H.R. 1 Expands 45Z Clean Fuel Production Credit for Conventional Biofuels While Cutting Sustainable Aviation Fuel Tax Credit – Clean Air Task Force

Report on Amendments to the 45Z Clean Fuel Production Credit under H.R. 1 and Their Implications for Sustainable Development Goals

1.0 Introduction

On July 4, 2025, H.R. 1, the “One Big Beautiful Bill” Act (OBBBA), was enacted, introducing significant amendments to the 45Z Clean Fuel Production Credit. These changes, which include extending the credit, altering eligibility criteria, and reducing incentives for Sustainable Aviation Fuel (SAF), are projected to cost taxpayers $25.7 billion from FY25-34. This report analyzes these modifications and assesses their substantial negative impact on the United States’ progress toward key Sustainable Development Goals (SDGs), particularly SDG 7 (Affordable and Clean Energy), SDG 9 (Industry, Innovation, and Infrastructure), SDG 13 (Climate Action), and SDG 15 (Life on Land).

2.0 Background: The 45Z Credit Under the Inflation Reduction Act (IRA)

The 45Z credit was established by the 2022 Inflation Reduction Act to promote the production of clean transportation fuels, aligning with SDG 7 and SDG 13. Key provisions of the original credit included:

• A maximum credit of $1.00/gallon for clean fuels produced from 2025-2027 with a carbon intensity (CI) below 50 kg CO2e/mmBTU.
• An enhanced maximum credit of $1.75/gallon for SAF to incentivize innovation and decarbonization in the aviation sector, supporting SDG 9.
• A technology-neutral approach intended to replace previous, less-targeted biofuel credits.
• An initial projected cost of approximately $2.9 billion over FY25-28.

3.0 Analysis of H.R. 1 Amendments to Section 45Z

H.R. 1 fundamentally alters the structure and intent of the 45Z credit, shifting its focus away from innovation and climate mitigation. The most significant changes are:

1. Exclusion of Indirect Land Use Change (ILUC) Emissions: The legislation mandates that emissions from ILUC be excluded from a fuel’s CI score. This directly undermines SDG 13 (Climate Action) and SDG 15 (Life on Land) by ignoring significant greenhouse gas emissions released when carbon-rich ecosystems like forests and grasslands are converted for biofuel crop production. This change artificially lowers the CI scores of conventional biofuels, making them eligible for larger subsidies despite their true environmental footprint.
2. Reduction of SAF Credit Value: The maximum credit for SAF has been reduced by 43%, from $1.75/gallon to $1.00/gallon. This severely curtails incentives for a nascent industry critical for decarbonizing aviation, hindering progress on SDG 7 (Affordable and Clean Energy) and SDG 9 (Industry, Innovation, and Infrastructure). It risks derailing investment in advanced fuel technologies and ceding U.S. leadership in this sector.
3. Extension and Expanded Eligibility: The credit is extended through 2029 and eligibility is broadened due to the weakened carbon accounting rules. This expansion primarily benefits mature, conventional biofuel industries, resulting in an order-of-magnitude cost increase without corresponding public benefits in climate mitigation or innovation.

4.0 Impact Assessment on Sustainable Development Goals

The modifications to 45Z will create a policy environment that is counterproductive to achieving multiple SDGs by redirecting public funds toward mature, carbon-intensive industries at the expense of climate progress and innovation.

4.1 Negative Impacts on Environmental and Climate Goals

• SDG 13 (Climate Action): By excluding ILUC, the policy fails to accurately account for the full lifecycle GHG emissions of fuels. It subsidizes fuels with limited climate benefits, directly contradicting the goal of taking urgent action to combat climate change. The amended 45Z is not expected to decrease overall GHG emissions from the domestic fuel supply.
• SDG 15 (Life on Land): The incentive structure encourages the production of land-intensive conventional biofuels (corn, soy), which can drive the conversion of natural habitats. This threatens biodiversity and worsens water, air, and soil quality, undermining the protection and restoration of terrestrial ecosystems.

