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Carbon Intensity
Tax Credits
The Future of Profitability for Sustainable Farming Practices
45z Tax Credits
In 2022, the U.S. Government passed a set of tax credits known as 45z aimed specifically at reducing carbon emissions by providing incentives for biofuel producers.
The idea is simple – the lower the carbon intensity of what goes into making the product (like corn or soybeans), the lower the carbon intensity of the end product (such as ethanol or biodiesel). The producer gets the maximum tax credit available.
Here's an example:
- The standard corn CI Score is 29.1.
- For every point below 29.1 (the industry standard) an ethanol plant can earn around 5.4 cents.
- That credit equates to about 76 cents per bushel – that’s $131.48 for a modest yield of 173 bushels per acre.
Here’s How Farmers Can Earn Premiums from Lowering Carbon Intensity
While the 45z tax credits don’t apply directly to farms, growers are the first step in this whole process. If you can offer biofuel producers a lower CI starting point, they stand to make a lot more money. That means you can charge a premium for your grains because you’re putting money directly in their pockets.