WASHINGTON, Iowa — U.S. biofuels manufacturers can begin claiming rebates of up to $1 per gallon for clean transportation fuels in 2025 under environmental provisions included in the federal Inflation Reduction Act (IRA). This means that energy crop producers who become certified and register a low soil carbon intensity (CI) score will also be eligible to reap the windfall of the new 45Z Clean Fuel Production tax credits available via the IRA, according to Continuum Ag chief operating officer Brad McDonald, a self-described “opportunistic” crop and pig farmer from eastern Iowa.  

“Carbon intensity is really the name of the game right now when it comes to how ethanol plants and the industry overall can lower their carbon intensity scores, and that is where the opportunity lies for us farmers,” McDonald said, during an April 4 Continuum Ag webinar that explored ways farmers can use regenerative agriculture practices to capitalize on lower carbon intensity scores. 

For grain, standard CI is 29.1 grams of greenhouse gas (GHG) emissions per megajoule (MJ) of energy. A CI rating of zero equates to carbon neutrality. To calculate a farm’s CI score, the total carbon footprint is divided by the amount of production. This is called the GREET model, which was designed by Argonne National Laboratory in Illinois. 

To qualify for premiums through processors under the upcoming 45Z tax credit, a farm’s grain CI must register 29.1 or less.

“Thanks to the Inflation Reduction Act, there is a value placed on a farm’s CI score. It enables fuel companies to earn tax credits, but they must lower their overall CI score below 50. Corn is just one component of what goes into ethanol, and it is known as scope three,” said McDonald. “There are two other scopes that can contribute to that score of 50, and those include (production facility) emissions and their own energy usage to run the plant. The easiest, fastest, most effective way for biofuels manufacturers to lower their score is by relying on farmers to certify their crops that are lower than their standard score, therefore reducing the carbon footprint of that ethanol or biofuel producer.”

Via the new 45Z tax credits, farmers — who often get a “bad rap” when it comes to their contributions to GHG levels — now have an opportunity to be “part of the solution” rather than the problem, according to McDonald.   

“These tax credits are available to producers beginning this January 1, 2025, meaning that the crops we are putting into the ground this spring are what is going to feed the first year of these tax credits,” he said. “The opportunity is pretty significant for farmers to have a big impact, and more importantly an immediate impact.”

For every CI point under 29.1, fuel manufacturers can earn 2 cents per gallon on biofuels or ethanol produced. According to Continuum Ag, grain producers could reap a value of 5.4 cents per bushel, per CI point for CI-certified corn.  

“If you are a farmer that is able to produce a crop with a Ci score of zero, that’s worth $1.57 per bushel to the ethanol plant in terms of tax credits. The amount of money that could flow through this (tax credit) is massive, and it represents a brand new revenue avenue for farmers,” said McDonald.

Under this scenario, a CI-certified corn field of 1,500 acres with a yield of 200 bushels per acre and a CI score of 16.6 could generate a premium of around 34 cents per acre, assuming a ratio of fifty percent revenue to the farmer. This could add over $100,000 in farm income per year, though McDonald was quick to stress that “no one knows for sure” what ratio of the 45Z tax credits fuel manufacturers plan to share with crop producers in the form of cash payouts. 

The Iowa producer, who joined forces with Continuum Ag in 2022, told farmers on the webinar that it will be critically important to begin regular monitoring of their soil CI levels to take advantage of the upcoming opportunity for the additional revenue stream.

“In 2019 I was as full-conventional as a farmer could possibly be — black dirt, full-till, no cover crops, no regen practices whatsoever. But even then my CI score was 25; I was still below the standard score even with fully conventional practices. That is why I believe that no matter what your practices, it is crucially important to know what your CI score is and whether you are creating value,” said McDonald, before offering examples of ways farmers can relatively quickly improve their soil CI scores.

“At Continuum Ag we help farmers implement these practices and certify their crops,” he said. “The number one way to improve their CI score is through cover crops. If you plant a cover crop you are going to substantially lower your score. No till or even reduced till helps, even a shallow vertical till will help. Reducing fertilizer and chemicals by applying manure is going to lower your synthetic fertilizer rate plus improve your soil organic matter, which helps your CI score.”

To learn more about Continuum Ag’s CI certification program, including fees and conditions, visit continuum.ag/carbon-intensity/ci-certification/.