Biden administration expands 45Z tax subsidies to cover methanol
Methanol and marine diesel bunker fuel producers will be eligible for 45Z tax credits, as per the interim guidance of the US Inflation Reduction Act (IRA).
PHOTO: The US White House in Washington DC. Getty Images
The US Inflation Reduction Act (IRA) now includes methanol and marine diesel bunker fuel producers as eligible entities for 45Z tax credits, according to interim guidance released by the US Department of the Treasury and the Internal Revenue Service.
The Clean Fuel Production Credit (Section 45Z) provides an income tax credit to producers of qualified clean fuels manufactured after 31 December 2024 and sold by 31 December 2027. Blenders and compressors of the fuel will not be eligible.
Renewable natural gas is also eligible if it is “produced in a manner such that if it were further compressed, it could be used as a transportation fuel,” the guidance further states.
To qualify, the well-to-wake greenhouse gas emissions of the fuel must not exceed 50 kilograms of carbon dioxide equivalent per million British thermal units (50 kgCO2e/mmBTU), the guidance specifies.
“The inclusion of clean methanol in 45Z and the explicit language around its use as a marine fuel will increase the incentive to produce clean methanol as a fuel, both for marine and other uses, here in the United States,” Lawrence Navin, vice president of external affairs at the Methanol Institute said in a social media post.
The guidance, published before US President-elect Donald Trump’s inauguration on 20 January, will undergo a 90-day public comment period.
Producers can begin claiming tax subsidies, but key decisions on interpreting the proposal and the scheme’s future will depend on the incoming Trump administration, Mark Brownstein, senior vice president at the Environmental Defense Fund, noted.
Renewable Fuels Association’s chief executive Geoff Cooper noted that significant work needs to be done before clean fuel producers and consumers can fully benefit from the program.
By Konica Bhatt
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