4.2 Negative Impacts on Economic and Industrial Goals

• SDG 9 (Industry, Innovation, and Infrastructure): The reduction in the SAF credit disincentivizes investment in innovative fuel production facilities and sustainable infrastructure. It shifts financial support from emerging technologies that require it to scale, to established industries, thereby stifling innovation.
• SDG 8 (Decent Work and Economic Growth): The policy represents an inefficient use of taxpayer dollars, subsidizing industries that would likely produce fuel anyway under existing mandates. This misallocation of resources undermines sustainable economic growth and limits the potential for job creation in high-tech, clean energy sectors. U.S. global competitiveness in advanced biofuels is likely to be diminished.
• SDG 12 (Responsible Consumption and Production): The amendments promote a system of subsidizing existing, carbon-intensive production patterns rather than fostering a transition to sustainable ones. Spending billions on duplicative credits for mature industries is inconsistent with the principles of responsible and efficient resource use.

5.0 Issues for Future Monitoring in Relation to SDG Achievement

The long-term impact of these legislative changes on the SDGs will depend on several forthcoming administrative and market developments. Key areas to monitor include:

1. Regulatory Implementation: How the U.S. Treasury and IRS implement the statutory exclusion of ILUC will be critical in determining the final impact on SDG 13 and SDG 15.
2. Inclusion of Climate Smart Agriculture (CSA): The potential incorporation of CSA practices into CI scoring could either mitigate or exacerbate environmental impacts, depending on the scientific rigor and verifiability of the credited practices.
3. Market Investment Signals: Tracking investment trends in innovative fuels like SAF, methanol, and clean ammonia will indicate the extent to which H.R. 1 has damaged progress toward SDG 7 and SDG 9.
4. Federal Biofuel Mandates: Future Renewable Fuel Standard (RFS) volumes set by the EPA will interact with these tax credits to shape the overall trajectory of the U.S. fuels market.

6.0 Conclusion

The amendments to the 45Z Clean Fuel Production Credit enacted under H.R. 1 represent a significant setback for U.S. climate and energy policy. By weakening environmental standards and reducing support for innovative technologies like SAF, the legislation undermines national commitments to the Sustainable Development Goals. Instead of fostering a transition to a clean energy economy as envisioned by SDG 7, SDG 9, and SDG 13, the revised policy directs substantial public funds to subsidize mature industries with limited environmental benefits and significant, unaccounted-for impacts on land and climate.

Analysis of Sustainable Development Goals (SDGs) in the Article

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

The article discusses issues related to energy policy, economic incentives, industrial innovation, climate change, and environmental impacts, which connect to several Sustainable Development Goals (SDGs). The following SDGs are addressed:

• SDG 7: Affordable and Clean Energy: The article’s core subject is the 45Z Clean Fuel Production Credit, a policy directly aimed at influencing the production of clean and renewable transportation fuels like biofuels and Sustainable Aviation Fuel (SAF).
• SDG 8: Decent Work and Economic Growth: The analysis touches upon economic growth, U.S. competitiveness, investment in innovative industries, and job creation, highlighting how the policy changes could negatively affect these areas.
• SDG 9: Industry, Innovation, and Infrastructure: The article contrasts support for mature industries (conventional biofuels) with incentives for nascent, innovative fuel technologies (like SAF), directly relating to industrial policy and technological innovation.
• SDG 12: Responsible Consumption and Production: The discussion revolves around government subsidies for energy production, questioning their efficiency and environmental justification, which aligns with the goal of rationalizing subsidies to reflect their true impacts.
• SDG 13: Climate Action: A central theme is the impact of the policy on greenhouse gas (GHG) emissions. The article argues that the changes to the 45Z credit will undermine climate progress by subsidizing carbon-intensive fuels and weakening carbon accounting rules.
• SDG 15: Life on Land: The article explicitly mentions the environmental consequences of biofuel production, including indirect land use change (ILUC), the conversion of forests and grasslands, and negative impacts on water, air, and soil quality.

