A coalition of environmental and taxpayer advocacy groups has voiced strong opposition to a proposed expansion of the Clean Fuel Production Credit, known as 45Z, included in the Senate’s FY25 budget reconciliation package. In a letter addressed to a senator, the coalition expressed concerns that the changes would lead to unnecessary spending on established industries.
The proposal seeks to remove indirect land use change (ILUC) considerations currently linked to the eligibility for the 45Z tax credit. The coalition argues that eliminating these provisions, which are essential for accurately assessing environmental impacts, would broaden the scope and increase the cost of the tax credit significantly. According to them, this move would result in further subsidies for conventional biofuels like corn ethanol and soy-based biodiesel and renewable diesel—fuels that are already produced without additional federal subsidies.
The Joint Committee on Taxation (JCT) estimates that this expansion could lead to an additional $57.1 billion in lost revenue from FY25-34, adding to the $8.4 billion from existing policies. Initially, when the Inflation Reduction Act was passed in 2022, JCT projected that targeting next-generation fuels with clean fuel credits would cost taxpayers $3 billion over ten years. The coalition notes that expanding this figure to $57.1 billion represents about twenty times more spending on legacy fuels, which have received federal support since the 1970s.
The groups behind this opposition include Clean Air Task Force Action, National Taxpayers Union, Taxpayers for Common Sense, Environment America, R Street Institute, U.S. PIRG, Friends of the Earth US, and National Wildlife Federation. They have expressed their willingness to collaborate with lawmakers “to chart a better path forward for 45Z and U.S. biofuels policy.”
