Clean Fuel Production Credit (Section 45Z)
Internal Revenue Service
Up to $1.00/gal of clean fuel
Per-gallon credit for clean transportation fuel
A federal production tax credit for transportation fuels with a lifecycle greenhouse gas emissions rate below 50 kg CO2e/mmBTU, active for fuel produced and sold from January 1, 2025 through December 31, 2029. The credit rate scales inversely with emissions intensity — cleaner fuels earn more per gallon. The maximum rate is $1.00/gallon for zero-GHG fuel (e.g., green hydrogen from electrolysis). The One Big Beautiful Bill Act (OBBBA, July 2025) extended §45Z through 2029 and, for fuel produced after December 31, 2025, equalized the sustainable aviation fuel (SAF) rate with non-aviation fuel at $1.00/gallon — removing the former $1.75/gallon SAF premium. Replaces the former §40B SAF credit and §40A biodiesel/renewable diesel credit, which expired January 1, 2025. For-profit producers may transfer (sell) the credit; no elective pay for §45Z.
- Funding type
- Tax Credit
- Level
- Federal
- Amount
- Non-aviation fuels: $1.00/gal × (1 - lifecycle emissions rate ÷ 50 kg CO2e/mmBTU). Maximum $1.00/gal for zero-GHG fuel; partially phased down as emissions rise toward the 50 kg CO2e/mmBTU limit. Sustainable Aviation Fuel (SAF): for fuel produced through December 31, 2025, $1.75/gal × (1 - lifecycle rate ÷ 50); for fuel produced after December 31, 2025, OBBBA equalized the SAF rate with non-aviation fuel at a $1.00/gal maximum. Inflation-adjusted annually. Active January 1, 2025 through December 31, 2029 (extended from 2027 by OBBBA).
- Realistic amount
- A renewable diesel producer making 50M gallons/year at 15 kg CO2e/mmBTU lifecycle intensity earns approximately $35M/yea…
- Deadline
- Fuel must be produced and sold (or used) between January 1, 2025 and December 31, 2029. The One Big Beautiful Bill Act (OBBBA, July 2025) extended the credit from its original 2027 sunset. Credit claimed on annual return for each qualifying calendar year.
- Status
- active
- States
- Nationwide
- Payment model
- tax offset
Who qualifies
- Eligible taxpayers: persons who produce and sell qualifying transportation fuel to an unrelated party — refiners, biofuel producers, SAF producers, and green hydrogen-to-fuel conversion facilities
- Qualifying fuel: any transportation fuel with a lifecycle GHG emissions rate below 50 kg CO2e/mmBTU using IRS-approved lifecycle methodology (GREET model per Notice 2024-49)
- Fuel must be produced in the United States or US territories
- Fuel must be sold for use as a transportation fuel or as a feedstock blended into transportation fuel
- For SAF: must meet the sustainable aviation fuel definition and CORSIA emissions methodology OR ICAO-approved alternative methodology
- No elective pay (direct pay) available — only for-profit taxpayers with tax liability can use §45Z directly; transferability is available under §6418
- FEOC restrictions: starting January 1, 2026, fuels produced with feedstocks from FEOC-controlled entities (China, Russia, North Korea, Iran) may be disqualified
- The lifecycle emissions rate is measured at the point of sale, not production, using the GREET (Greenhouse Gases, Regulated Emissions, and Energy in Transportation) model or IRS-approved equivalent
What it covers
Eligible expenses
- Qualifying transportation fuel produced from biomass feedstocks (corn stover, soybean oil, waste fats, oils, greases)
- Renewable diesel and biodiesel produced below the 50 kg CO2e/mmBTU threshold
- Sustainable aviation fuel (SAF) meeting CORSIA or ICAO emissions methodology
- Green hydrogen produced from electrolysis using zero-GHG electricity and converted to transportation fuel
- Compressed natural gas from biogas (landfill gas, manure digesters) when lifecycle rate qualifies
- E15 and higher ethanol blends if lifecycle rate qualifies
Ineligible expenses
- Conventional diesel, gasoline, and jet fuel from petroleum sources
- Fuels with lifecycle GHG rate ≥50 kg CO2e/mmBTU
- Fuel produced outside the United States
- Electricity for transportation purposes (§45W commercial EV credit, terminated Sept 30, 2025 by OBBBA)
- Fuel sold to related parties (must be arm's-length sale to unrelated buyer)
- Feedstocks sourced from FEOC-controlled entities after January 1, 2026 (per anticipated OBBBA FEOC rules)
How to apply
-
1
Determine lifecycle emissions rate for qualifying fuels
Commission a lifecycle GHG analysis using the Argonne GREET model (or IRS-approved alternative per Notice 2024-49). The analysis must cover the entire fuel pathway — feedstock production, transportation, processing, and combustion. Fuels above 50 kg CO2e/mmBTU do not qualify. Lower rates earn proportionally higher credits.
~20 hrs
-
2
Verify fuel meets transportation use requirement
Confirm the fuel will be sold for use as a transportation fuel (motor fuel, aviation fuel, marine fuel) or as a qualifying blending feedstock. Track sales through the supply chain to an unrelated buyer using the fuel for transportation purposes. Maintain records of purchaser's intended use.
~4 hrs
-
3
Calculate credit amount per gallon
Apply the formula: non-aviation = $1.00 × (1 - lifecycle rate ÷ 50). SAF = $1.75 × (1 - lifecycle rate ÷ 50) for fuel produced through Dec 31, 2025; $1.00 × (1 - lifecycle rate ÷ 50) for SAF produced after that date (OBBBA equalized the rate). Multiply by gallons produced and sold during the tax year. Adjust for inflation per IRS annual Rev. Proc. if applicable.
~4 hrs
-
4
Plan credit transfer if beneficial
Producers with insufficient income tax to absorb the credit may transfer (sell) §45Z credits to third-party buyers under §6418. Register with the IRS Transfer Portal before filing. Execute transfer agreements with buyers specifying the credit amount and transfer price. Transferred credits are taxable income to the transferor.
~8 hrs
-
5
Claim on Form 8912 (or applicable IRS form) with annual return
File the credit on the applicable IRS form with your federal income tax return for each qualifying tax year (2025, 2026, 2027). Maintain lifecycle analysis documentation, fuel production records, and sales records for IRS audit purposes. Retain for minimum 4 years post-filing.
~6 hrs
Final Treasury GREET-model regulations had not been issued as of early 2025 — producers using interim guidance (Notice 2024-49) may face retroactive adjustments. Lock in a certified lifecycle analysis before production ramps to avoid credit disqualification.
Deadline & timing
OBBBA (July 2025) extended §45Z through December 31, 2029 and, for fuel produced after December 31, 2025, equalized the sustainable aviation fuel rate with non-aviation fuel at a $1.00/gal maximum (removing the former $1.75/gal SAF premium). §45Z replaces the §40A biodiesel/renewable diesel credit and §40B SAF credit, both of which expired December 31, 2024. Treasury and IRS issued Notice 2024-49 providing interim lifecycle emissions guidance using the GREET model (Argonne National Laboratory). The credit does NOT cover electricity used in transportation (that path used §30D/§45W, though §45W was terminated by OBBBA Sept 30 2025).
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Last reviewed 2026. GrantCompass is an independent funding-discovery tool and is not affiliated with any government agency. Always confirm details on the official program page.