What Role Do Tax Incentives Play in Lowering Carbon Emissions?

Biofuel producers and their products lower carbon emissions every day, but tax incentives play a role in spurring investments in technologies that further lower their carbon intensity (CI) scores. The biggest and most promising of these technologies is carbon capture, utilization, and storage (CCUS), in which biogenic CO2 emitted during the ethanol production process is either sequestered safely underground or captured and sold for food and beverage and healthcare applications. CCUS and other technologies like it can help biofuel producers lower their emissions, which lowers their CI scores, and in turn helps them qualify for bigger tax incentives.

These incentives don’t just lower emissions, but also provide the certainty that the U.S. biofuels industry needs in order to compete in global next-generation fuel markets, particularly when it comes to sustainable aviation fuel (SAF). In order to unleash innovation and job opportunities through rural America, while supporting the strength and longevity of Midwest communities and the liquid fuels sector, regulators must pursue a technology-neutral approach to these tax incentives, and administer them using the U.S. Department of Energy Argonne GREET model.

What Role Do These Tax Incentives Play in Helping Farmers?

45Z is a tax credit that can be claimed by biofuel producers, but the value of the credit can go up or down depending on how much any given producer can reduce the carbon intensity (CI) of its fuel below a certain baseline level. The practices that farmers use to plant, grow, and harvest feedstocks have a direct impact on the CI of the fuels those feedstocks ultimately go on to produce. With the right guidelines that connect those regenerative ag practices to the administration of the 45Z credit, farmers can contribute to lowering any given fuel’s overall CI score. This allows producers to incentivize the adoption of regenerative ag practices and to pass down the value of 45Z to farmers in the form of a premium paid for corn and other feedstocks grown using regenerative ag practices.

The promise of 45Z’s downstream benefits for farmers has already driven new investments in communities across rural America. As regulators continue to answer the remaining questions surrounding the implementation of 45Z (and the updates made to it by the One Big Beautiful Bill Act (OBBBA)), the potential for even more and bigger investments will only continue to grow.

What Is the GREET Model?

The U.S. Department of Energy’s Argonne Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) suite of life cycle models are the gold standard for measuring the emissions-reducing power of farm-based feedstocks and biofuels for the purposes of calculating different tax It incorporates up-to-date science that more accurately scores carbon intensity for corn ethanol and other renewable fuels.

Federal regulators must us this model to ensure that farmers, rural communities, and U.S. biofuel producers will be able to participate in global SAF markets and take advantage of opportunities in other sectors.

What Is CORSIA and How Does It Differ from GREET?

CORSIA stands for Carbon Offsetting and Reduction Scheme for International Aviation. It’s a competing lifecycle analysis model built and maintained by the International Civil Aviation Organization (ICAO) (sometimes the CORSIA model is simply referred to as ICAO, but they refer to the same thing). CORSIA relies on some of the same data used by GREET to arrive at its estimates of carbon intensity, but in some important areas the two models diverge.

The most noteworthy and important of these differences comes down to how each model accounts for land-use change (LUC or sometimes indirect land use change or iLUC). The theory is that the more the production of a certain crop disturbs existing land, the greater its carbon intensity, since soil can capture and store carbon (meaning when the soil is dug up it releases that carbon into the atmosphere). GREET’s estimate of how much the production of bioethanol impacts land use is based on much more recent data than CORSIA’s; farmers that produce the corn that goes on to make bioethanol have found ways over the last several decades to increase their crop yield on fewer acres while decreasing how much their planting processes disturb the soil. GREET accounts for these innovations, while CORSIA uses a land-use change estimate that’s based on data from nearly a decade ago.

The result of this schism between the two models means that CORSIA’s estimate of bioethanol’s carbon intensity is much higher than GREET’s, again, because it inflates how much the process of making bioethanol disturbs the land. If regulators awarding carbon reduction tax incentives were to only rely on CORSIA, they would disqualify most bioethanol produced from corn and thereby lock these farms and producers out of the SAF market.

What Is the 45ZCF-GREET Model?

DOE specifically designed 45ZCF-GREET to determine emissions rates under Section 45Z of the Internal Revenue Code.

According to DOE, the 45ZCF-GREET user manual (most recently updated in September 2026) “describes how 45ZCF-GREET characterizes life cycle greenhouse gas emissions of approved transportation fuel production pathways and provides instructions on how the model should be used.”

What Impact Would Growth Energy’s Policy Priorities Have on Consumers, the Economy, or the Environment?

• The 45Z Clean Fuel Production Tax Credit provides a tax credit for low-emissions fuels that have a carbon intensity (CI) score below a baseline level (50 kgCO2e/mmBTU). This incentive will ensure the U.S. maintains its dominant position as the world’s top biofuel producer, provide new income opportunities for growers in an ailing farm economy, and promote American leadership in liquid fuels for light-duty vehicles, heavy-duty trucks, aviation, and marine vessels.
  • Implemented properly, this pro-growth tax policy will unlock billions of dollars in new investments in U.S. clean energy innovation.
• With the right rulemaking, 45Z alone would add $21.2 billion to the U.S. economy, generate nearly $13.4 billion in household income, support more than 192,000 jobs across all sectors of the national economy, and provide farmers with a 10 percent premium price on low carbon corn used at an ethanol plant.