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How the 45Z tax credit works for ethanol in 2026: the CI formula, what corn ethanol earns per gallon, farm practices, carbon capture, and how to claim or sell it.
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Paulestini Francois
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The 45Z tax credit pays ethanol plants by carbon intensity, and most corn ethanol sits right at the line. A few points of carbon intensity can decide whether a plant earns nothing or tens of millions of dollars a year. Here's how the 45Z tax credit ethanol producers claim is calculated, what it's worth per gallon, how plants and farmers lower their scores, and how producers claim or sell it.
QUICK ANSWER
The 45Z tax credit pays ethanol producers $1.00 per gallon with prevailing wage, or $0.20 without, times an emissions factor of (50 minus the carbon intensity score) divided by 50, rounded to the nearest 0.1. Most corn ethanol scores near 46 to 51 kg CO2e per MMBtu, so credits range from $0 to about $0.30 per gallon, or about $0.70 with carbon capture.
KEY FACTS
How much is the 45Z credit for ethanol? Up to $1.00 per gallon times the emissions factor; most corn ethanol earns $0 to about $0.30 per gallon in 2026.
What CI score does ethanol need for 45Z? No more than 50 kg CO2e per MMBtu. The emissions factor must round to at least 0.1, which takes a CI of about 47.5 or less.
Is there still an ethanol tax credit after OBBBA? Yes. The 45Z clean fuel production credit applies to ethanol sold through December 31, 2029.
Can farm practices raise an ethanol plant's 45Z credit? Yes. Climate-smart practices scored in USDA's FD-CIC tool, such as cover crops and no-till, lower corn's CI score.
Which form claims the 45Z credit? Form 7218, filed separately for each facility, after Form 637 registration.
Is 45Z a production tax credit (PTC)? Yes. The 45Z PTC is paid per gallon produced and sold, scaled by carbon intensity, and it can be transferred for cash.
How does the 45Z tax credit work for ethanol?
The 45Z clean fuel production credit pays ethanol producers per gallon based on carbon intensity. The rate is $1.00 per gallon with prevailing wage and apprenticeship, or $0.20 without, times an emissions factor of (50 minus the CI score) divided by 50, rounded to the nearest 0.1. Fuel scoring above 50 kg CO2e per MMBtu earns nothing.
The credit is in 26 U.S.C. 45Z. It goes to the registered producer of the fuel, not the blender, and covers fuel produced after 2024 and sold by December 31, 2029. That's a big change from the old Volumetric Ethanol Excise Tax Credit, a flat $0.45 per gallon paid to blenders until 2011, as farmdoc daily notes. For 45Z ethanol credits, every point of carbon intensity (CI) matters.
The $0.20 and $1.00 amounts are adjusted for inflation after 2024. Since 2026, feedstock must be grown or produced in the United States, Mexico or Canada. For the full credit across all fuels, see our 45Z tax credit guide.
How much is the 45Z credit worth per gallon of ethanol?
For most corn ethanol plants, 45Z is worth $0 to about $0.30 per gallon in 2026, before inflation adjustment. Plants near 50 kg CO2e per MMBtu earn little, plants using low-CI corn can reach $0.20 or more, and plants with carbon capture can reach about $0.70.
Because the emissions factor rounds to the nearest 0.1, the credit moves in $0.10 steps at the $1.00 rate. A CI of 41.68 kg gives a raw factor of 0.17, which rounds to 0.2, or $0.20 per gallon. A CI of 47.6 rounds to zero. Estimates vary widely:
Kansas State's Roger McEowen estimated that business-as-usual plants could earn about $0.35 to $0.45 per gallon once indirect land use change was removed, and $0.70 to $0.75 with carbon capture.
farmdoc daily's worked example, cover-crop corn in Champaign County, Illinois, lands at a 41.68 kg CI using a 20 kg plant assumption.
A Capstone projection from January 2026, before the June and September model updates, put generic corn ethanol at about $0.10 per gallon.
The spread comes down to the plant's own CI, which only the official model can set. Use the calculator below to test your plant's numbers.
A 45.7 kg score gives a 0.1 factor, worth $0.10 a gallon and $10.0M a year. Cutting about 3.2 more points adds another $0.10 per gallon.
Illustrative only. Your official emissions rate comes from the 45ZCF-GREET model and IRS tables; credit amounts are shown before the post-2024 inflation adjustment. The factor rounds to the nearest 0.1. Fuel must be sold by December 31, 2029.
What is a typical corn ethanol carbon intensity score?
Corn ethanol scores sit close to the 50 kg CO2e per MMBtu limit. The GREET default for corn is 6,295 g CO2e per bushel, about 30.7 kg per MMBtu of ethanol. Add 15 to 20 kg for a typical plant and the total lands between about 46 and 51 kg.
A CI score has two parts: the feedstock and the rest of the system, meaning the plant's energy, chemicals and transport. farmdoc daily notes that feedstock production is at least 40% and up to 60% of corn ethanol's CI. The 30.7 kg figure is our conversion of the GREET default at 2.7 gallons per bushel and 0.076 MMBtu per gallon, the factors farmdoc uses.
Producers get their official score from the 45ZCF-GREET model. Removing indirect land use change from the calculation for fuel produced after 2025 lowered corn ethanol's scores, which is why many plants now qualify.
How can ethanol plants lower their CI score?
Ethanol plants cut their carbon intensity three ways: buying corn grown with recognized climate-smart practices, using less fossil energy in the plant, and capturing and storing fermentation CO2. Farm practices can cut several points, and carbon capture typically cuts about 30.
