The Farmer First Fuel Incentives Act mandates that clean fuel production tax credits require U.S.-grown feedstocks, excludes indirect land use emissions from emissions rate calculations, and extends the credit's availability until 2034.
Tracey Mann
Representative
KS-1
The Farmer First Fuel Incentives Act modifies the clean fuel production tax credit by requiring that qualifying fuels be made from U.S.-grown feedstocks starting in 2025. It also extends the availability of this credit until 2034 and adjusts how emissions rates are calculated by excluding indirect land use changes. Finally, the bill revises a specific emissions factor used in determining the credit amount for fuel produced after 2024.
Clean Fuel Tax Credit Extended to 2034, But Only for Fuel Made from U.S. Crops
The Farmer First Fuel Incentives Act is shaking up the federal tax credit for clean fuel production (the Section 45Z credit). Essentially, this bill is a major trade-off: it gives the clean fuel industry stability while simultaneously imposing a new, strict supply chain requirement.
The biggest change for the industry is that the clean fuel tax credit, which was set to expire in 2027, is now extended until December 31, 2034 (SEC. 4). That’s seven extra years of tax certainty for producers, which is huge for long-term investment. However, starting with any fuel sold after December 31, 2024, that tax credit will only apply if the fuel is made from feedstocks—the raw materials—that were grown or produced right here in the United States (SEC. 2). If a fuel producer was relying on imported canola or sugarcane, they’ll need to find a new domestic source fast, or lose the credit.
The 'Buy American' Mandate for Biofuels
This new U.S.-only feedstock rule is a clear win for American farmers and agricultural businesses, guaranteeing a massive, federally subsidized market for their crops. For example, a soybean farmer supplying biodiesel plants suddenly has a much more secure market. But for fuel producers, especially those who have optimized their supply chains using cheaper or more readily available foreign feedstocks, this could be a major headache. If domestic supply can’t keep up with demand, we could see raw material costs rise, which eventually trickles down to the price at the pump.
Changing the Emissions Math
The bill also makes two significant technical changes to how the government calculates the environmental score of these fuels. First, starting with tax years after December 31, 2025, the calculation for total lifecycle greenhouse gas emissions must exclude any emissions related to “indirect land use change” (ILUC) (SEC. 3). ILUC emissions are calculated based on the idea that growing crops for fuel might displace food production elsewhere, causing forests or grasslands to be converted to farmland. By removing this factor, the emissions score for many biofuels will likely look better, making them more competitive for the credit. The Treasury Secretary, in partnership with the EPA and the Secretary of Agriculture, will be tasked with figuring out the exact formula for this exclusion, leaving a lot of regulatory detail up to future agency decisions.
The Small Number with a Big Impact
Finally, the bill tweaks the actual formula for the credit amount by changing a specific number in the calculation from “0.1” to “0.01” (SEC. 5). This change applies to fuel produced after December 31, 2024. This is deep in the weeds of tax code, but when you change a factor in a tax credit formula by a factor of ten (from 0.1 to 0.01), it significantly alters the economics. For the average person, this kind of change determines how much money the government is willing to pay fuel producers to make their product, which in turn influences the market and the types of fuels that get prioritized. It’s a subtle but powerful lever that could shift who benefits most from this massive tax incentive.