Guidance and the GREET Model: Considerations for 2026 Section 45Z Tax Credit Purchases
As the tax credit transferability market moves into mid-2026, the market for Section 45Z continues to mature. While Treasury and the IRS have now released proposed guidance on the credit, several critical issues remain open, including the anticipated release of an updated Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model expected in the third quarter of 2026.
The initial framework for the Clean Fuel Production Credit was established through proposed Treasury guidance released in February 2026. That guidance provided necessary certainty and reliance for renewable fuel producers and tax credit buyers alike.
Since then, the market has transacted billions of dollars of 2025 §45Z credits. Now, renewable fuel producers are shifting their focus on anticipated updates to the Argonne National Laboratory 45ZCF-GREET Model, which is expected to address industry concerns regarding feedstock treatment, indirect land use penalties, and other adjustments to carbon intensity calculations.
How New GREET Revisions Will Reshape Carbon Intensity Scores
The current version of the model has generated substantial debate across renewable fuels industries. Producers have pushed for greater recognition of climate-smart agriculture practices, the removal of the indirect land use change (ILUC) penalty, and reduction of the emissions rate cap on animal manure feedstock.
Treasury officials and industry groups have indicated that an updated GREET model is expected in Q3 2026, with many market participants viewing the release as critical to continue transacting on 2026 tax credits. For nearly all renewable fuel producers, the forthcoming model update is expected to materially reduce carbon intensity scores and, by extension, increase overall credit amounts and monetization economics. As such, there are many considerations that both sellers and buyers must consider when transacting 2026 credits ahead of the release of the new model.
Ways to Structure the Sale of 2026 Credits Right Now
A buyer may commit to purchasing the amount of credits that can be substantiated with the current GREET model. The seller would then need to procure a second buyer for any excess credits after the release of a new model. This can result in higher-than-expected transaction costs, potentially lower pricing (as both sales will be for smaller amounts of credits) but has greater certainty for both buyers and the seller.
A buyer commits to purchase up to the amount expected to be generated upon the release of the new GREET model. Fundings occurring before the release of the model are based on the currently available model. Additional generated credits are purchased as a true up in future fundings. However, in the event the GREET model comes out less than favorably, the buyer’s economics and tax savings drastically change, which could require less favorable provisions for the seller in the sale contract.
Sellers can wait until the GREET model comes out to transact 2026 credits. This is costly to sellers as they are delaying cash proceeds, but it provides the most certainty to both parties.
Despite the remaining uncertainty around 2026 credits, the broader §45Z transfer market has continued to mature rapidly as pricing and market terms become more standardized.
For more information, reach out to Associate Molly Stevens at molly@mickco.com or 605-977-4873 ext. 7, or one of our team members if you are interested in learning more about tax credit transfers.
Your organization should seek independent legal, tax, and accounting advice as part of this process. Mickelson & Company is not providing legal or accounting services.