Biofuel and farming organizations across the country want USDA to dismantle mandatory combinations of climate-smart agriculture practices to qualify for biofuel tax credits, and the groups suggest moving to a simplified accounting system to propel the industry's growth.
The advice comes in comments filed in response to USDA's request for information on standards to measure reductions in greenhouse gas emissions from crops grown as biofuel feedstocks. The invitation announced by Secretary of Agriculture Tom Vilsack last month received about 260 comments by the deadline last Thursday.
USDA's information-gathering effort sought to demonstrate whether individual conservation practices could yield verified reduction of greenhouse gas emissions that compare with the combination of practices currently required by a tax credit for sustainable aviation fuel.
Guidance for the 40B tax credit, released in April, allows corn ethanol to qualify as a SAF feedstock, if producers use no-till, cover crops and enhanced efficiency fertilizers. Soy oil could qualify if the soybeans were grown using no-till and cover crops on the same acreage.
The 40B guidance expires at the end of the year, to be replaced by a broader 45Z clean fuels credit that will apply to other fuels as well as SAF.
USDA's request for information invited ideas for expanding the practices allowed and crops available for tax credits. In his announcement, Vilsack said the RFI is not specific to the 45Z tax credit being developed by the Treasury Department, but its findings could be incorporated into that or other clean fuel plans.
The Iowa Renewable Fuels Association urged USDA to remove mandatory practice bundling and argued against a “one size fits all” approach to climate smart practices. Some in the industry say that some practices or combination of practice required by 40B regulations do not work in some operations or geographic locations.
“While we recognize that there is uncertainty in some CSA [climate-smart agriculture] modeling, we urge the Department to adopt the best available science and to update any regulations as better science becomes available in a continuous cycle of improvement,” IRFA said. “The only thing that is certain is that, if adopting a CSA practice does not provide a return-on-investment to the farmer, adoption will be much slower than if it did.”
The current bundling and limited number of practices allowed by the 40B guidance leave entire regions struggling to participate in the SAF feedstock market, said the National Council of Farmer Cooperatives.
The National Oilseed Processors Association argued for a domestic feedstock requirement for the credit, citing the wave of imported low-carbon-intensity feedstocks such as used cooking oil and tallow. From the beginning of 2023 to the end of May, the United States imported 7.4 billion pounds of these feedstocks to meet California and federal program requirements, NOPA wrote. This displaced an equivalent of over 600 million bushels of domestic soybeans.
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The U.S. oilseed industry has previously warned that these lower-carbon intensity imports could hurt American producers. The American Soybean Association, American Farm Bureau Federation, National Corn Growers Association and the National Farmers Union also support a domestic feedstock requirement for 45Z.
NOPA also pushed for greater scrutiny and traceability of imported feedstocks, citing rumors that some may be fraudulent.
Like others, NOPA urged USDA to unbundle CSA practices to allow producers to implement standards that work for their operations. The group also suggested including additional oilseed crop pathways for crops such as sorghum, canola, brassica carinata, camelina and pennycress.
The American Coalition for Ethanol said USDA and other agencies should follow the Department of Energy’s GREET model to track and verify emissions from agricultural production of biofuel feedstocks. The group considers it the gold standard that uses the best available science.
ACE also wrote that credit values for CSA practices should be regularly updated with the latest science and results from USDA conservation programs.
The Breakthrough Institute, an environmental research center, used its comments to question whether using climate-smart practices to determine carbon intensity calculations for biofuels will yield positive environmental impacts. The efforts could increase demand for crop-based biofuel, which could actually increase greenhouse gas emissions, the group wrote.
If USDA does expand practices to consider in quantifying emissions for biofuel feedstocks, the institute said it should include those that reduce net greenhouse gas emissions permanently and exclude those that only have temporary benefits like a short-term increase in soil carbon stocks.
Additionally, the group pushed for USDA to prioritize practices that maintain or increase crop yields, 10-15 year contracts to prevent carbon reversal and consider environmental tradeoffs of climate-smart practices. Given these criteria, the group suggested USDA include nitrogen management practices like adopting enhanced efficiency fertilizers.
The Renewable Fuels Association and others wrote that USDA should at least analyze and quantify emissions impacts of reduced nitrogen fertilizer application rates and enhanced efficiency nitrogen. The group also recommended the agency examine benefits of no-till, reduced till, perennial cover grown in field strips, and legume and non-legume cover cropping.
RFA also suggested USDA apply a “book-and-claim” system for CSA to decouple the emissions reductions of the practices from the physical product itself. It says the system has been applied to renewable energy credits, renewable natural gas and voluntary carbon offset markets.
Under a book-and-clai
Fueling with SAFm system, a farmer could implement a set of climate smart practices and get a third party to verify the records that the practices were properly executed. After the CSA is certified, it could be placed on a market, open to any clean fuel producer. This allows the biofuel producer to source feedstock in the most efficient manner for their operation or proximity, regardless of the carbon intensity of the physical product.
Adopting this system would eliminate the need for contracts for physical feedstock purchases between the CSA farmer and ethanol producer, RFA wrote. It also lets farmers not in close proximity to ethanol, SAF or biofuel facilities to still be rewarded for adopting CSA practices.
“Decoupling CSA attributes from the physical feedstock and allowing the renewable fuel producer to use book-and-claim accounting would encourage widespread adoption of CSA practices by growers and broad incorporation of CSA emissions improvements into biofuel lifecycle carbon intensity values,” RFA wrote. “At the same time, book-and-claim accounting will allow the grain market to continue operating rationally and efficiently for all participants.”
The Iowa Renewable Fuels Association also argued in favor of a book-and-claim system for feedstocks. In comments, the organization said this system allows USDA and the Treasury Department to avoid tracking, monitoring and auditing the agricultural system between the farmer and biofuel producer.
“If the goal is to encourage widespread adoption of CSA practices to leverage lower-carbon biofuels, there is no need to require full supply chain traceability,” IRFA wrote.
This system could separate the Treasury Department from farmers and ensure USDA is the sole federal entity responsible for verifying climate-smart practices on the farm level, IRFA wrote.
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