US Senate Adopts Tax Neutrality for Advanced Biofuels

The US Senate Finance Committee modifies the '45Z' tax credit to standardize the tax treatment of renewable fuels, thereby encouraging advanced biofuel production starting October 2025.

The United States Senate Finance Committee has approved a major reform concerning the federal tax credit named Clean Fuel Production Tax Credit (45Z), introducing tax parity between Sustainable Aviation Fuel (SAF) and other advanced biofuels, including biodiesel and renewable diesel. The measure, effective from October 1, 2025, aims to revive American biofuel production, heavily penalized since January by fiscal disparities.

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Rebalancing Renewable Fuel Taxation

The previous version of this law, established by the Inflation Reduction Act of 2022, provided up to $1.75 per gallon produced of Sustainable Aviation Fuel, while other biofuels received a lower credit. The scheduled expiry of the Biodiesel Blenders’ Tax Credit in December 2024 has further contributed to the industry’s slowdown. According to the Sustainable Advanced Biofuel Refiners (SABR), rebalancing this fiscal measure is now a crucial step to revitalizing the US advanced biofuel supply chain.

Industry organizations, including the National Association of Truck Stop Operators (NATSO), the Society of Independent Gasoline Marketers of America (SIGMA), and the American Trucking Associations (ATA), particularly welcomed this revision which they say should encourage increased production and consumption of biofuels. David Fialkov, Executive Vice President of Government Affairs for NATSO and SIGMA, explained that introducing tax neutrality will generate more gallons of biofuels at lower overall costs for American taxpayers.

Foreseeable Impacts on Energy Markets

According to Matt Durand, Deputy General Counsel at the National Association of Convenience Stores (NACS), this new tax balance is crucial for sustainably reviving the US biodiesel market. The current cost differential between Sustainable Aviation Fuel and renewable diesel has significantly disadvantaged the latter, severely hampering its economic appeal and thus production.

This tax harmonization would now allow producers to select economically competitive biofuels, according to experts. It is expected to result in a natural industry shift toward the most profitable energy products on the market, thereby boosting competition and potentially moderating pump prices for American end consumers.

Reconfiguration of a Strategic Sector

Biofuels represent a significant component of the US energy sector, particularly in road and air transport. Industry professionals hope this Senate decision will help revive weakened production and restore a favourable economic dynamic for the entire supply chain.

Final approval of this provision still depends on a full Senate vote and discussions with the House of Representatives. Stakeholders are therefore closely monitoring the legislative progress of this important tax measure.