The §45Z Clean Fuel Production Credit: Clarity at Last?
The producers of biofuel got guidance on Section 45Z tax credits. The farmers not so much.
Part of the wait is over for clean fuel producers. On February 3, 2026, the US Department of the Treasury and the IRS released the long-anticipated proposed regulations for the §45Z clean fuel production credit. Amended by last year’s “One Big Beautiful Bill” (OBBB), these rules provide a roadmap for domestic fuel production through 2029.
The Essentials: Values and Eligibility
The §45Z credit is designed to reward low-carbon transportation fuels produced and sold in the U.S. between 2025 and 2029.
Credit Value: The base credit is $0.20/gallon, but it jumps to $1.00/gallon for producers who meet strict prevailing wage and apprenticeship requirements. Converting this to value per bushel is about $3 in most situations.
Market Pricing: Current market data shows these credits trading between $0.88 and $0.93 per dollar of tax credit when they are sold by the biofuel producer to a bank or other taxpayer.
Feedstock Restrictions: To qualify, feedstocks must generally be produced or grown within the U.S., Canada, or Mexico.
Measuring “Clean”: The GREET Model
Credit value is tied directly to a fuel’s lifecycle greenhouse gas (GHG) emissions.
