Trump’s ‘big, beautiful bill’ to extend 45Z credits through 2031

opinion

by Fayaz Hussain

May 19, 2025

“Big, beautiful bill.” That’s how President Trump announced the latest tax and reconciliation package introduced by the House Republicans. It includes a modified version of the 45Z Clean Fuels Production Tax Credit, which is given to sustainable aviation fuel (SAF) producers. The proposal, which cleared the initial hurdle of the House Ways and Means Committee, includes multiple provisions that have a substantial impact on the US SAF industry.

The biggest of these is the extension in the 45Z credit until 2031, adding four more years to the incentive, which was set to expire by 2027. This extension will provide crucial long-term certainty for SAF project developers and investors at a time when the production is scaling significantly.

Data released by the Energy Information Administration showed domestic SAF production in the US doubled from December 2024 to February 2025. This growth is a consequence of significant capacity expansions in the US with capacity additions of about 25,000 barrels per day (bpd) in late 2024 as Phillips 66 completed its 10,000bpd project in Rodeo, California. Diamond Green Diesel also completed its 15,000bpd facility in Port Arthur, Texas.

Additional capacity is coming online too. The extension in 45Z credits will mean project developers can be certain on getting incentives for the next six years.

According to agricultural economist Scott Irwin, the proposed changes would significantly impact feedstock markets and SAF production economics. For SAF producers specifically, the removal of indirect land usage calculations (ILUC) from carbon intensity calculations could dramatically shift which feedstocks are most economically viable.

As Irwin explains: “Without ILUC, credit values for vegetable oil will be much closer to those of animal fats feedstocks. For example, under the original 45Z, soybean oil renewable diesel would have gotten around 35 cents per gallon and used cooking oil would have been around 65 cents per gallon. Much of that gap would be eliminated without ILUC.”

The changes to ILUC mean that vegetable oils like soybean and canola (rapeseed) – with typically higher emissions – would become more competitive for SAF compared with oils and fats.

Industry has also backed these recommendations in the proposal. The SAF Coalition, which represents SAF stakeholders in the US, said it is grateful to the Ways & Means Committee for supporting the extension of 45Z through 2031.

“This critical legislation provides long-term certainty for SAF producers, incentivises private sector investment and builds out a robust domestic supply chain. The bill ensures that 45Z delivers direct benefits to US farmers and rural economies,” it said in a statement.

Growth Energy, a body that represents biofuel interests in the US, said the 45Z extension would give biofuels producers a longer runway to innovate and to make investments in creating new markets for farmers.

“Pro-growth tax policy can unlock billions of dollars in new investments towards US energy dominance while supporting stronger markets for America’s farmers,” said Emily Skor, CEO, Growth Energy.

While these proposals are more than welcome and give the US SAF industry a profitable way forward, the modifications still face a long legislative journey. “It is important to remember that this version of 45Z is only from one committee on the House side. Whatever the House passes will have to be considered by the Senate,” said Irwin.

Industry sources indicate the Senate may be working on an alternative approach with “fixed credits for each biofuel” rather than the more complex carbon intensity-based structure, which could simplify implementation but might change incentives for specific SAF pathways.

For SAF producers planning investments in new or expanded production capacity, these policy developments represent both an opportunity for longer-term certainty and a challenge in predicting which feedstock strategies will prove most economical under the final legislation as they race to expand production.