What do new renewable fuel tax credits in the U.S. mean for canola?

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There’s more work to do to improve where canola’s carbon intensity score ranks in the tax credit regime for renewable fuels in the U.S., according to the executive director of the Canadian Oilseed Processors Association (COPA).

After taking a few days to digest the U.S. Treasury Department’s awaited announcement last week of new requirements for sustainable aviation fuel tax credits, COPA’s Chris Vervaet says there were some positives for canola, as well as some areas where more work will be needed to boost demand for the crop as a feedstock for renewable fuels in the growing U.S. market.

First, the announcement last week confirmed canola-based sustainable aviation fuel (SAF) will qualify for a $1.25/gal tax credit retroactively for 2023 and 2024, he notes.

“That is good news,” says Vervaet. “More good news is that there’s a pathway for Canadian canola through this new updated GREET model — the new model that will be used going forward to calculate the carbon intensity of different feedstocks that are used for the production of fuel.”

At the same time, he says canola-based SAF was left “on the outside looking in” regarding an additional $0.50/gal tax credit available for SAF made from U.S. corn and soybeans grown with what the U.S. government deems “climate smart agricultural practices,” such as zero-till, enhanced efficiency fertilizers, and cover cropping.

While the announcement last week was the guidance regarding the 40B blenders’ tax credit for SAF sold before the end of 2024, all eyes in the renewable fuel sector are on the upcoming 45Z clean fuel production tax credit that will run from 2025 to 2027, encompassing all the major renewable fuels where canola is relevant — biodiesel, renewable diesel, and sustainable aviation fuel.

“There is work that needs to be done leading up to this new tax credit starting in 2025 to improve canola’s carbon intensity score, to help ensure we are eligible down the line based on the carbon intensity,” explains Vervaet.

What this means for the expansion of canola crush infrastructure that’s underway in Western Canada is yet to be determined, he says, but there’s a window of opportunity to work on the details to support a better carbon intensity score for canola for the tax credits starting in 2025.

Listen for more with COPA’s Chris Vervaet on where canola fits into the new U.S. renewable fuel tax incentive criteria:

Related: U.S. demand for canola oil rising, with construction underway on new crush facilities

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