ACE Applauds Inclusion of Clean Fuel Production Credit in Spending Package – Fuels Market News

Report on the Extension of the Clean Fuel Production Credit (Section 45Z) and its Alignment with Sustainable Development Goals

Introduction and Legislative Context

• A final tax and spending package passed by the U.S. Congress includes a significant extension and revision of the Clean Fuel Production Credit, known as Section 45Z.
• The American Coalition for Ethanol (ACE) has recognized this development as a crucial step in advancing the domestic biofuels industry.
• Originally enacted under the Inflation Reduction Act, the 45Z credit is a technology-neutral incentive rewarding fuel producers based on the reduction of lifecycle greenhouse gas (GHG) emissions.

Key Revisions and Contributions to SDG 7 (Affordable and Clean Energy)

• The 45Z credit has been extended through the end of 2029, two years beyond its original expiration date, providing medium-term stability for the clean fuels market.
• This legislative action directly supports SDG 7 (Affordable and Clean Energy) by incentivizing the production and accelerating the use of homegrown, low-carbon biofuels.
• Key modifications strengthening the credit’s impact include:
1. Restoring the transferability of the credit.
2. Limiting feedstock eligibility to those produced or grown in the United States, Mexico, or Canada (USMCA countries).
3. Revising lifecycle GHG emission calculations to formally exclude penalties associated with indirect land use change (ILUC).

Advancing Climate Action and Sustainable Agriculture (SDG 13 & SDG 2)

• The fundamental design of the 45Z credit, which provides financial incentives for lower lifecycle GHG emissions, serves as a direct mechanism for SDG 13 (Climate Action).
• ACE is committed to further enhancing this climate impact by working with federal agencies to monetize on-farm conservation practices. This initiative promotes sustainable agricultural systems, contributing to the objectives of SDG 2 (Zero Hunger).
• Climate-smart agricultural practices targeted for monetization include:
1. Reduced-tillage farming.
2. 4R nutrient management.
3. The use of cover crops.

Fostering Innovation and Partnerships for the Goals (SDG 9 & SDG 17)

• In a clear example of SDG 17 (Partnerships for the Goals), ACE has established a 10-State USDA Regional Conservation Partnership Program (RCPP) to validate and monetize low-carbon farming.
• This partnership unites farmers, land-grant university scientists, and government bodies to achieve shared sustainability objectives.
• The project supports SDG 9 (Industry, Innovation, and Infrastructure) by generating critical data to enhance scientific models, including the GREET model and the USDA FDCIC.
• Scientists will collect soil samples and field-level data to better calibrate these models, which will in turn generate more reliable carbon scores for specific farming practices, unlocking their value within the 45Z framework and regulated fuel markets.

Economic and Production Implications (SDG 8 & SDG 12)

• The extension and strengthening of the 45Z credit bolster the economic foundation of the clean fuels sector, supporting job creation and economic activity in alignment with SDG 8 (Decent Work and Economic Growth).
• By creating a value chain that rewards low-carbon intensity from feedstock to final product, the policy encourages more sustainable and efficient production methods, directly addressing the principles of SDG 12 (Responsible Consumption and Production).

Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 2: Zero Hunger – The article discusses the implementation of sustainable and low-carbon farming practices such as reduced-till, 4R nutrient management, and cover crops, which are central to improving soil quality and ensuring sustainable agriculture.
• SDG 7: Affordable and Clean Energy – The core topic is the Clean Fuel Production Credit (45Z), which incentivizes the production of clean fuels like ethanol, a form of renewable energy, contributing to a cleaner energy mix.
• SDG 8: Decent Work and Economic Growth – The tax credit is an economic policy designed to stimulate a specific sector (biofuels), aiming to decouple economic growth from environmental degradation by promoting low-carbon technologies.
• SDG 12: Responsible Consumption and Production – The article focuses on creating sustainable production patterns for fuel by incentivizing lower lifecycle greenhouse gas emissions and using feedstocks from sustainable agricultural practices.
• SDG 13: Climate Action – The entire premise of the 45Z credit is to combat climate change by providing financial incentives for fuels based on their lifecycle greenhouse gas emissions, thereby integrating climate change measures into national tax policy.
• SDG 15: Life on Land – By promoting farming practices that improve soil health and carbon sequestration (e.g., cover crops, reduced tillage), the initiative directly contributes to the sustainable use of terrestrial ecosystems and improving land quality.
• SDG 17: Partnerships for the Goals – The article highlights the collaboration between the American Coalition for Ethanol (ACE), the U.S. Congress, and the USDA, as well as land-grant universities, to implement and refine the 45Z credit, showcasing a multi-stakeholder partnership.

What specific targets under those SDGs can be identified based on the article’s content?

1. SDG 2: Zero Hunger

   • Target 2.4: “By 2030, ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production, that help maintain ecosystems… and that progressively improve land and soil quality.” The article directly supports this by mentioning the push to monetize “low-carbon farming practices” like “reduced-till, 4R nutrient management, or cover crops” which are designed to improve soil health.

2. SDG 7: Affordable and Clean Energy

   • Target 7.2: “By 2030, increase substantially the share of renewable energy in the global energy mix.” The extension of the 45Z credit for “clean fuels” like ethanol directly aims to increase the production and use of renewable energy sources in the transport sector.

3. SDG 13: Climate Action

   • Target 13.2: “Integrate climate change measures into national policies, strategies and planning.” The 45Z credit is a clear example of a national policy—a tax credit within a “final tax and spending package”—that is specifically designed to reduce “lifecycle greenhouse gas emissions.”

4. SDG 15: Life on Land

   • Target 15.3: “By 2030, combat desertification, restore degraded land and soil… and strive to achieve a land degradation-neutral world.” The article describes how the ACE RCPP project involves collecting “soil samples and other field-level data” to measure the benefits of conservation practices, which directly relates to improving land and soil quality.

5. SDG 17: Partnerships for the Goals

   • Target 17.17: “Encourage and promote effective public, public-private and civil society partnerships…” The article details a partnership between ACE (a private coalition), the USDA (public), and land-grant universities (academic/public) through the “10-State USDA Regional Conservation Partnership Program (RCPP)” to achieve shared environmental and economic goals.

Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. For SDG 2 & 15 (Sustainable Agriculture & Life on Land)

   • Implied Indicator: Adoption rate of sustainable farming practices. The article refers to “farmers participating in the project have implemented reduced-till, 4R nutrient management, or cover crops.” Tracking the number of farmers or acres under these practices would be a direct indicator.
   • Mentioned Indicator: Soil carbon benefits. The article explicitly states that “land-grant university scientists will collect soil samples and other field-level data about the resulting carbon benefits,” which is a direct measurement of progress in improving soil quality.

2. For SDG 7 & 13 (Clean Energy & Climate Action)

   • Mentioned Indicator: Lifecycle greenhouse gas emissions score. The article states the 45Z credit provides incentives “based on lifecycle greenhouse gas emissions.” The calculation of this score using models like GREET is a key performance indicator.
   • Mentioned Indicator: Carbon scores for farming practices. Progress is measured by the ability to “generate more reliable carbon scores for farming practices” through the USDA FDCIC, which quantifies the climate benefit of specific agricultural methods.

3. For SDG 17 (Partnerships)

   • Mentioned Indicator: Functioning and output of multi-stakeholder partnerships. The existence and activities of the “ACE RCPP” project itself serve as an indicator. Its success is measured by its ability to “unlock 45Z to allow ethanol producers to generate and benefit from low-carbon farming practices.”

Table of SDGs, Targets, and Indicators

Source: fuelsmarketnews.com