U.S.: government releases preliminary guidance for clean fuel tax credits

On January 10, 2025, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released the long-awaited initial guidance on the 45Z Clean Fuel Production Tax Credit (PTC), a key component of the Inflation Reduction Act (IRA). The guidance outlines the process for biofuel producers to claim tax credits, although many details remain pending.

The 45Z tax credit, effective from January 1, 2025, through the end of 2027, offers up to USD 1.00 per gallon for road transportation fuels and USD 1.75 per gallon for sustainable aviation fuel (SAF). Eligible fuels must achieve at least a 50% reduction in life cycle greenhouse gas (GHG) emissions compared to petroleum-based fuels.

Some highlights of the released