Lower-CI corn. USDA's Feedstock Carbon Intensity Calculator (FD-CIC) recognizes no-till, reduced till, cover crops, nitrification inhibitors, split in-season fertilizer and spring-only fertilizer, according to farmdoc. In Illinois, cover crops cut corn CI by about 1,174 to 3,137 g CO2e per bushel depending on the county.
Plant efficiency. Less natural gas per gallon, renewable or combined heat and power, and better process controls lower the plant's share of the score.
Carbon capture. McEowen says CCS can bring a plant's CI to about 12 to 15, but CO2 pipeline delays mean many trunk lines may not run until 2027 or 2028.
The September 2026 45ZCF-GREET model integrated FD-CIC, so farm practice reductions can now flow into producer credit values. Notice 2026-53 also deems USDA's pre-application nutrient budget requirement met for fuel produced in 2025 and 2026, because those crops were planted before the guidelines were final. The chart below shows how five plant and corn combinations land against the 50 kg limit.
Cover-crop corn, average plant: farmdoc's Champaign County, Ill. cover-crop example: 41.68 kg.
Sources: farmdoc daily 45Z series, Parts 2 and 3 (University of Illinois, 2026); R. McEowen, Proposed IRC 45Z Regulations (K-State, Feb. 2026); 26 U.S.C. 45Z. Plant CI values are assumptions, not a specific plant's score. Amounts before the inflation adjustment.
Can an ethanol plant with carbon capture claim 45Z and 45Q?
Not in the same year. A facility is not a qualified 45Z facility for any taxable year in which the Section 45Q carbon capture credit is allowed for it. Ethanol plants with CCS must choose, and McEowen notes 45Z is often worth about three times as much as 45Q for them.
The rule is in 45Z(d)(4), which also excludes facilities claiming the 45V clean hydrogen credit that year. Because 45Z ends after 2029, a plant whose capture system starts in 2028 may only get one or two years of the higher 45Z value. Our 45Q tax credit guide covers the alternative.
How do farmers benefit from 45Z?
Farmers don't receive the 45Z credit directly; ethanol producers do. Farmers benefit if plants pay premiums for verified low-CI corn. farmdoc daily estimated cover-crop corn in Champaign County could create about $98.80 of credit value per acre, before the plant keeps its share or pays verification costs.
The farmdoc estimate uses a 220 bushel yield, about 594 gallons of ethanol per acre, and the unrounded $0.166 per gallon rate. Its county-level range for the medium plant case is about $48 to $184 per acre. That is a maximum pool of value, not a payment. Farmers must use FD-CIC, and claims of farm-practice reductions need third-party verification and a traceable mass-balance chain from field to plant.
What changed for ethanol under OBBBA and the 2026 rules?
The One Big Beautiful Bill Act extended 45Z through 2029, removed indirect land use change from emissions rates for fuel made after 2025, limited feedstocks to North America and ended the higher rate for sustainable aviation fuel. Treasury then proposed regulations in February 2026 and issued Notice 2026-53 in September.
February 4, 2026: proposed regulations published. Our 45Z proposed regulations guide covers them.
June 12, 2026: updated 45ZCF-GREET model released; USDA's final feedstock guidance followed June 29, per Trinity Consultants.
September 8, 2026: Notice 2026-53 published the 2026 emissions rate table, with a September model that integrates FD-CIC.
Final regulations were still pending in late October 2026. The U.S. made a record 16.49 billion gallons of ethanol in 2025, Biofuels Digest reported, so even $0.10 per gallon would mean about $1.6 billion a year of credits industry-wide by our math.
How do ethanol producers claim or sell 45Z credits?
Producers must register with the IRS on Form 637 before producing the fuel, then claim the credit on Form 7218, one per facility, with their tax return. They can also sell 45Z credits for cash under Section 6418 after completing IRS pre-filing registration.
The IRS says fuel made before the registration date doesn't qualify, so register early. Most ethanol producers sell their credits to corporate buyers because the credit is large relative to their own tax bills. See our guides to IRS pre-filing registration, prevailing wage rules and credit pricing.
Sources
26 U.S.C. 45Z, clean fuel production credit
farmdoc daily (University of Illinois), 45Z series: Introductory Discussion, Part 2: Carbon Intensity, Part 3: Potential Value
R. McEowen, Proposed IRC 45Z Regulations (Kansas State University, February 9, 2026)
GlobalELR, IRS Issues 45Z Tax Credit Notice and DOE Updates 45ZCF-GREET Model (September 2026)
Trinity Consultants, Section 45Z Update: GREET Model and USDA Feedstock Guidance
Biofuels Digest, Ethanol production rose to record 16.49B gallons in 2025
Frequently Asked Questions
How does the 45Z tax credit work for ethanol?
Ethanol producers earn $1.00 per gallon with prevailing wage and apprenticeship, or $0.20 without, times an emissions factor equal to (50 minus the fuel's CI score) divided by 50, rounded to the nearest 0.1. Fuel above 50 kg CO2e per MMBtu earns nothing.
How much is 45Z worth per gallon of corn ethanol?
Can ethanol plants claim both 45Z and 45Q?
Do farmers get the 45Z credit?
Can Cenet Capital help sell 45Z credits?
Producing ethanol? Turn your 45Z into cash
Cenet Capital helps ethanol producers estimate their 45Z credit from their carbon intensity score and sell it to corporate buyers under Section 6418. Share your annual gallons and CI score.
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