An updated model for the federal 45Z Clean Fuel Production Credit could improve the value of soybean oil as a biofuel feedstock while creating additional opportunities for farmers to monetize lower-carbon production practices.
The Clean Fuel Production Credit was established through the Inflation Reduction Act in 2022 and replaced the previous $1-per-gallon Biodiesel Blenders' Tax Credit with a credit based on the carbon intensity of biofuels beginning in 2025. The credit is calculated using the 45Z-GREET model developed by the Department of Energy's Argonne National Laboratory.
The One Big Beautiful Bill Act, also known as the Working Families Tax Cut Act, made two significant changes to the credit in 2025. Feedstocks used to produce eligible biofuels must now be sourced from the United States, Mexico or Canada. The law also removed indirect land use change penalties from carbon intensity calculations for agricultural feedstocks.
Soybean Oil Gains Ground
The updated model shows significant improvements for soybean-based biofuels. The carbon intensity score for soybean-based renewable diesel fell from 42.60 to 26.36 kilograms of carbon dioxide equivalent per million British thermal units. The associated potential credit increased from 11 cents to 55 cents per gallon.
For biodiesel, soybean oil's carbon intensity score declined from 33.70 to 20.23, while the potential credit increased from 33 cents to 66 cents per gallon.
The changes move soybean oil from a marginally credit-positive feedstock to one of the stronger crop-based biofuel feedstocks. Its revised carbon intensity score also narrows the gap with waste-derived feedstocks such as tallow, used cooking oil and distillers corn oil.
Canola also benefits from the updated model, moving from a nonqualified baseline into positive territory. Its carbon intensity remains higher than that of soybean oil, in part because soybeans require less synthetic nitrogen. On average, 50% to 60% of soybean nitrogen demand comes from biological nitrogen fixation.
Limited Impact on Winter Crops
The updated model has less impact on winter cover crops because those crops did not carry an indirect land use change penalty under the original calculations.
Winter camelina's renewable diesel carbon intensity score declined from 51.30 to 45.19, allowing its potential credit to increase from zero to 11 cents per gallon. Winter pennycress declined from 36.40 to 35.18, with its renewable diesel credit remaining at 33 cents per gallon.
Waste-derived feedstocks remained largely unchanged because they did not carry indirect land use change penalties. Used cooking oil and tallow have carbon intensity scores of about 19 kilograms of carbon dioxide equivalent per million British thermal units under the updated model, with potential credits of 66 cents per gallon. Distillers corn oil retains potential credits of 76 cents per gallon for renewable diesel and 87 cents for biodiesel.
Regenerative Practices Could Add Value
The 45Z framework also could provide additional value for farmers who adopt practices that reduce on-farm emissions. The USDA worked with Argonne National Laboratory to develop the Feedstock Carbon Intensity Calculator, which estimates emissions from producing crops and compares farm-level results with national averages.
The calculator currently includes soybeans, corn, canola and sorghum. Practices that can lower a crop's carbon intensity include cover crops, reduced tillage, no-till, nitrification inhibitors and manure applications. Synthetic nitrogen use is also incorporated into the calculations, with lower application rates generally producing lower carbon intensity scores.
Because the calculator accounts for local soil and weather conditions, the potential value of individual practices varies by county.
For soybeans, reduced tillage generally provides less than 10 cents per bushel of potential additional value. No-till offers greater potential, with much of the country receiving the equivalent of at least 10 cents per bushel. Parts of Minnesota, Wisconsin and the Delta region could receive at least 20 cents per bushel, while some areas of the Northeast could exceed 40 cents.
Cover crops could generate at least 10 cents per bushel equivalent across portions of the southern soybean-growing region and the Northeast. Some areas of the Southeast could exceed 20 cents, although limited soybean production and the relatively small number of biomass-based diesel plants in those areas could restrict participation.
Stacking Practices Increases Potential
Combining practices can provide greater potential value. Stacking cover crops with no-till could generate at least 10 cents per bushel equivalent across nearly the entire U.S. soybean-growing region. Some counties could exceed 50 cents, while much of the primary soybean-growing region could generate the equivalent of 30 cents to 40 cents per bushel.
The potential premiums come with significant qualifications. The 45Z credit is awarded to biofuel producers rather than farmers, meaning the portion ultimately reaching the farm depends on market conditions. The estimates also assume that the entire credit is passed back to farmers as a soybean premium, making them a potential maximum rather than a likely outcome.
Farmers must also meet traceability, recordkeeping and reporting requirements. Sales records must demonstrate that sales of lower-carbon crops do not exceed the amount produced under qualifying practices. Participation also depends on the entire supply chain, including the relevant crush facility and biofuel producer, meeting program requirements.
Final Rules Remain Outstanding
The Department of Energy still needs to incorporate the USDA's Feedstock Carbon Intensity Calculator into the 45Z model, and final Treasury Department guidance remains outstanding. As a result, the carbon intensity scores and potential credits remain subject to change.
Even with those uncertainties, the updated model could strengthen soybean demand by improving the economics of soybean oil as a renewable diesel and biodiesel feedstock. It also gives farmers another potential avenue for capturing value from lower-carbon production practices, including practices they may already have adopted.
Source: American Soybean Association, "A Look at Potential Soybean Farmer Premiums with 45Z"