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

Based on the article’s content, the following specific SDG targets can be identified:

1. Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix.
   • The article discusses the promotion of various renewable fuels, including conventional biofuels and advanced fuels like SAF. However, it argues that the policy changes favor less effective biofuels, which could hinder progress toward a cleaner energy mix.
2. Target 7.a: By 2030, enhance international cooperation to facilitate access to clean energy research and technology… and promote investment in energy infrastructure and clean energy technology.
   • The article highlights that reducing the SAF tax credit “limits the incentive for domestic investment in new or expanded SAF facilities” and warns that companies may “shift planned SAF investments to other countries,” directly impacting investment in clean energy technology.
3. Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation.
   • The policy is criticized for disadvantaging “industry investment in innovative fuel production” and shifting financial incentives away from “new, innovative fuels that generate significant economic growth,” thereby working against the goal of promoting innovation.
4. Target 9.5: Enhance scientific research, upgrade the technological capabilities of industrial sectors… encouraging innovation.
   • The article states that the changes “limit federal incentives for domestic production of innovative fuels like SAF,” which directly contradicts the goal of encouraging innovation and upgrading technological capabilities in the energy sector.
5. Target 12.c: Rationalize inefficient fossil-fuel subsidies that encourage wasteful consumption… including by restructuring taxation and phasing out those harmful subsidies… to reflect their environmental impacts.
   • Although focused on biofuels, the principle is identical. The article describes the modified 45Z credit as an “inefficient use of taxpayer dollars” and a “windfall for conventional biofuels,” arguing it is a harmful subsidy that fails to account for true environmental impacts, especially by excluding emissions from indirect land use change.
6. Target 13.2: Integrate climate change measures into national policies, strategies and planning.
   • The article critiques H.R. 1 for weakening a key national climate policy. It explicitly states, “45Z as modified will not decrease GHG emissions of domestic fuel,” and notes that less stringent carbon intensity requirements undermine “climate progress.”
7. Target 15.3: By 2030, combat desertification, restore degraded land and soil… and strive to achieve a land degradation-neutral world.
   • The article points out that the policy change ignores emissions from “clearing grasslands or forests” for biofuel crops. It also links conventional biofuel production to “worse water, air, and soil quality,” which relates directly to land degradation.

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

Yes, the article mentions or implies several indicators that can be used to measure progress:

1. Carbon Intensity (CI) Score:
   • This is a direct indicator mentioned multiple times. The article specifies a threshold (“less than 50 kg CO2e/mmBTU”) and discusses how excluding indirect land use change (ILUC) emissions (an estimated “20-25 g CO2e/MJ”) artificially lowers this score. This indicator measures the climate impact of fuels (relevant to SDG 13).
2. Value of Tax Credits/Subsidies:
   • The article provides specific monetary values for the tax credits, such as the reduction for SAF from “$1.75/gallon to $1.00/gallon.” The total projected cost to taxpayers (“$25.7 billion”) is also cited. This serves as an indicator for Target 12.c, measuring the scale of potentially inefficient subsidies.
3. Investment in Clean Fuel Production:
   • The article implies this indicator by discussing how the policy changes create “serious risks to investment and production capacity” for SAF and may cause a shift in “planned SAF investments to other countries.” Tracking domestic investment in innovative fuel facilities would measure progress toward Targets 7.a and 9.5.
4. Greenhouse Gas (GHG) Emissions from Land Use Change:
   • This is an implied indicator. By discussing the exclusion of ILUC from carbon accounting, the article points to the importance of measuring emissions from land conversion (e.g., “clearing grasslands or forests”). This is a key indicator for SDG 13 and SDG 15.
5. Production Volume of Different Fuel Types:
   • The article implies this by discussing the benefits to “domestic corn ethanol and soy biodiesel industries” versus the disadvantages to “innovative fuels like SAF.” Measuring the production volumes of each fuel type would indicate the real-world impact of the policy on the share of renewable energy (Target 7.2).

4. Summary Table of SDGs, Targets, and Indicators

Source: catf.us