The Inflation Reduction Act (IRA) signed into law on August 16, 2022, introduced several new renewable energy credits including the 45Z Clean Fuel Production Credit which supplants the $1.00/gallon Blenders Tax Credit (BTC) starting in 2025.
The 45Z CFPC is eligible to domestic producers of all transportation fuels that achieve a lifecycle emissions rate below 50 kilograms of carbon dioxide equivalent per million BTU. The CFPC is not currently eligible for imported biofuels but the IRA does not stipulate that the fuel must be consumed in the US, effectively subsidizing US exports of qualifying renewable fuels. The 45Z covers fuel produced between January 1, 2025, and sold before December 31, 2027.
Below, we explore the impact of the 45Z price for various renewable fuels and common renewable feedstocks pathways on RIN markets, state-based LCFS credits, and international trade flows.