American corn and soybean producers are facing serious financial pressure. Trade policies under President Trump have driven up fertilizer and other input costs while simultaneously weighing down commodity prices. Compounding the problem, export markets may be slow to rebound as key trading partners, including China, increasingly source crops from Brazil instead of the United States.
As a result, strong domestic demand for U.S. corn and soybeans is more important than ever. Biofuels already play a major role in supporting those markets, accounting for roughly 45% of soybean oil use and about 40% of U.S. corn production. These fuels also deliver significant environmental benefits. One peer-reviewed study found that today’s biofuels reduce greenhouse gas emissions by approximately 46% compared to fossil fuels. That performance has helped drive bipartisan backing for policies such as the extension of the 45Z tax credit, which incentivizes the production of lower-carbon biofuels.
Early this year, then-Agriculture Secretary Tom Vilsack unveiled a rule outlining how greenhouse gas emissions from U.S.-grown biofuel feedstock crops would be measured, reported, and verified. Under the 45Z clean fuel production tax credit, biofuel producers that manufacture fuels with lower carbon intensity than petroleum-based alternatives are eligible for a $1-per-gallon credit.
To qualify, producers must further reduce the carbon intensity of their fuels—an outcome that can be achieved in part by sourcing corn and soybeans from farmers who adopt lower-carbon production practices. Those practices include cover cropping, conservation tillage, and the use of enhanced-efficiency fertilizers. For farmers, this approach could translate into stronger demand and improved commodity prices.
At the time, Vilsack described the rule as broadly beneficial, stating, “The new guidelines are a win for farmers, biofuel producers, the public, and the environment. The action today marks an important milestone in the development of market-based conservation opportunities for agriculture.”
Both of us were closely involved in developing the 45Z credit, and we were disappointed that the Biden administration was unable to finalize the rule in time for immediate implementation. Treasury officials declined to incorporate the rule into 45Z tax guidance without first conducting a public comment period on how carbon intensity would be measured for biofuels. In practical terms, we advanced the policy nearly to completion, anticipating that the Trump administration would finish the job within weeks.
That public comment period wrapped up in early spring. Yet months later, the Trump administration has not taken steps to move the rule forward.
This delay is not due to opposition to farmers adopting what we referred to as climate-smart practices, or what the administration now calls regenerative agriculture. In fact, earlier this month Agriculture Secretary Brooke Rollins, joined by Health and Human Services Secretary Robert F. Kennedy Jr. and Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services, announced a $700 million Regenerative Pilot Program aimed at encouraging practices that improve soil health, protect water quality, and enhance long-term farm productivity.
While that initiative does not provide new funding streams for farmers, the farming practices it promotes are the same ones Vilsack highlighted in January as pathways to producing lower-carbon feedstocks for ethanol, biodiesel, and sustainable aviation fuel. Cover crops, reduced or no-till systems, better fertilizer management, and precision agriculture technologies all serve both goals: lowering carbon intensity and strengthening soil health.
We believe there may be two additional factors slowing action on 45Z. First, the administration has shown a willingness to accommodate fossil fuel interests, which have historically resisted biofuel policies. Second, there is currently no clear advocate within the administration—no equivalent of Tom Vilsack—championing biofuels policy.
There is still an opportunity to get this right, but time is short. Treasury is actively drafting the regulation governing the clean fuel production tax credit under 45Z. The department can either include regenerative agricultural practices—unlocking new market opportunities for farmers while improving environmental outcomes—or exclude them altogether.
If regenerative practices are incorporated into 45Z, the resulting incentives would far exceed the scale of the administration’s $700 million pilot program. Doing so would support domestic transportation fuel demand, expand access to international markets seeking lower-carbon liquid fuels, and create market-based pathways for farmers to improve profitability while reducing emissions.
Adapted from an article shared by Agri-Pulse. Image credit: Michigan Advanced Biofuels Coalition.
Notice: The Michigan Advanced Biofuels Coalition (MiABC) does not lobby or influence policy in any way. The policy interests of Michigan soybean farmers and biodiesel producers are supported by the Michigan Soybean Association and Clean Fuels Alliance America, respectively. All posts are shared for educational purposes only.