Some stars may be aligning to improve future earnings for farms operating anaerobic digesters. Updates to the Environmental Protection Agency’s (EPA) Renewable Fuel Standard, California’s Low Carbon Fuel Standard, and the new federal 45Z clean fuel tax credit create opportunities for some anaerobic digester operators.
A push for renewable fuel
The Renewable Fuel Standard (RFS)is a federal program administered by the EPA. It requires that transportation fuel sold in the U.S. contains a minimum volume of renewable fuels. This spring, EPA finalized its new standards with the highest biofuel requirements in the program’s history. These updated standards take effect on June 15.
This bump in biofuel requirements generally benefits corn and soybean farmers by raising demand for their crops. A downside is that greater demand could raise feed costs for livestock farmers. For farms operating anaerobic digesters, though, there are income opportunities. Some farms creating biogas take it a step further and produce renewable natural gas, which then can be injected into the pipeline and used in fuel. Farms producing renewable natural gas can earn credits called Renewable Identification Numbers, which can be sold to companies looking to meet their EPA fuel mandates.
Farms in California can get additional benefits from producing renewable natural gas. The Low Carbon Fuel Standard (LCFS) is designed to reduce the carbon intensity of the state’s transportation fuel and provide more low-carbon and renewable alternatives.
California amended its LCFS last summer, intensifying carbon reduction targets of 30% by 2030 and 90% by 2045. This makes manure‑based renewable natural gas more attractive as it has one of the lowest carbon intensity (CI) scores of any fuel since it prevents methane emissions.
Credits for less carbon
Another opportunity for digester operators producing renewable natural gas is the Clean Fuel Production Credit, commonly referred to as the 45Z tax credit. As part of the Inflation Reduction Act, this tax credit incentivizes domestic production of low-emission transportation fuels. The credit amount is tied to the fuel’s carbon intensity score and applies to fuel produced and sold between Jan. 1, 2025, and Dec. 31, 2029.
To participate, there are a few “hoops” to jump through. First, fuel producers must register with the IRS. Second, the facilities used to make the fuel must be located in the U.S. or its territories and meet certain carbon dioxide (CO2) requirements. The fuel produced must be a transportation fuel, and the fuel must be purchased by an unrelated person through a qualified sale.
Farmers not producing renewable natural gas may still benefit from this tax credit indirectly. Fuel producers may be willing to pay more for feedstocks like corn and soybeans that come from farms with reduced carbon emissions. Practices such as planting cover crops or no-till farming may make crops more desirable to fuel producers seeking credits.
Anaerobic digesters are still an expensive way to manage manure. However, these new and updated incentives have the potential to make each unit of methane produced by livestock more valuable. Time will tell how well federal policy, tax credits, and state law can mesh together to benefit agricultural businesses. This push for natural renewable gas may become even more important, though, as conflict in Iran has crude oil and natural gas prices skyrocketing.
This article appeared in the May 2026 issue of Journal of Nutrient Management on page 10.
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