Beyond carbon: Regenerative agriculture’s role in the future of biofuels

Transportation accounts for 38% of greenhouse gas (GHG) emissions in the United States (EPA), making it a primary focus for climate action. Corporations across sectors are seeking ways to reduce their carbon footprint and broader environmental impact. While electrification is a key component of transportation decarbonization, it will not be sufficient for all sectors.

Biofuels have long been part of the transportation energy mix, with ethanol blended into approximately 10% of finished gasoline (DOE) and total biofuel production reaching 13.73 billion gallons in 2023 (EIA). As electric vehicle (EV) adoption scales up, liquid fuels will remain essential for hard-to-electrify sectors such as aviation, marine shipping, and long-haul trucking.

With nearly 40% of the United States’ corn crop used for ethanol production (USDA), ensuring the widespread adoption of renewable agriculture practices requires looking beyond the value chain for food production and considering options for innovation in food, fuel, and fiber. As part of our work to create demand for sustainable commodities, members of the Midwest Row Crop Collaborative (MRCC) are exploring how biofuels can be produced in a way to maximize environmental benefits. In 2024, MRCC initiated a series of conversations with environmental NGOs, agriculture associations, and industry experts to better understand the biofuels landscape, what’s driving change, and the opportunities to advance regenerative agriculture in biofuels supply chains.

Drivers of investment in biofuels

The U.S. biofuels market emerged in the 2000s with policies like the Energy Independence and Security Act of 2007, which created the Renewable Fuel Standard’s (RFS) mandate to blend ethanol into gasoline. Federal tax credits, such as the Biodiesel Tax Credit (BTC), provided additional financial incentives and led to increased biodiesel production and adoption of blends like B5 (5% biodiesel) and B20 (20% biodiesel).

Renewable diesel emerged in the 2010s as a drop-in alternative to diesel and biodiesel, spurred by state-level policies such as California’s Low Carbon Fuel Standard (LCFS). However, as demand for bio- and renewable diesel grew, feedstocks diversified, with imported used cooking oil becoming a major source. This shift introduced challenges in verifying feedstock content and sustainability, highlighting risks that well-intentioned policies might lead to unintended consequences.

Many of the early biofuels programs lacked strong environmental or sustainability criteria. In its first two triennial reports on this issue, EPA concluded that since the passage of EISA, actively managed cropland has increased by roughly 4 million to 7.8 million acres, and that production of biofuels—corn for ethanol and soy for biodiesel—is responsible for much of this land conversion. The report, as well as the previous report in 2011, found that the environmental and resource conservation impacts of biofuel production and the RFS were, on balance, negative.

The Inflation Reduction Act of 2022 introduced new tax credits for clean fuel production, including the 40B tax credit for sustainable aviation fuel (SAF) and the 45Z tax credit for both SAF and on-road biofuels. While 40B, which expired at the end of 2024, required regenerative agriculture practices like cover cropping, no-till, and enhanced efficiency nitrogen fertilizer use (for corn), the recently proposed 45Z guidance is still developing its guidance for climate-smart agriculture criteria. Current U.S. incentives primarily focus on reducing the carbon intensity of biofuels rather than promoting broader environmental benefits.

Programs like the RFS and LCFS operate under different incentive structures—RFS sets volume-based requirements, while LCFS allows carbon intensity (CI) reductions at the plant level but not yet at the feedstock level. This gap presents an opportunity for companies to exceed compliance by supporting practices that enhance water quality, air quality, and biodiversity.

The next frontier: Sustainable aviation fuel

Aviation represents the next major challenge for biofuels. In 2021, the Biden administration launched the SAF Grand Challenge, aiming to produce 35 billion gallons of sustainable aviation fuel annually by 2050—equivalent to 100% of projected U.S. jet fuel demand. Meeting this ambitious goal will require a shift toward non-food feedstocks, as current production relies heavily on food crops like corn and soybeans.

Advanced feedstocks, such as dedicated energy crops grown on degraded land and agricultural or forestry residues, have long been discussed but remain a small fraction of total biofuel production. Challenges in collection, cleaning, and cost-effectiveness hinder their widespread adoption, requiring further research, development, and policy support. Today, there is a lot of excitement for the potential winter oilseeds and other cover crops to fill this need. However, the adoption of oilseeds and cover crops like winter camelina, carinata, and pennycress face additional barriers, including:

• Lack of crop insurance and regulatory clarity for emerging oilseed technologies.
• Concerns over disease risks from cover crops.
• Underdeveloped markets for cover crops, requiring demand for all growth stages.
• The need for stronger price signals to drive market and infrastructure investment and innovation.

Defining what good looks like

While policy incentives have largely focused on carbon intensity, a broader definition of sustainability is needed to ensure biofuels contribute positively to ecosystems and communities. When developing a robust framework, teams might consider the following elements.

• Ensuring net GHG reductions over the entire biofuel lifecycle.
• To prevent contributing to land use change, ensure feedstocks are not sourced from any recently converted lands (lands recently in forest, grassland or other habitat).
• Minimizing water use and preventing water contamination.
• Enhancing soil health through regenerative agriculture practices.
• Providing adequate incentives and compensation to farmers to encourage adoption of regenerative management.
• Diversifying feedstocks by incorporating non-food crops, agricultural residues, and waste materials.
• Ensuring supply chain transparency and traceability for feedstocks.

In addition, to support adoption and viability, it will be important for sustainable biofuels to be cost competitive without reliance on indefinite subsidies. Stakeholders should invest in and support use of data collection and improved methodologies to enable transition from practice-based incentives to performance-based incentives.

The biofuels industry is at an inflection point, with increasing demand for low-carbon fuels and evolving policy incentives. Regenerative agriculture has the potential to enhance the sustainability of biofuels, but a more comprehensive approach is needed to define and incentivize “what good looks like.” By advancing policies and market mechanisms that prioritize environmental and social co-benefits, stakeholders in corporate and NGO sectors can play a vital role in shaping a more sustainable biofuels future.

In 2025, MRCC members will create a set of voluntary procurement guidelines for sustainably produced biofuels for organizations to adopt. Our focus is on creating procurement guidelines that signal demand for sustainable production of biofuel feedstocks, especially in regenerative agriculture. These guidelines will primarily target end-users (e.g., transportation fleets, fuel retailers) rather than biofuel producers. In 2026, MRCC members aim to demonstrate the viability of this approach through a pilot project.

Reach out to Jaycie Thomsen if you have questions or would like to start a conversation about our biofuels work and sign up for email updates via Environmental Initiative which administers the Midwest Row Crop Collaborative.