On April 30, the U.S. Department of the Treasury and Internal Revenue Service (IRS) released ...

On April 30, the U.S. Department of the Treasury and Internal Revenue Service (IRS) released the latest updates to the Greenhouse Gases, Regulated Emissions, and Energy use in Technologies (GREET) model. This is the primary model used in the United States to calculate carbon intensity (CI) scores regarding greenhouse gas emissions.

The GREET model will be the basis for calculating subsidies for production of renewable energy. One of the fastest growing renewable energy sectors is Sustainable Aviation Fuel (SAF). As seen in our previous Newswire, Nebraska is preparing to be on the forefront of this emerging space with a state-based tax credit that stacks with federal credits. The release this week from the IRS focuses on application of the model to 40B federal tax credits, which is for production of SAF.

The GREET model works by requiring strict records of the practices farmers and ranchers are using throughout the production of the end product. The scores assigned to different practices are combined, and an overall CI score is determined. The score is then verified by a third party.

Under the new GREET model, farmers producing corn for SAF will be ineligible for credits unless they implement three practices:

1. No-till farming.
2. Planting cover crops.
3. Using enhanced efficiency nitrogen fertilizer.

Soybeans for SAF will also require the first two practices to be eligible for tax credits, but nitrogen application is not required.

As you may notice, requiring these practices can be negative for Nebraska farmers and ranchers. Enhanced efficiency fertilizer forgets that some areas do not even have a need for fertilizer, and cover crops only have a positive effect in some areas of the state, with special note that no-till practices and cover crops do not often get used together.

Notably, the IRS has clarified that if a farmer or rancher is already enrolled in a program involving carbon, they will not be eligible for any tax credits for carbon under federal programs. This highlights the strong importance for farmers and ranchers to be very thorough when considering any long-term contract, particularly when it comes to emerging markets such as carbon capture.

You may find more information in the official press release. As always, if you have any questions, please feel free to reach out to Kole Pederson, director of environmental & regulatory affairs, at [email protected].