Biofuels derived from agriculture have been around for decades. Yet today there is growing interest in their potential as a game-changer in the quest for cleaner energy. Why all the buzz? What are low-carbon biofuels? And how do biofuel plants and farmers set themselves up to take advantage of this wave of interest?
To shed light on these questions, we spoke with Chris Malone, a strategic leader in Indigo Ag's low-carbon biofuel initiatives. Previously, Malone spent many years as a consultant in the commodities sector, focused mostly on energy.
What is carbon intensity (CI)? Why is a carbon intensity score relevant in the biofuels discussion?
C.M.: Just think of carbon intensity as the same thing as a carbon footprint. It is how much carbon is embedded in something. In corn-based ethanol, about half of the carbon intensity of the ethanol is actually from the corn, on average. Of course at Indigo, we know you can have vastly different carbon intensities of corn. You can have a negative carbon intensity or you can have a very high one, depending on how the corn was grown. The CI score can differ for corn fields growing right next to each other. The system hasn't been in place to one, incentivize growers to lower the crop’s CI score, and two, capture it and create value.
How do ethanol plants factor into this space?
C.M.: Ethanol plants can generate significant value from tax credits and low carbon fuel credits because in various compliance markets they’re producing a fuel that has a lower carbon footprint than traditional fuel. You've seen the ethanol industry realizing this and wanting to figure out how they decarbonize themselves further and lower the carbon intensity score of their ethanol so that they can generate more credits.
How can those ethanol plants get started generating credits?
C.M.: There’s a lot of different credit markets out there. But through the Inflation Reduction Act, there’s a new market coming that’s a little bit different: When you generate a credit, it’s just a tax credit. The money comes directly from the federal government vs. other markets where you sell to a buyer who has deficits. The 45Z tax credit, which takes effect in January 2025, pays 2 cents per gallon for every Carbon Intensity (CI) point reduction. Indigo Ag can help ethanol plants capture value from 45Z, which will be the first market that will allow companies to include ag-based practices to generate credits in the biofuels space in a meaningful way.
Why is Indigo Ag starting work now on 45Z? Why should ethanol and renewable diesel plants get involved before 45Z is finalized?
C.M.: If you're planning to produce 45Z credits next year, you'll be using primarily corn, soybeans, or other crops harvested in 2024. To ensure it's low carbon, we need to target, track, and manage this year's crop, which will be planted soon. That's why we're focusing on this year's corn to help produce more 45Z credits next year.
What is driving the demand for producing more quantities of low-carbon biofuel?
C.M.: Governments want the transportation industry to reduce carbon emissions, making low-carbon fuels valuable. Lowering the CI of fuels has become important. Prior to clean-fuel compliance programs, we didn’t know the CI score of the biofuel feedstock, nor did it really have any value. But now, every point of reduction in CI adds more value.
Could a low-carbon fuel standard be a thing nationally at some point?
C.M.: Yeah, there's been talk about a national low carbon fuel standard. We might actually get one in the next few years. Plus, more states are getting on board. Washington just kicked off theirs. New Mexico just passed a bill establishing a clean-fuel standard. Meanwhile Illinois is in motion, and so are Minnesota and New York. Hawaii's showing interest too. Looks like we'll have more states, maybe even regions like the Midwest, starting their own programs.
What solution does Indigo Ag provide around biofuels?
C.M.: Over the past five years, Indigo has developed a full stack of capabilities to efficiently generate carbon assets from row-crop agriculture. These capabilities include farmer targeting and enrollment, program management and tracking, data collection and validation, and CI quantification and reporting. Indigo now offers all these capabilities to its partners to run their own programs or collaborate with Indigo on a shared program.
Did you know Indigo Ag is a member of the U.S. Grains Council, Ethanol Advisory Team, Growth Energy, Low Carbon Fuels Coalition and Chairs their Climate Smart Ag Advisory Committee.
Tell us more about the technology—what is needed?
C.M.: Scoring corn CIs requires new technologies and ways of working. Indigo’s software can help ethanol plants and their grain suppliers run 45Z programs for farmers by enabling farmer enrollment and contracting, program tracking, data collection, practice verification, and CI quantification and management. Our software tool provides workflows to streamline the enrollment and onboarding process, making it easier to manage and track progress.
Indigo has developed the industry’s most efficient system for collecting agronomic data. By leveraging satellite imagery, third-party data, and digital connections to farm management software, Indigo minimizes the amount of information that a farmer must provide. To facilitate program management, Indigo’s system can provide a single view into enrollment and data collection progress, as well as CI scores and outcome reporting.
Indigo performs multiple layers of data validation, including using remote sensing to verify practices and automated QAQC to detect outlier values and potential data input errors. Indigo’s quantification and reporting system outputs high integrity CI scores and provides supporting data to streamline audits by third-party verifiers. Our software also tracks deliveries of grain and ties it to the CI quantification of that grain for improved inventory management.
Why are you excited about this low-carbon biofuel opportunity?
C.M.: Biofuels are a huge market and 45Z is the first program to consider contributions that farmers can make to lower CI. Low-carbon crops are a huge opportunity to greatly reduce the carbon intensity of biofuels, and thus transportation in general. These programs, in turn, create a huge catalyst to expand programs and technologies for growing crops with lower and lower CI scores.
Indigo Ag’s Sustainability Solutions can identify target areas for 45Z credit generation opportunity within your supply chain
Biofuels offer a unique opportunity to align economic prosperity with environmental stewardship. By continuing to innovate and collaborate, we can accelerate the transition towards a cleaner, more sustainable energy future. Reach out to learn more about Indigo’s biofuels program.