The existing 45Z tax credit, established by the Inflation Reduction Act of 2022, provides a tax credit for the production and sale of low-emission transformation fuels. The credit begins at 20 cents per gallon for non-aviation fuels and 35 cents per gallon for SAF.
Under the bill, the 45Z Clean Fuels Production Tax Credit would be extended until the end of 2031. The bill also modifies the 45Z to prevent the use of certain foreign feedstocks, such as used cooking oil from China.
Fuels for the tax credit under the bill would be limited to feedstocks produced or grown in the United States, Canada or Mexico. The bill would also limit federal agencies from attributing any greenhouse gas emissions to "indirect land use change." There is also a special provision that opens up the 45Z tax credit to transportation fuels derived from animal manure.
Patrick Serfass, executive director of the American Biogas Council, issued the following statement on the House Ways and Means Committee’s extension of the Clean Fuel Production Tax Credit and refinement of carbon intensity scoring.
“The American Biogas Council applauds the House Ways and Means Committee for extending the 45Z Clean Fuel Production Tax Credit in its reconciliation bill. This is a critical step toward supporting reliable renewable fuels like biogas that reduce air and water pollution, create American-made energy, and drive rural economic development. The extension of 45Z ensures continued momentum for investment in biogas systems that turn organic waste into clean energy—benefiting communities, farmers, and rural economies.
“In addition, the bill calls for manure-specific carbon intensity scoring related to Section 45Z. This will provide a more accurate reflection of emissions savings when biogas projects recycle manure. We thank the Committee for recognizing the importance of this credit and look forward to working with Congress to ensure its swift passage.
“We look forward to working with the Senate to extend the provisions for biogas projects that make renewable electricity (Sections 48E/45Y) and hydrogen (Section 45V). The electricity credit in particular will help small farmers and municipalities who want to extract value from their waste but will be unable to use Section 45Z to do so and will bear greater costs to their operations without them.”
