A new independent study found that the Section 40A Biodiesel Blenders’ Tax Credit (BTC) delivers more value across the biofuel supply chain than its replacement, the Section 45Z Clean Fuel Production Credit.
A bipartisan group of lawmakers introduced last year the Biodiesel Tax Credit Extension Act of 2025, which would extend the "40A" biodiesel blender's tax credit and extend the biodiesel tax credit for two years at the blender level. The proposal still sits in the House Committee on Ways and Means.
Prepared by GlobalData and commissioned by NATSO, SIGMA, and the National Association of Convenience Stores (NACS), the Tax Credit Impact on U.S. Biofuels report concludes that the BTC is a stronger mechanism for supporting biofuel consumption and providing consumer price relief.
Total renewable diesel and biodiesel volumes have declined by almost 60% since the BTC expired at the end of 2024, according to NATSO, representing America's travel centers and truck stops, SIGMA: America's Leading Fuel Marketers, and the National Association of Convenience Stores (NACS).
NATSO, SIGMA, and NACS—representing 90% of retail fuel sales—are urging Congress to reinstate the BTC to alleviate price pressures caused by market volatility.
Consumer-friendly policy
According to the research, nearly 70% of the BTC value traditionally flowed through the supply chain to blenders and consumers. Under normal market conditions, the $1-per-gallon BTC was relatively evenly spread, with producers keeping 30% to 50% of the credit while 50% to 70% was passed down to the pump.
In contrast, GlobalData found that under the 45Z production credit, as little as 20% to 40% of the value reaches blenders and consumers. Biofuel producers are expected to retain 60% to 80% of the 45Z credit value.
Barriers to savings
The report highlights several structural differences that prevent the 45Z credit from benefiting the public as effectively as the BTC:
- Payment mechanism: The BTC was an excise credit available immediately to blenders, allowing the value to flow freely and lower retail prices. The 45Z is an income tax credit that producers receive periodically, which prevents immediate price reductions for consumers.
- Complexity and loss: The 45Z credit varies based on greenhouse gas (GHG) emissions and must be redeemed against annual tax filings. Furthermore, most producers must trade these credits to other businesses, losing 5% to 10% of the total value in transaction costs.
- Market reach: While the BTC applied to all biomass-based diesel regardless of origin, the 45Z credit is restricted to fuel produced in the U.S. using specific feedstocks.
"This study highlights that the Biodiesel Tax Credit remains one of the most consumer-oriented tax policies," said NATSO President and CEO Max McBrayer, adding that reinstating the BTC would help stabilize fuel supply and lower prices at the pump.
Matt Durand, Deputy General Counsel for NACS, added that the BTC's transparency and market-tested structure deliver "real value for American families and small businesses."
The study suggests that while the BTC had minor weaknesses, it remains the superior policy for driving both production and consumption across the U.S. biofuel industry.
