The ethanol industry is undergoing significant shifts, particularly pertaining to carbon intensity (CI) reduction, feedstock and technology innovations, and evolving federal tax incentives. In a recent webinar hosted by EcoEngineers, Laith Amin, vice president, Growth and Development, McCord Pankonen, managing director, North America Biofuels, Juan Vargas Ramirez, Ph.D., account manager, North America Biofuels, and Logan Leduc, manager, Life-Cycle Analysis, discussed the latest industry trends gleaned from the 2025 Fuel Ethanol Workshop (FEW) held in Omaha, Nebraska on June 9-11.

This article highlights key topics discussed in the webinar, including the latest on the Section 45Z Clean Fuels Production Tax Credit, energy attribute credits (EACs), as well as corn and sorghum kernel fiber conversion.

Impact of Section 45Z and EACs

With uncertainty around the Section 45Z tax credit building ahead of this year’s FEW, the One Big Beautiful Bill Act (OBBBA) was eventually signed into law on July 4, 2025. The bill resulted in significant changes to Section 45Z, including:

• Extended Availability: Originally, Section 45Z was scheduled to expire after December 31, 2027. The OBBBA extends the Section 45Z credit through December 31, 2029.
• Feedstock Sourcing Requirements: After December 31, 2025, qualifying fuel must be produced from feedstocks sourced from the United States (U.S.), Mexico, or Canada.
• Emissions Rate Determination: The OBBBA provides clarity on the determination of emissions rates, excluding emissions attributed to indirect land-use change (ILUC). The U.S. Treasury is directed to provide distinct emissions rates for fuels derived from animal manure.
• No Double Credit: The OBBBA clarifies that a taxpayer cannot claim the Section 45Z credit for fuel produced from a fuel that has already generated a Section 45Z credit.
• Foreign Entity Restrictions: The OBBBA incorporates restrictions related to Specified Foreign Entities (SFE) and Foreign-Influenced Entities (FIE), applying the SFE prohibition for tax years beginning after enactment and the FIE prohibition for tax years beginning two years after enactment.

Ethanol producers recognize the importance of accurate CI calculations and robust documentation to mitigate risks and ensure compliance. Tracking and validating data, through accredited third-party verifiers, is essential for reducing underwriting costs, insurance, and maximizing the benefits of the Section 45Z tax credit.

EACs, particularly renewable energy credits (RECs), a type of EAC, are also key factors in enabling producers to offset carbon emissions by purchasing credits from renewable energy sources. The timing and quantity of renewable energy production can be challenging, especially for facilities operating 24/7. The impact of RECs on CI scores varies based on the grid’s emissions factor and a facility’s energy consumption. Producers must evaluate the cost-effectiveness of RECs and other renewable energy options to ensure a favorable return on investment.

Kernel Fiber Ethanol and ASTM E3417-25 Method Update

Interest in kernel fiber conversion remains high within the ethanol producer community. Under the Renewable Fuel Standard (RFS), kernel fiber ethanol offers access to higher-value D3 Renewable Identification Numbers (RINs), compared to D6 RINs for starch ethanol, due to its lower CI score. Producers should remain informed about the latest biotechnological advancements and regulatory updates to capitalize on this opportunity.

The United States Environmental Protection Agency’s (USEPA) approval of methods to measure kernel fiber conversion has led to more than 120 ethanol producer registrations for this pathway. The USEPA’s latest update to the American Society for Testing and Materials (ASTM) E3417-25 method, which determines the kernel fiber converted fraction from blends of corn and up to 69% sorghum, and the National Renewable Energy Laboratory (NREL) method issued in 2021, open up opportunities for ethanol producers to contribute significantly to the cellulosic biofuels mandate.

Although renewable natural gas (RNG) dominates the D3 category, with over 90% of RINs, the USEPA’s proposed revision to decrease the D3 RINs set for 2025 underscores the need for increased participation from ethanol producers. Demonstrating the capacity to produce cellulosic ethanol can help prevent further revisions and showcase the ability of the ethanol industry to help meet regulatory requirements.

In response to the latest ASTM E3417-25 method update, the USEPA requires ethanol producers with an approved in-situ kernel-fiber-to-ethanol pathway and using the ASTM method to measure the kernel fiber converted fraction and submit an engineering review addendum performed by a third-party professional engineer. This is particularly important as these producers approach their next kernel fiber converted fraction recertification. Ethanol producers must update their engineering reviews to reflect the use of the new ASTM method, regardless of feedstock.

EcoEngineers has supported more than 30 ethanol facilities in registering in-situ D3 kernel fiber pathways and provides Quality Assurance Programs (QAP) for those requiring Q-RIN status.

Summary

The ethanol industry is at another pivotal moment: production margins are thin, accentuating the importance of CI reduction as a strategy to improve federal tax incentive value.

To improve risk/return profiles, Biofuel producers must continue to focus on accurate data management, understanding their EAC options, and market diversification (e.g., kernel fiber ethanol). Staying informed on regulatory changes and technological advancements will also be crucial for navigating challenges and seizing growth opportunities. The inclusion of new feedstock options, such as sorghum, along with improved measurement methods, signals progress. Compliance with updated standards and active contributions to the D3 RIN category will help shape the future of ethanol. These ongoing advancements highlight the dynamic nature of the ethanol industry and the potential for significant innovation and growth.

For more information about our North America Biofuels services and capabilities, contact:

McCord Pankonen, Managing Director, North America Biofuels | mpankonen@ecoengineers.us 

About EcoEngineers

EcoEngineers, an LRQA company, is a consulting, auditing, and advisory firm exclusively focused on the energy transition and decarbonization. From innovation to impact, EcoEngineers helps its clients navigate the disruption caused by carbon emissions and climate change. Its team of engineers, scientists, auditors, consultants, and researchers live and work at the intersection of low-carbon fuel policy, innovative technologies, and the carbon marketplace. For more information, visit www.ecoengineers.us.