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    Are You Ready for 45Z? 4 Questions to Ask a Tech Provider

    March 22, 2024

    If you're in the biofuels space, you’ve likely been hearing a lot of buzz about 26 U.S. Code § 45Z, also known as the Clean Fuel Production Credit, or simply "45Z." This initiative under the Inflation Reduction Act will take effect in January 2025 paying 2 cents per gallon for every carbon intensity (CI) point reduction below the minimum threshold. 45Z will be the first clean fuels program to include ag-based practices and enable the generation of credits from lower CI ag feedstock in a meaningful way. Scoring crop CIs and passing third-party verification will require new technologies and ways of working, so it's advisable to consider hiring a technology provider to get the most value from the 45Z opportunity.

    Here are four essential questions to ask potential providers to ensure they're the right fit for your needs.

    1. Does the tech provider have experience running climate smart ag programs like this?
    These programs are breaking new ground in agriculture. You’ll need various technologies to make your program possible and successful. That includes contracting regenerative acreage with growers, collecting essential agronomic data for CI calculations, managing programs across many growers, deploying accurate practice verification models, and ensuring data accuracy for calculating CI scores.

    While 45Z is new, Indigo has been developing the capabilities to efficiently generate carbon assets from row-crop production for the past six years. We’ve created climate-smart agriculture programs for the world’s largest food, beverage, and ingredients companies. Additionally, we’ve established the largest verified carbon credit program in agriculture, with nearly 300,000 metric tons of carbon dioxide sequestered or abated since 2019.

    2. Do they have software to make it easy?
    Managing a 45Z farmer incentive program involves several tasks:

    • Enrollment and contracting. In this initial but vital step, growers commit to selling both their physical grain and its carbon (CI attribute) to a buyer. Software tools can help streamline enrollment and onboarding and improve organization during the contracting process.
    • Data collection. Agronomic data is essential to calculating feedstock CI. Leveraging satellite imagery and digital connections to farm management software is critical to reducing the amount of data that must be gathered directly from the grower. Manual data collection can be burdensome, expensive, and time-consuming if it’s not carried out efficiently.
    • Program management. Running a program is complex, involving coordination across multiple employees, numerous growers, and potentially grain sellers. It's vital to track the progress of various components, manage the completion of steps, and have an overview of the program's overall size all from the same dashboard.
    • QA/QC. Data validation and practice verification are integral to maintaining program credibility, since it ensures the accuracy of the data used for calculating CI scores. Without this step, a climate-smart program won’t have the integrity it needs to withstand scrutiny and third-party review. 

    Indigo has heavily invested in developing top-notch tools to measure, monitor, verify, and report GHG reductions and removals in agricultural projects. To date, farmers in Indigo Ag’s sustainability programs have earned more than $12M. We've built a comprehensive set of capabilities to efficiently generate carbon assets from row-crop agriculture. These capabilities are now available to our partners for running their own programs or collaborating with us on shared initiatives.

    3. Can they help you enhance your relationship with growers in your supply chain?
    Selling low-CI crops to biofuel plants for cleaner biofuels is just one avenue for growers to market their regenerative product. They should have various opportunities to earn new carbon revenue for their crops and their sustainable farming practices. Look for a partner that can also monetize non-biofuel aspects of growers' crop rotations, providing a more consistent revenue stream across every field.

    At Indigo, we've engineered our software and validated our science to enable this. Our programs are designed to be flexible. Growers commit to adopting, maintaining, or expanding their regenerative practice use—and, in turn, we can help bring them more revenue-generating opportunities that maximize their new revenue for a particular field in a particular year.

    4. Do they have a deep understanding of biofuel markets and carbon markets?
    Look for a technology provider who can explain how carbon and biofuel markets are changing. Make sure they play an active role in shaping the policies, rules, and decisions that affect these markets. As an innovative thought leader in the policy and sustainability landscape, Indigo works directly with regulatory organizations and protocols to enable measurable and impactful Scope 3 solutions for food and beverage companies throughout their value chain.

    Indigo serves as the chair of the Climate Smart Ag committee within the Low Carbon Fuels Coalition, advocating for the integration of climate-smart agricultural practices into clean fuels markets.

    Additionally, Indigo actively participates in the Technical Working Group known as TWG+ for the Draft GHG Protocol Land Sector and Removals guidance, offering insights into agricultural Scope 3 accounting best practices.

    Indigo also played a pivotal role in developing the CAR SEP and VM42 methodologies for agricultural soil carbon accounting.

    Choosing the correct technology provider for your 45Z initiatives is critical. A suitable partner can navigate program complexities and promote sustainable growth and profitability for your investment in clean energy production. With Indigo's track record for developing comprehensive, climate-smart solutions over the last five years, we're here to support your journey.

    Tap into 45Z and other tax credits with Indigo Ag