New US government guidance on the 45Z biofuel tax credit will limit eligible feedstocks to the US, Canada, and Mexico, a development that could have significant implications for North American biofuel markets and Canadian oilseed producers.
The U.S. Department of the Treasury and the Internal Revenue Service on Tuesday released proposed regulations outlining how domestic producers can qualify for and calculate the clean fuel production credit, commonly known as the 45Z credit. The guidance reflects changes made under last year’s One Big Beautiful Bill and is intended to provide greater clarity and certainty for fuel producers navigating the program.
The clean fuel production credit applies to clean transportation fuels produced in the U.S. after Dec. 31, 2024, and sold by Dec. 31, 2029. To claim the credit, producers must be registered with the IRS and comply with detailed certification, emissions accounting, and reporting requirements set out in the proposal.
Among the most consequential changes is a restriction limiting eligible feedstocks to those grown or produced in the U.S., Canada, or Mexico, explicitly excluding foreign-origin inputs. This provision has been welcomed by industry groups as a boost for continental supply chains, particularly for Canadian canola used in renewable diesel and other low-carbon fuels.
The proposal also extends the credit through 2029, eliminates a special rate for sustainable aviation fuel, introduces anti-abuse provisions to prevent double crediting, and broadens rules around sales through related intermediaries. In addition, the regulations remove indirect land-use change emissions from carbon intensity calculations, prohibit negative emissions rates except for fuels derived from animal manure, and require feedstock-specific emissions rates for manure-based fuels.
U.S. industry reaction has been generally positive. The Renewable Fuels Association said the proposal resolves lingering uncertainty around what constitutes a qualified fuel sale and reflects meaningful stakeholder input. The Clean Fuels Alliance America also welcomed the guidance, noting that producers have struggled to fully utilize the credit since it became available in early 2025 due to limited direction.
Treasury officials say the proposed rules are designed to balance environmental integrity with market certainty, as the formal rulemaking process now moves forward.
