- The USDA, led by Secretary Tom Vilsack, advocates for more flexible tax credit requirements to support renewable fuel production, particularly sustainable aviation fuel from corn-based ethanol and soybean oil.
- The USDA proposes a flexible approach, allowing farmers to choose from a list of approved practices instead of strict requirements. It also aims to expand the subsidies beyond corn and soybeans.
- Vilsack warns against efforts to exclude US biofuels made with foreign ingredients from the 45Z tax credit, emphasising that such actions could harm American trade and the broader renewable energy market.
Under Secretary Tom Vilsack, the US Department of Agriculture (USDA) actively pushes for more flexible tax credit requirements for crops used in renewable fuel production. This move directly supports sustainable aviation fuel, which relies on ingredients like corn-based ethanol and soybean oil.
Current regulations are tied to a subsidy designed to boost sustainable aviation fuel demand so that US farmers adopt specific practices, such as planting cover crops during the off-season and using no-till farming. However, biofuel producers argue that these demands often prove impractical.
The biofuels industry now waits for the Treasury Department to guide the 45Z clean fuel credit, a key element of President Joe Biden’s climate legislation. The credit begins in January.
During an ethanol conference in Nebraska, Vilsack outlined the USDA’s proposal to give farmers more flexibility under the new rules. This plan allows farmers to choose from a list of approved practices instead of adhering to strict requirements. Vilsack also stressed the importance of expanding subsidies beyond corn and soybeans, the dominant crops in the US farm belt.
Ethanol producers and corn growers express concern that the current guidance could limit their participation in the expanding sustainable aviation fuel market. They worry that if the Treasury sticks to its initial guidance, qualifying for the credit will become challenging.
Vilsack warned against efforts to block US biofuels made with foreign ingredients from benefiting under the 45Z tax credit. He argued that this could harm American trade.
“If every country does this, then there’s no trade,” Vilsack said on August 15. “If there’s no trade, then what do we do with the 20% to 30% of the crops we sell overseas? What would that do to prices?”
The USDA’s proposal seeks to balance supporting sustainable farming practices while ensuring farmers can still benefit from the upcoming tax credit. The USDA aims to encourage broader participation in the renewable fuels market by offering a more flexible approach.
The 45Z clean fuel credit is crucial to Biden’s climate agenda, which targets reducing greenhouse gas emissions and promoting renewable energy sources. The subsidy will play a significant role in the growth of sustainable aviation fuel, a key focus of the administration’s efforts to combat climate change.
The debate over the credit requirements highlights the challenge of balancing environmental goals with the practical realities of farming. As the biofuels industry awaits further guidance, the USDA’s push for flexibility underscores the need for a solution that benefits producers and the environment.
With the January start date rapidly approaching, this debate will have significant implications for US farmers, the biofuels industry, and the broader effort to promote renewable energy. The USDA’s efforts to adjust the tax credit requirements emphasise the importance of finding a path forward that supports sustainable practices while ensuring economic viability for farmers.
In summary, the USDA advocates for more flexible tax credit requirements to help farmers engage in the growing market for renewable fuels. The proposed changes aim to offer greater flexibility in farming practices while advancing the broader goals of President Biden’s climate legislation.