Biodiesel producers welcome new IRS tax credit guidance

Renewable fuel producers in the United States have welcomed long-anticipated guidance from the Department of the Treasury and the Internal Revenue Service on the Section 45Z Clean Fuel Production Tax Credit, which was updated under the One Big Beautiful Bill Act last year.
The proposed regulations, issued at the start of February, clarify how the tax credit for clean transportation fuels such as biodiesel and renewable diesel will be calculated, certified and claimed. Producers have struggled with uncertainty since the old blenders’ credit expired at the end of 2024, contributing to a sharp drop in output — for example, Iowa’s biodiesel industry saw production fall by some 31 per cent in 2025 amid unclear policy signals.
Industry groups, including the Iowa Biodiesel Board and Clean Fuels Alliance America, say the new guidance gives much-needed certainty to plan investments and stabilise production. Commentators emphasise that clearer rules on emissions rates, registration and eligible sales are essential for uptake and growth under Section 45Z.
While details are still subject to public comment and further finalisation, biofuels and agricultural organisations have broadly praised the move as a positive step towards supporting domestic renewable fuel production and encouraging greater use of lower-carbon fuels in the transport sector.