At ABLC 2025, there was significant discussion regarding tax credits, mandates, subsidies, and incentives as crucial policy mechanisms for advancing the bioeconomy and sustainable fuels and chemicals. Here’s a breakdown of what was learned:

Tax Credits:

• The 45Z Production Tax Credit (PTC) from the Inflation Reduction Act (IRA), which went into effect on January 1, 2025, was a major topic of discussion. There is a significant concern within the industry regarding the lack of Provisional Emission Rates (PER) from the Treasury Department, which are necessary for biofuel producers to calculate and monetize these tax credits. Without these rates, companies cannot realize the anticipated revenue, impacting their financial projections and relationships with lenders and investors.

• Eric McAfee from Aemetis emphasized that the 45Z credit is the only federal revenue source supporting domestic biofuel production and that the delay in issuing PERs is causing substantial losses across the value chain, affecting farmers and lenders. He urged the industry to push for the Treasury Department to open the provisional emission rate window to unlock this revenue stream. He also highlighted the importance of connecting biofuel production to rural America to gain the attention of policymakers.

• The IRA also includes other relevant tax credits like section 45V and 45Q. Support for maintaining these IRA tax credits, particularly by 21 Republicans, was highlighted as important.

• Jennifer Aurandt Pilgrim from Marquis mentioned their experience selling Investment Tax Credits (ITC) under section 48 A3A, demonstrating the importance of tax credits as a revenue source for the industry. The transferability of certain clean energy tax credits under Section 6418 was noted as a way to simplify monetization for producers without sufficient tax liability.

• SAF (Sustainable Aviation Fuel) production tax credits, potentially under the IRA, were also discussed as crucial incentives for the industry’s growth. The interaction between SAF tax credits and Low Carbon Fuel Standard (LCFS) credits can significantly impact project viability. Illinois was mentioned as another state using SAF production tax credits.

• A National Ag-based Biomanufacturing Incentive has been proposed, which would offer tax credits (either Investment Tax Credit or Production Tax Credit) for the conversion of renewable US feedstocks to high-value products other than food, fuels, or pharmaceuticals.

• Several Midwestern states (Nebraska, Iowa, Minnesota, Indiana, Illinois, Ohio) offer state-level tax credits or incentives for bioproducts and biorenewable chemicals, indicating a growing recognition of the sector’s economic benefits at the state level.

Mandates:

• The Renewable Fuel Standard (RFS) continues to be a foundational mandate driving the biofuel industry. There were mentions of potentially positive changes to RFS2, including potential SAF inclusion and E15 blending support.

•The California Low Carbon Fuel Standard (LCFS) was frequently mentioned as a significant driver for low-carbon fuel adoption, creating valuable credits. Changes to the LCFS, including a 30% target in 2030, and the impact of regulatory decisions on LCFS credit prices were discussed. The interaction of LCFS credits with other incentives like RINs and SAF tax credits was also highlighted.

• The potential for a Brazilian mandate for SAF was identified as a key factor for investment in that sector in Brazil.

• The Canadian Clean Fuel Regulation was highlighted as a system where co-processing of bio crude allows for credit generation based on both biogenic content and emission reductions at the facility. This suggests a broader scope for crediting carbon benefits compared to some US regulations.

Subsidies:

• The need for some sort of subsidy structure was mentioned as potentially beneficial for making SAF blends economically viable for airlines, particularly in regions like Europe where such structures might be lacking compared to the US credit systems.

• The discussion about the difficulty in funding non-biofuel bioeconomy projects highlighted a reliance on subsidized funding rather than pure product demand. There was a call for a greater product focus to drive the industry.

Incentives:

• RINs (Renewable Identification Numbers) under the RFS were consistently referenced as a key incentive mechanism, impacting the value stack of biofuels like ethanol and biodiesel.

• The potential for IMO (International Maritime Organization) incentives and sustainability requirements to drive investment in sustainable shipping fuels was noted in the context of Brazil’s bioeconomy development.

• The importance of policy being pathway agnostic was raised, advocating for standardized Life Cycle Analysis (LCA) methods and allowing co-processing to qualify for incentives.

• The need to orient government development aid toward the agriculture-energy interface was suggested as a way to strengthen the evidence base for biofuels.

• State-level SAF tax incentives are emerging as another form of incentive to promote SAF production.