Section 45Z: Quiet Tax Credit Sparks Clean Water Revolution Through Low-Carbon Fuels

The Inflation Reduction Act of 2022 has a little-known provision called Section 45Z that could spark a revolution in clean water practices.

This section grants tax credits to biofuel producers who make low-carbon fuels, with the goal of reducing greenhouse gas emissions and improving water quality.

The tax credit's worth is based on a carbon intensity score, which tracks the supply chain's carbon footprint. Producers who achieve lower scores can earn higher premiums for their crops, such as corn used to make ethanol.

Farmers who implement soil health practices like cover crops and reduced tillage can lower their carbon intensity scores and receive higher payments.