Overview of Section 45Z Clean Fuel Production Credit

The Section 45Z Clean Fuel Production Credit, introduced in the Inflation Reduction Act, aims to streamline the incentive system for clean transportation fuels by consolidating various expiring credits into one comprehensive program. Effective from 2025 to 2027, this credit promotes the production of low-GHG emission fuels across the United States, including territories, offering up to $1.75 per gallon for aviation fuels and $1.00 per gallon for nonaviation fuels.

Eligibility and Requirements

Geographic and Emissions Standards: Fuels must be produced domestically and emit no more than 50 kg of CO2 equivalent per mmBTU to qualify, supporting both environmental goals and domestic energy production.

Fuel Applications: Eligible fuels include those used in highway vehicles and aircraft, focusing on reducing carbon footprints in major transportation sectors. The program's technology-neutral approach encourages innovation across various fuel types.

Incentives and Labor Standards

Credit Amounts: The credit values vary based on the fuel's GHG emissions, with additional benefits for complying with prevailing wage and apprenticeship requirements. These labor standards ensure fair working conditions and promote skilled workforce development in the green energy sector.

Economic and Strategic Impact

Budget and Policy Impact: Estimated to cost $2.9 billion between FY2025 and FY2028, the CFPC aims to catalyze advancements in clean fuel technologies, likely leading to broader economic and environmental benefits.

Simplification and Focus: By consolidating several credits into one, the CFPC reduces administrative complexity, making it easier for producers to navigate and claim the benefits. This strategic simplification helps maintain focus on reducing GHG emissions in line with national environmental targets.

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