Editor’s Note: Find the Original Article published in Ethanol Producer Magazine here.
Most fuel producers are now familiar with the Section 45Z Clean Fuel Production Tax Credit, which provides a significant financial incentive for facilities able to achieve a carbon intensity (CI) score below 50 kg CO2e/MMBtu. For many producers, reaching that threshold—or lowering CI scores enough to move into the next credit tier—may depend on the use of energy attribute certificates (EACs), also commonly referred to as renewable energy certificates (RECs). However, the U.S. Department of the Treasury’s February 2026 proposed rule introduced an important change to the eligibility requirements for EACs that producers need to understand as they plan for the first years of the 45Z program.
The 45Z tax credit allows transportation fuel producers to offset electricity-related emissions by purchasing EACs associated with qualifying renewable electricity generation. When applied appropriately, EACs can meaningfully lower a facility’s CI score, helping producers either qualify for the credit or increase the value of the credit they receive.
However, strict eligibility requirements apply to the use of EACs. In February 2026, the IRS and Treasury released a proposed rule for 45Z that revises how one of the key eligibility criteria, the incrementality requirement, is determined.
Redefining Incrementality
Under the proposed rule, the incrementality requirement now ties the eligibility of EACs to the first year a facility produces qualifying transportation fuel. Specifically, a fuel production facility is treated as “placed in service” in the first taxable year it produces transportation fuel, defined as fuel with a CI score below 50.
This begged the question: can producers continue to utilize EACs to achieve a CI score below 50?
Through discussions with the IRS, it was clarified that EACs may be employed by transportation fuel producers to initially qualify their products as “under-50” CI transportation fuel. EACs thankfully remain a viable option for lowering a facility’s CI score beneath the qualifying threshold, allowing the fuel to be categorized as transportation fuel for credit purposes.
Under the revised incrementality rule, the electricity generation facility associated with an EAC must have a commercial operations date no more than 36 months before the first day of the taxable year in which the fuel production facility first produces qualifying transportation fuel.
For many producers, that first year will be 2025. As a result, eligible EACs would generally need to originate from electric generation facilities that commenced operations in January 2022 or thereafter. If a producer can demonstrate a CI score below 50 in an earlier year, that earlier year would instead establish the starting point for the 36-month lookback period.
How the Proposed Rule Differs from Previous Guidance
This approach differs from the earlier incrementality framework outlined in the 45ZCF-GREET User Manual. Previously, the requirement was tied to the original placed-in-service date of the fuel production facility.
For example, a facility that began operations in January 2010 could source EACs from generation facilities with a placed-in-service date up to 36 months older than the fuel facility itself. Under the proposed rule, however, eligibility is instead linked to the year the facility first produces qualifying transportation fuel.
The intent behind this change is to encourage the development of new clean electricity generation capacity rather than subsidizing existing renewable generation facilities.
While the revised requirement effectively limits eligible EACs to newer electricity generation sources, the market currently appears to have an overall oversupply of EACs. As a result, the requirement may only modestly increase costs for facilities that must now source EACs from 2022 or newer generation.
It is also worth noting that producers that purchased and retired EACs under the January 2025 Notice of Intent to Propose guidance may still rely on the original incrementality rule for the 2025 tax year, provided their tax returns are filed before final regulations are issued. Final regulations are currently expected as early as summer 2026.
While the incrementality requirement received significant attention in the February proposed rule, the remaining EAC eligibility criteria remain unchanged.
Eligible Sources
Only wind, solar and hydroelectric generation qualify. Producers may not source EACs from other generation sources, including gas-based EACs. The 45ZCF-GREET User Manual notes that future guidance may allow the use of gas energy attribute certificates—such as RNG book-and-claim mechanisms—under certain conditions if approved by the Secretary of the Treasury. Until such guidance is issued, gas EACs and book-and-claim mechanisms are not permitted.
Deliverability
EACs must originate from the same geographic region as the fuel production facility. This requirement is satisfied if both the electricity generation source and the fuel production facility are electrically interconnected to balancing authorities located within the same region. The Department of Energy has mapped U.S. balancing authorities to regions defined in its Needs Study, which is referenced within the 45ZCF-GREET User Manual.
Temporal Matching
Annual matching is required, meaning the EACs used must be generated in the same calendar year as the electricity consumption they are intended to offset.
All EAC transactions must also occur through a qualifying registry to prevent double counting of environmental attributes. Each EAC carries a unique identification number that verifies ownership and ensures the environmental attributes are claimed and retired only once. For example, the same EAC cannot be used to satisfy both the 45Z tax credit and California’s Low Carbon Fuel Standard.
Most transportation fuel producers opt to purchase EACs through a broker rather than establishing their own registry account. Current guidance allows brokers to retire EACs on behalf of the transportation fuel producer.
Why EACs Matter for 45Z Credit Value
For many facilities, EACs will play an important role in determining whether they qualify for the credit, or how much they ultimately receive. Under the proposed framework for non-sustainable aviation fuel (non-SAF) pathways, with the 5x multiplier applied for meeting prevailing wage and apprenticeship requirements, the value of the 45Z credit increases in 10-cent increments as a facility’s CI score declines. CI scores are evaluated to the hundredth place, meaning even relatively small reductions in CI can translate into meaningful increases in credit value.
Because of this tiered structure, EACs provide a way for some producers to lower their CI score just enough to qualify for the credit or increase the value of the credit they receive.
EACs may be particularly valuable in the 2025 tax year. The indirect land use change (ILUC) penalty remains in the CI calculation for that reporting period and is not scheduled to be removed until the 2026 reporting year. As a result, EACs provide an important means for producers seeking to bring CI scores below the 50 threshold or move into a more favorable credit tier.
The proposed changes to the incrementality requirement reinforce Treasury’s intent to ensure EAC use supports the development of new clean electricity generation. While the change may reduce the pool of eligible EACs, the mechanism remains an important tool for fuel producers seeking to lower CI scores under 45Z. As producers evaluate their tax strategies, understanding how and when EACs can be used will be critical to determining eligibility for the credit and maximizing its value.
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If you are looking to offset your electricity emissions to lower your 45Z emissions rate, our team can help. We can walk you through the process of confirming EAC criteria and ensuring your EAC/REC purchase is valid.
