What is the 45Z Credit?
The 45Z credit is a per-gallon production tax credit for domestically produced clean transportation fuels. It replaced several legacy biofuel incentives that expired at the end of 2024, consolidating them into a single, technology-neutral framework based on carbon intensity (CI).
Eligible fuels include ethanol, biodiesel, renewable diesel, sustainable aviation fuel (SAF), renewable natural gas, and hydrogen — provided they meet emissions thresholds and are produced domestically.
How the Credit Works
The credit value is tied directly to the fuel's lifecycle greenhouse gas emissions. The lower the CI score, the higher the credit. To qualify, fuels must produce less than 50 kg of CO2e per mmBTU — roughly half the emissions of conventional petroleum products.
Base credit: $0.20/gallon
Maximum credit: $1.00/gallon (non-SAF) or $1.75/gallon (SAF) for fuels meeting wage and apprenticeship requirements
Emissions are calculated using the DOE's 45ZCF-GREET model, which accounts for the full lifecycle from feedstock production through fuel combustion.
Key Changes Under OBBBA
The One Big Beautiful Bill Act made several important modifications to 45Z:
- Extended timeline: Credit now runs through December 31, 2029 (previously 2027)
- ILUC exclusion: Indirect land use change emissions are now excluded from CI calculations, benefiting corn ethanol and soy biodiesel
- Feedstock restrictions: Feedstocks must be sourced from North America (U.S., Canada, or Mexico)
SAF adjustment: Maximum SAF credit reduced from $1.75 to $1.00/gallon
What This Means for Buyers
For corporate tax teams looking to purchase 45Z credits, the market is still maturing. Unlike established ITC and PTC credits for wind and solar, 45Z presents unique considerations:
- Production-based risk: Credits are tied to actual fuel output, not upfront investment
- Commodity exposure: Feedstock availability affects credit generation
- Verification requirements: CI data must be verified and auditable
- Pricing dynamics: Currently trading in the high $0.80s to low $0.90s range
Looking Ahead
With Treasury's proposed regulations now public and a comment period running through April 2026, the market is poised for growth. Final guidance will bring the clarity producers and buyers need to transact with confidence.
Key dates to watch:
April 5, 2026: Public comment period closes
May 28, 2026: Public hearing scheduled
H2 2026: Final regulations expected
Need help navigating the 45Z market? Whether you're a producer looking to sell credits or a buyer seeking verified supply, Vericap provides the infrastructure to transact with confidence.