Last week, the One Big Beautiful Bill passed its final legislative hurdle in the U.S. Congress, clearing the House after Senate approval. The bill, which initially stalled when House leadership encountered resistance from deficit hawks over approving procedural rules, was signed into law by the President on 4 July 2025. The bill includes major changes to clean energy tax credits and vehicle efficiency and emissions standards, which are outlined as follows.
Clean Fuels
Notably, the 45Z Clean Fuels Production Credit, which was set to expire in 2031 per earlier versions of the bill, is now set to end after 31 December 2029. The final bill also applies a restriction on foreign feedstocks. This could limit the growth of clean fuels such as renewable diesel, specifically for coastal facilities that rely on imported feedstocks to produce cleaner fuels. The bill also reduces the amount of crediting eligible for Sustainable Aviation Fuel but confirms that manure-based biogas remains eligible for the credit.
Carbon Sequestration and Enhanced Oil Recovery
The 45Q Tax Credit for Carbon Sequestration was left intact, with the tax credit for enhanced oil recovery being expanded to be on par with the credits received for geologic storage. This could encourage carbon capture, utilization, and storage (CCUS) activities being carried out at oil and refining facilities.
Zero-Emission Vehicle and Efficiency Standards
Additional Updates
The bill also modifies the 45V Clean Hydrogen Credit by making facilities that begin construction after 31 December 2028 no longer eligible. While this is seen as an extension given previous iterations suggested making this date 31 December 2025, this is still a lower window compared to the original 2033 date in the Inflation Reduction Act. While this may still benefit clean hydrogen projects, the limited time frame may hinder the commercial adoption of certain projects. The bill also keeps battery and solar tax credit eligibility through 2032 but ends crediting for wind projects in 2027 and phases out mineral credits by 2033. Finally, the bill doubles the biodiesel producer credit and extends it through 2026, strengthening margins for smaller Midwest and Northwest producers serving clean fuel markets.
Impact on Carbon Markets
The dismantling of foundational policy tools that pushed automakers toward fleet-wide electrification and rollbacks of incentives for clean fuel production risk stalling climate progress across the country, moving further away from the 1.5-degree warming target. While some revisions may in fact support near-term growth in clean fuels, the broader structural shifts that this bill introduces jeopardize overall decarbonization. Reduced federal incentives that supported achieving targets and emission reduction goals under Low-Carbon-Fuel Standards and Cap-and-Invest programs may slow the rate of emissions decline, adding bullish pressure to the programs.
This regulatory rollback may force states like California to reassess targets with respect to fuels’ carbon intensity, ZEV adoption, and overall emission forecasts in carbon markets.
For further details on how this bill impacts clean fuel programs and has the potential to reshape supply chains affecting the energy sector, please reach out to ClearBlue’s policy experts using the Contact Us button above. ClearBlue will continue to follow these developments and will provide updates as needed.