The U.S. Department of Agriculture is pushing for a relaxation of the tax credit for crops used to produce renewable fuels, according to Secretary Tom Vilsack.
Current guidelines for a subsidy to encourage the production of sustainable jet fuel – which can be made from corn ethanol and soybean oil, among other sources – require U.S. farmers to bundle practices, including planting cover crops out of season and no-till farming. Producers say such requirements are sometimes impractical.
The biofuels industry is awaiting guidance from the Treasury Department on the so-called 45Z Clean Fuel Credit under President Joe Biden’s landmark climate bill. The subsidy will take effect in January.
The U.S. Department of Agriculture (USDA) is working on a proposal that would give farmers the flexibility to “choose from a range of activities and actions” under the new rules, Vilsack said during an ethanol conference in Nebraska. Another goal is to ensure that the crops that may benefit from the new subsidies are not limited to corn and soybeans, which are dominant in the U.S. agricultural belt, he added.
Producers of American ethanol and the corn used to make it fear they will not be able to participate significantly in the growing market for sustainable aviation fuel if the U.S. Treasury Department sticks to its current guidance for the upcoming loan.
Vilsack also warned on Thursday against a move to exclude American biofuels with foreign ingredients from the 45Z tax credit, saying it could harm American trade.
“If every country does that, there is no trade,” he said. “If there is no trade, what do we do with the 20 to 30 percent of the crop that we currently sell abroad? What effect would that have on prices?”
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