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 determinations, and extends the credit's availability through 2034.
Roger Marshall
Senator
KS
The Farmer First Fuel Incentives Act modifies the clean fuel production tax credit by requiring that qualifying fuel be made from feedstocks grown in the United States starting in 2025. The bill also extends the availability of this credit until 2034 and adjusts how emissions rates are calculated by excluding indirect land use changes for future tax years. These changes aim to incentivize domestic production and alter the environmental metrics used for the tax incentive.
Clean Fuel Tax Credit Extended to 2034, But Only for Fuel Made from US-Grown Crops
The aptly named Farmer First Fuel Incentives Act is making some serious changes to the tax breaks available for clean fuel producers, specifically the Section 45Z clean fuel production credit. If you’re a consumer, a fuel producer, or a farmer, this bill is going to affect your supply chain and potentially your wallet, starting as early as the end of 2024.
The New ‘Made in America’ Rule for Biofuel
Starting in 2025, if a company wants to claim the clean fuel production tax credit, the transportation fuel they sell must be made exclusively from U.S.-grown or produced feedstocks (Sec. 2). Think of it like this: if a biofuel plant currently relies on imported vegetable oil or sugar cane to mix into their clean fuel, they won’t qualify for the federal tax credit anymore. This is a massive shift. For U.S. farmers who grow crops like corn or soybeans used in biofuels, this could mean a significant increase in demand and potentially better prices for their commodities. However, for fuel producers who rely on cheaper international inputs to keep their costs down, this new mandate could force them to switch suppliers, potentially increasing their operational costs. If those costs get passed on, consumers might see a slight bump at the pump, even for 'clean' fuels.
Seven More Years of Tax Breaks
One of the biggest wins in this bill is the extension of the clean fuel production credit (Sec. 4). This tax incentive was set to expire at the end of 2027, but this bill pushes the deadline back a full seven years, all the way to December 31, 2034. For the companies building and operating clean fuel facilities, this long-term stability is huge. It provides the certainty needed to invest hundreds of millions of dollars in new plants and technology, knowing the tax benefit won't vanish overnight. This extension means more stability for the entire clean energy sector and the jobs that come with it.
Changing the Emissions Math
This bill also fundamentally alters how the government calculates the emissions rate of these fuels, which is the key factor in determining how big the tax credit is. First, starting in tax years after 2025, the calculation for a fuel’s lifecycle greenhouse gas emissions must completely exclude emissions from indirect land use change (ILUC) (Sec. 3). ILUC emissions are those that result when, say, a forest is converted to farmland to grow biofuel crops. By removing this factor, the calculated emissions rate for many biofuels will likely drop, potentially making them eligible for a larger tax credit. The Treasury Secretary, EPA, and USDA will be working together to figure out the exact rules for this exclusion.
Second, the bill makes a technical but critical change to the formula itself. For fuel produced after December 31, 2024, the emissions factor used in the credit calculation is changing from “0.1” to “0.01” (Sec. 5). This seemingly minor tweak in the math could dramatically alter the final credit amount producers receive. Depending on how this new factor interacts with the emissions rate, this could be a major financial boost or a significant hurdle for producers, creating some uncertainty until the Treasury Department clarifies the exact impact of this adjustment.