USDA final rule lets corn and soybean farmers quantify carbon intensity for biofuel tax credits

The USDA has finalized its Regenerative Feedstock Rule, allowing farmers growing corn and soybeans for biofuels to quantify the carbon intensity of their crops using practices like cover crops, reduced tillage, and nitrification inhibitors. The rule replaces the earlier 'climate-smart agriculture' label and gives farmers a way to calculate and market lower-carbon feedstocks. Crop production accounts for more than 50% of direct emissions from corn ethanol and nearly 50% from soybean biodiesel, according to the rule. Industry groups in Iowa are pushing for the Department of Energy to quickly incorporate the USDA's updated carbon intensity calculator into the GREET model, which determines eligibility for the 45Z low-carbon fuel tax credit. The Iowa Renewable Fuels Association says the rule could open 'massive new markets' for low-carbon biofuels. A companion executive order from the White House calls for more federal investment in regenerative agriculture and faster EPA review of alternative crop chemicals. For carbon market participants, the rule creates a standardized way to attach a carbon intensity score to field-level practices. The key open question is whether Treasury and DOE will adopt the USDA tool in time for farmers to make planting decisions by August. If they do, the rule could meaningfully shift how biofuel feedstock is grown and priced.