45Z Clean Fuel Production Tax Credit & Carbon Intensity Scores

While official USDA eligibility guidance for the emissions-based 45Z Clean Fuel Production Tax Credit is still pending, early indications suggest that the Carbon Intensity (CI) Score could play a role in determining eligibility. However, until the final regulations are released, it is not certain how exactly CI scores will impact eligibility for the tax credit.

What is a Carbon Intensity (CI) Score?

A CI score measures the greenhouse gas (GHG) emissions associated with producing a unit of agricultural feedstock. This includes emissions from fertilizer use, tillage, cover cropping, and other farm management practices. The lower the CI score, the more valuable the feedstock may be in the clean fuel market.

Farm-Level CI Score

Farmers must calculate a farm-level CI score for each crop type, reflecting the carbon emissions from producing one bushel of that crop. This score is based on the harvest year, including total crop production. The USDA’s Feedstock Carbon Intensity Calculator (FD-CIC) can assess emissions based on farm management practices. Understanding a farm-level CI score can help farmers manage their emissions and may help them qualify for the 45Z tax credit once the final guidelines are available.

Key Data Required for the Calculation:

• Farm Location
  - County and State

• Crop Information
  - Crop Type (e.g., field corn, soybeans, sorghum)
  - Crop Yield (per acre for the specified crop)

• Total Field or Management Unit Acres
  - Total acreage where the crop is grown

• Climate-Smart Agriculture (CSA) Practices
  - Tillage (e.g., no-till, reduced till, conventional tillage)
  - Cover Crops

• Nitrogen Fertilizer Application Timing
  - Timing of application (e.g., spring only, split in-season)

• Nitrification Inhibitors
  - Use of inhibitors to reduce nitrogen loss

The USDA assigns default CI values to conventional crops, while CSA-compliant crops receive a customized CI score based on farm-specific data.

Recordkeeping and Reporting

Once the farm-level CI score is calculated, farmers must track and report the specific CI score for each crop sold as a reduced-CI crop. Records should align with farm-level CI data, including crop-specific emissions and practices, ensuring accurate reporting for biofuel feedstocks meeting reduced CI standards.

Biofuel Feedstock Report

• Documentation of USDA FD-CIC calculations
• Unique field or management unit identifiers
• A Farm Producer Attestation, verifying:
  • No double counting of GHG benefits
  • No-till will be maintained for at least four out of five years
  • Land used for CSA feedstocks was not recently converted from other uses

Tillage and Cover Crop Management

• Field locations, sizes, and operations performed
• Equipment used and operation dates
• Cover crop seeding and termination details
• Photographic evidence of cover crop establishment
• Nutrient budgets demonstrating nitrogen availability and planned application adjustments
• No fertilization, harvesting, or grazing of cover crops

Nutrient Management

• Maintain a nutrient budget based on yield goals and measurable N-P-K sources
• Use soil tests no older than two years
• Avoid fall synthetic nitrogen application on fallow or cover-cropped fields
• Apply at least 75% of total synthetic N after crop emergence
• Keep records of all nutrient applications, including sources, dates, methods, and acreages

Verification and Audits

Third-party verification by accredited verifiers ensures compliance with USDA standards for reduced-CI feedstocks. All entities, from the first point of aggregation to biofuel refiners, must undergo annual audits, with verification evidence passed through the supply chain. Farms supplying the first point of aggregation must have a sample of their operations audited each year. A Biofuel Feedstock Report documenting CSA practices and CI calculations is provided to the first point of aggregation to assist in selecting the audit sample. Audits verify the mass balance system, CI recording, and CSA practice compliance. Farms may be exempt from additional audits if previously verified, and producers can choose to hire their own third-party verifiers. Biofuel refiners must also ensure CI and mass balance systems are correctly recorded. All third-party verifiers must be ISO 14065 accredited.

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Source:
USDA Technical Guidelines for Climate-Smart Agriculture Crops Used as Biofuel Feedstock