The Clean Fuel Production Credit, known as 45Z, has quickly become one of the most financially significant incentives the biofuels industry has ever seen. For many producers, it offers a rare combination of meaningful per-gallon incentives, immediate monetization through transferable credits, and strong federal support for lower-carbon fuels.

But alongside this opportunity comes an equally powerful force: uncertainty.

“Without guarantees around whether these tax credits are 100% secured down the road, we don’t recommend spending all of the money the credits provide,” cautions Donna Funk, lead biofuels advisor at Pinion. 

“While these credits are not expected to disappear, companies need to be cautious about impacts stemming from current and future market pricing. Ensure you secure the money with safeguards in place, rather than just spending it and possibly regretting it if an unexpected event (economic downturns and tax or leadership changes) quickly erodes its value.”

Funk recommends evaluating a financial strategy that might include strategic forecasting, consideration of plant expansions, avoiding debt bottlenecking, and wealth planning.

With guidance now proposed, producers face the decisions of how to maximize the tax credit value while keeping potential unknowns in mind. Maximizing the tax credits might mean allocating them to the owners or it might be selling them and collecting cash.

The answer lies in a disciplined approach — protecting liquidity, preserving flexibility, and avoiding irreversible commitments until regulatory clarity improves.

Below are strategies to help you take advantage of today’s benefits while staying financially resilient amid policy uncertainty.

1. Don’t commit the money yet

Because 45Z credits are transferable, many producers may see near-term cash as the program takes shape. With regulatory guidance still evolving, the smartest move right now is often to preserve flexibility rather than lock capital into long-term decisions too early.

“Producers looking for slightly higher returns could include short-term corporate bond funds in their approach but would need to be comfortable with the credit profile of the holdings. There may also be opportunities to further increase returns using risk hedged investments but producers should work to understand the potential timing of liquidity needs for the credits,” says Blake Allen, advisor, Pinion Wealth Management. 

2. Evaluate major long-term capital investments

Keep evaluating projects the same way you did before 45Z. The credit may help, but if a project only works because of 45Z, it may not be the right move. Use 45Z as a bonus — not the reason to invest.

3. Use the funds to reduce risk, not increase it

Rather than deploying capital aggressively, consider using early 45Z proceeds to strengthen the organization’s financial foundation:

  • Pay down high-interest or floating-rate debt
  • Increase operating reserves
  • Improve liquidity and leverage ratios

These steps enhance resilience regardless of how policy ultimately evolves.

4. Build a dual pathway plan for capital allocation

A disciplined approach is to separate investments into two strategic buckets:

Bucket A: Secure, “no‑regrets” investments

These are improvements that make business sense on their own. Even if 45Z were delayed, modified, or eliminated, these investments still strengthen operations and reduce long-term risk:

  • Energy efficiency upgrades
  • Maintenance and reliability improvements
  • Digital monitoring systems and process controls
  • Incremental CI-reduction practices that have an impact beyond 45Z

 Bucket B: Contingent/strategic spending

 These investments depend on regulatory stability:

  • Major CI‑reduction CapEx
  • New product and co-product pathways

Deploy Bucket B with a different risk tolerance than Bucket A. Think of it as “I am willing to lose this” vs “I need to do this regardless.”

5. Stress-test the business against policy reversal

Model scenarios such as:

  • Early expiration of 45Z
  • Unfavorable changes in CI calculation methodology
  • Credit value compression
  • Restrictions on transferability
  • Inclusion of Climate Smart Agriculture practices that are not practical in your feedstock region
  • Feedstock traceability requirements that are hard to implement

Cash reserves and liquidity planning should ensure the business can withstand scenarios where:

  • 45Z payouts decline materially
  • Compliance costs increase
  • Projected ROI temporarily collapses

In today’s environment, scenario modeling is not optional. It is essential risk management.

6. Apply hedging-style financial discipline

Producers can use financial structuring tools to protect downside risk:

  • Lock in fixed‑rate debt when financing projects
  • Establish escrow accounts for future CapEx
  • Structure investments with milestone-based funding triggers

These mechanisms preserve capital while keeping strategic options open.

7. Organizational changes you might need to consider

  • Do you need to strengthen your compliance team?
  • Do your contracts have the right language to “force” contractors to comply with prevailing wage and apprenticeship requirements?
  • How are compensation packages structured to avoid employees and executives getting too satisfied with bonuses and becoming complacent about the “small” things that matter and will really matter when the 45Z dollars are no longer available?

8. Details matter

When selling transferable credits, producers should consider:

  • The risks included in the contract.
  • If no insurance is required, how do you maintain the financial strength for the required period?
  • What does the insurance policy really insure against vs what are you still at risk for?
  • Consider agreements with multi-year options for both parties to try and reduce costs going forward as you should not have to negotiate as much each time and attorneys will start with new contracts each period.

9. Strengthen documentation and compliance readiness

One of the largest long-term risks is retroactive IRS audits which could challenge things such as:

  • CI Scoring
  • Prevailing wage and apprenticeship compliance
  • Qualified sales
  • Related party transactions
  • Documentation details

Strong documentation protects against potential credit claw backs and regulatory scrutiny.

A Practical Path Forward

45Z represents a compelling financial opportunity — but also introduces meaningful uncertainty. The producers best positioned for success will be those who balance ambition with discipline, preserving flexibility while building long-term resilience.

By protecting liquidity, stress-testing assumptions, and deploying capital strategically, biofuel producers can capture today’s value without jeopardizing tomorrow’s stability.

Reach out to a biofuels advisor for help assessing your organization’s 45Z strategy, modeling scenarios, or exploring credit monetization options.