Farmers seek certainty as Washington weighs 45Z clean fuel credit

Greg Messer says farmers can supply the low-carbon feedstocks Washington wants, but only if the final 45Z rule rewards what happens in the field, not just what happens on paper. With spring planting wrapping up and diesel and fertilizer costs still high, he argues that corn growers are making risk decisions now, and they need to know whether reduced tillage, cover crops and tighter fertilizer management will actually count in the carbon math.

What 45Z is deciding

The Clean Fuel Production Credit under section 45Z is available beginning January 1, 2025, applies to clean transportation fuel produced domestically and sold through December 31, 2029, and requires taxpayers to register with the IRS on Form 637 before claiming the credit. Treasury and IRS also said in their January 2025 guidance that 45Z is based on lifecycle greenhouse gas emissions, and Treasury said the Department of Energy would release the 45ZCF-GREET model to do the scoring.

That matters because 45Z replaces a patchwork of older credits for biodiesel, renewable diesel, alternative fuels and the sustainable aviation fuel credit. In practice, it is now the main federal tax incentive shaping how refiners, renewable diesel makers and ethanol producers think about feedstocks, carbon intensity and whether they can turn lower-emissions production into a bankable margin.

Why farmers want certainty now

Messer’s core point is that farming decisions are being made before the rule is finished. He says farmers are already dealing with tight economics, high input costs and low returns on the dollars invested in crops, which makes a new federal credit worthwhile only if the rules are stable enough to plan around. If the policy recognizes the emissions benefits of regenerative and conservation practices, farmers can potentially capture value for work they are already doing to improve soil health, resilience and yields.

The uncertainty is not abstract. Farmers need to know which practices will count, how they will document them and what reporting and recordkeeping Treasury will require. If the final rule is too narrow or too administratively heavy, the credit will flow to fuel producers without materially changing how feedstocks are grown. If it is practical, it can reward growers for no-till, strip till, cover crops, precision fertilizer applications, manure application and optimized fertilizer use.

The carbon-intensity fight

The most important issue is whether 45ZCF-GREET truly incorporates agricultural practices into the carbon intensity score. Messer says USDA already released draft biofuel feedstock guidelines and a beta version of an on-farm calculator last year, and he argues those tools should be integrated into 45Z because USDA has the agronomic expertise Treasury needs. USDA later sent its final biofuel feedstock guidelines to the White House for review, leaving Treasury, Energy and USDA to align the final framework.

That alignment will decide who wins. Farmers who already use conservation practices would benefit if the model credits lower input use, healthier soils and higher yields. Ethanol plants and renewable fuel producers would benefit because lower CI feedstocks improve the credit value and can make domestic gallons more competitive. But if the model ignores on-farm practices, then the credit favors the most easily documented gallons rather than the gallons with the best emissions profile.

Feedstock eligibility could redraw the supply chain

Another hard line is the feedstock origin test. The IRS says that for fuel produced after December 31, 2025, the feedstocks must be exclusively produced or grown in the United States, Mexico or Canada. That gives a clear boost to North American supply chains and makes domestic sourcing a compliance issue, not just a preference.

The flip side is equally clear. Producers reliant on imported feedstocks will lose access to the credit on post-2025 gallons, and blenders that depend on loosely documented supply chains will face pressure to tighten procurement. For farmers in the United States, Mexico and Canada, the rule creates a larger addressable market, but only if their production practices can be translated into a lower CI score that fuel makers can actually use.

What the industry says Treasury still has to fix

Industry groups have already said the proposed regulations improved certainty but left too many gaps. Treasury and IRS issued proposed 45Z regulations on February 3, 2026, but Clean Fuels Alliance America said in February that producers and farmers had struggled to capitalize on the credit because guidance had been minimal. The Renewable Fuels Association pressed Treasury in May to finalize clear, stable, practical regulations and to release an updated 45ZCF-GREET model without delay.

The list of unresolved issues is specific: safe harbors, qualified sales, tolling arrangements, qualifying fuels used in non-transportation applications and the integration of regenerative agriculture practices into the emissions model. Each one affects who can monetize the credit. A narrow reading of qualified sales or tolling could exclude common commercial structures. Ambiguity around non-transportation uses could leave some gallons stranded outside the program. Delays in the updated model could keep producers from pricing 45Z into contracts.

Farm-state pressure is focused on field practices

In March 2026, Senate and House Republicans led by Joni Ernst and Mariannette Miller-Meeks told Treasury, USDA and Energy to make sure no-till, cover crops, strip till, manure application and optimized fertilizer use are recognized as lower-carbon practices under 45Z. That push reflects the central political test of the rule: whether it pays for actual improvements in farm management or simply rewards fuel pathways that already have the easiest paperwork.

Treasury’s January 2025 rollout showed that the administration understood the stakes. John Podesta and David M. Turk both praised the role of farmers, climate-smart agriculture and biofuels in cutting emissions and supporting competitiveness. The final rule now has to convert that rhetoric into a usable framework. If it does, 45Z can strengthen farm income, support domestic biofuels and sharpen the carbon case for North American feedstocks. If it does not, the credit will exist on paper while the market keeps waiting for the certainty it needs to move.