Senate Republicans preserved a credit for producing clean transportation fuels in the latest version of the One Big Beautiful Bill Act, but advocates argue that the move still falls short of supporting the broader clean fuel sector.

The Senate released its legislative text for the Republicans’ budget reconciliation over the weekend to advance President Donald Trump’s tax and spending agenda. GOP lawmakers have slashed many clean energy tax credits from former President Joe Biden’s Inflation Reduction Act to align with the Trump administration’s agenda. 

Recommended Stories

• Clean energy industry left reeling over tax on wind and solar in Republican megabill
• Inside the efforts to restart the Three Mile Island nuclear plant
• If Energy Star goes away, finding energy-efficient appliances will be harder. Here are some tips

Still, the Clean Fuel Production Credit (45Z), which promotes the production of clean transportation fuels, remains intact despite Republican cuts. The bill has extended the credit until 2029, at a cost of nearly $26 billion.

Feedstock is often used to produce clean fuel. The language in the Senate’s bill closely resembles that of the House-passed version, which would prohibit using feedstock from foreign entities. Only feedstock sourced from the United States, Mexico, and Canada would be eligible for the credit. 

“Maintaining and improving upon the House-passed language ensures that tax policy is aligned with the broader policy goals of supporting our farmers and producers over foreign actors,” said Devin Mogler, President and CEO of the National Oilseed Processors Association. 

While the bill extends the 45Z tax credit, Rachel Starr, a senior policy manager at the Clean Air Task Force, stated that it undermines the broader clean fuel goals by reducing other key credits, such as those for hydrogen, while also aiming to promote on-road biofuels.

The clean fuel production credit supports producers of on-road biofuels, such as ethanol, biodiesel, and renewable diesel, Starr said. She added that these industries are mature and already receive federal and state incentives.

“45Z is still tens of billions of dollars in giveaways to the on-road biofuels industry, which does not need support,” Starr said.

She added that the Senate bill version also lowered the value of the tax credit for sustainable aviation fuels, making production economically unviable. It is costly to produce SAFs, and with a smaller tax credit, there is no incentive to do that, Starr said. 

Instead, lawmakers should focus on next-generation fuels, such as hydrogen and advanced aviation fuels, to ensure the U.S. remains internationally competitive. Hydrogen can produce clean fuels, such as those used in transportation.

“There is an international market for clean fuel, so I think we would be falling behind not to be participating in that,” Starr said.

CLEAN ENERGY INDUSTRY LEFT REELING OVER TAX ON WIND AND SOLAR IN REPUBLICAN MEGABILL

“The U.S. is well-positioned to be a world leader in clean fuel production, but that won’t necessarily happen if federal policy continues to reward conventional biofuel production at the expense of advanced fuels,” she added.

The latest version of the Senate bill extended the clean hydrogen production credit to 2027 despite the hydrogen industry lobbying lawmakers to extend it to 2029. Starr said a question remains whether extending the credit to 2027 would be a meaningful amount of time for the hydrogen industry.