The agricultural sector has faced a string of difficult headlines lately, such as low commodity prices, rising input costs, and ongoing market uncertainty. Yet amid this bleak news cycle, a recent development from the U.S. Treasury Department offers a genuine bright spot in the form of the proposed guidance on the 45Z Clean Fuel Production Credit.
Released on February 3, 2026, the 170-page proposed rule brings long-awaited clarity to this tax incentive created under the Inflation Reduction Act. The 45Z credit rewards producers of clean transportation fuels, such as sustainable aviation fuel and biofuels, based on the carbon intensity (CI) score of their feedstocks. Lower CI scores translate to higher credits, creating a direct financial incentive for reducing emissions across the fuel production chain. While “emissions” are not a primary concern of ours here, farmer profitability is.
For farmers, this means the opportunity to capture value from sustainable practices already in use or under consideration. The credit applies to fuels produced from feedstocks grown in the United States, Canada, or Mexico, explicitly limiting eligibility to North American sources and addressing earlier concerns about foreign feedstocks like palm oil. The proposed rule incorporates a USDA-developed carbon intensity model called the 45Z FDFCIC, which factors in on-farm practices such as cover crops, reduced tillage, efficient fertilizer use, manure management, and yield improvements. This model draws from the Department of Energy’s GREET framework and USDA data, with verification, traceability, and audits emphasized throughout.
The potential upside is significant. Industry estimates suggest that adopting practices to reduce CI scores by an average of 18 points could generate up to $1.08 per bushel in credit value for biofuel producers. Farmers supplying corn, soybeans, and other feedstocks stand to benefit as part of this value chain, particularly as biofuels expand into new markets like sustainable aviation fuel.
Industry groups have responded with strong support. The National Corn Growers Association highlighted the proposal’s potential to enable corn growers to supply the aviation sector, improving long-term economic viability for producers. The American Soybean Association and National Oilseed Processors Association praised the guidance for strengthening domestic markets for U.S. soybeans, while stressing the need for complementary policies like a robust Renewable Fuel Standard. Iowa farmer Mitchell Hora, founder of Continuum Ag, described the framework as an “immense opportunity” with a “transparent points system” that rewards sustainable scoring.
Despite the optimism, important details remain unclear. The credit flows directly to biofuel producers, not farmers, so the share of value that trickles down to growers depends on contractual arrangements and market dynamics. Key uncertainties include the final chain-of-custody methodology, and whether “book and claim” will be allowed (letting farmers sell credits based on field-level CI scores without strict identity preservation) or if a more rigid mass balance system prevails. The final 45Z FDFCIC model is not expected until late summer 2026, and no payments are flowing yet. Farmers interested in participating will need meticulous record-keeping, including field-level data such as as-applied maps, receipts, and imagery.
In an ideal scenario, Treasury and USDA would finalize rules that prioritize simplicity and fairness for farmers. A book-and-claim approach would make participation more accessible, allowing growers to monetize low-carbon practices without major operational overhauls. Timely guidance, strong alignment with the Renewable Fuel Standard, and clear pathways for value sharing would maximize benefits, encourage widespread adoption, and bolster rural economies and domestic biofuel production.
The 45Z credit is not a silver bullet, but it represents a meaningful step toward rewarding environmental stewardship in agriculture. As the proposal moves toward finalization, it offers farmers an opportunity to turn practices many already employ into economic opportunity at a time when such wins are sorely needed. Close attention to the coming months will determine just how bright this spot truly becomes.