Why 45Z Needed Its Own Framework
Unlike 48E or 45X, which generate credit value tied to a facility's construction and placement in service, 45Z is a production credit measured against a facility's actual output and its carbon intensity score. That structure creates a different set of compliance questions. Producers don't just need to establish when construction began, they need an ongoing, defensible methodology for calculating emissions intensity using the government's GREET model, and they need certainty about how that calculation interacts with feedstock sourcing decisions made well before a facility is operational.
The February 2026 proposed regulations address both halves of that problem. On construction timing, the guidance provides a safe harbor structure that mirrors the physical work and cost-percentage approaches used elsewhere, adapted for production facilities rather than generation facilities. On carbon intensity, it clarifies how feedstock-specific GREET model inputs should be documented and locked in for purposes of the credit calculation, reducing the risk that a producer's emissions methodology gets challenged after the fact.
What This Means for Feedstock Sourcing Decisions
The practical impact lands hardest on facilities where feedstock choice drives the carbon intensity score, which is most of them. A producer that has already built its GREET model assumptions around a specific feedstock sourcing plan needs to confirm that plan against the newly clarified documentation standards, not assume the prior approach still holds. This is particularly relevant for facilities pursuing carbon capture as part of their emissions profile. As we discussed in our piece on what makes CCS eligible for ethanol projects, the interaction between capture methodology and credit eligibility has always required careful documentation. The new 45Z guidance adds a construction-timing layer on top of that carbon accounting question, and both now need to be satisfied together.
Where This Fits Into the Broader 45Z Picture
This regulatory update sits on top of the fundamentals we've already covered. If you need the baseline mechanics of how the credit works, 45Z tax credit: What you need to know in 2026 is still the right starting point. If you're further along and thinking about how buyers actually evaluate 45Z credits in the transfer market, Beyond infrastructure: What 45Z credit buyers actually need in 2026 covers that ground. This piece is the layer in between: what changed procedurally, and what producers need to do differently starting now that the safe harbors exist.
What Producers Should Do With This Guidance
For facilities still in development, the immediate task is aligning the construction-start plan with the new safe harbor structure rather than the improvised approach many producers were using in the absence of formal guidance. For facilities already under construction, the priority is a documentation review: confirming that the GREET model inputs and feedstock sourcing records that exist today would satisfy the standard the proposed regulations describe, not just the standard that seemed reasonable before this guidance existed. Treasury accepted comments on the proposed regulations, which means some details could still shift before finalization, but the core framework is unlikely to change substantially. Producers who build their compliance documentation around this structure now are in a materially better position than those waiting for a final rule to start adjusting.