Limit biofuel tax credit to US producers, lawmakers tell Yellen

A surge of Chinese used cooking oil flowing into the US to make biofuels is prompting a call for Treasury Secretary Janet Yellen to ensure that only domestic ingredients can benefit from a tax credit taking effect next year. 

The push by a bipartisan group of senators, including Democrat Sherrod Brown of Ohio and Republican Roger Marshall of Kansas, underscores the mounting pressure on the Biden administration to halt the flood of foreign used cooking oil that lawmakers say threatens American farmers and the intention of President Joe Biden’s landmark climate law. 

“Allowing US tax credits to fund the importation and use of foreign feedstocks to produce biofuels would put US agriculture at the back of the line, while foreign agricultural producers are subsidized by US taxpayers,” said a July 30 letter to Yellen signed by more than a dozen senators. 

The senators are calling on Yellen to issue final guidelines for the Clean Fuel Production Credit, known as 45Z, under the Inflation Reduction Act before Jan. 1, when the tax incentive is set to take force. “As Treasury works to craft 45Z guidance, we urge you to restrict the eligibility to renewable fuels made from feedstocks sourced domestically,” the letter states. 

The tax credit aims to encourage more production of climate-friendly fuels like renewable diesel and sustainable aviation fuel, or SAF, that can be made from crops including soybeans, canola and corn as well as waste products such as used cooking oil and tallow. 

US crop processors say the flood of foreign biofuel ingredients, including sugarcane ethanol used to make green jet fuel, are undercutting American farm products, and some groups have pushed for higher levies on used cooking oil imports from China. 

The lawmakers contend guidance for the current SAF tax credit known as 40B, which expires at the end of this year, is flawed because no domestically produced ethanol can meet its requirements. 

The letter comes on the heels of a group of US House Republican lawmakers pressing the Environmental Protection Agency to confront the imports of possibly fraudulent UCO. They are highlighting the use of third-party certification to help block fake supplies from entering the US. 

There has been widespread speculation used cooking oil from Asia is mixed with fresh vegetable oils, potentially distorting commodity values, undermining US biofuel laws and leading to deforestation.