July 11, 2025

Federal Incentives & the One Big Beautiful Bill: Key RNG and Energy Market Updates

Introduction

Renewable Natural Gas (RNG) is a high-BTU fuel derived from the anaerobic decomposition of organic waste streams such as dairy manure, landfills, wastewater treatment plants, and food waste digesters. After upgrading to remove CO₂ and other impurities, RNG is chemically similar to fossil natural gas and can be used as a transportation fuel, for pipeline injection, or in thermal applications.

RNG plays a key role in reducing methane emissions and supporting clean fuel initiatives. Its economic viability is closely tied to a set of federal programs that offer tax incentives, renewable fuel credits, and compliance-driven market support.

The One Big Beautiful Bill (OBBB), signed into law by President Trump on July 4, 2025, modifies several of these key federal programs, restructuring the financial and regulatory landscape for RNG development nationwide.

This blog reviews how the new law affects the key tax incentives and policy mechanisms for RNG.

1. Inflation Reduction Act (IRA)

The IRA currently provided funding and tax incentives for clean energy development, including some RNG infrastructure. The OBBB includes targeted rollbacks to the IRA but preserves several RNG-relevant provisions:

As noted in the ‘Big Beautiful Bill,’ IRA-related climate provisions face repeal or funding rescission, which may directly impact RNG grant opportunities and tax support.

• Large-scale cuts (up to $2 trillion) to solar, wind, and electric vehicle (EV) related IRA programs. However, downstream impacts to RNG projects tied to IRA funding (e.g., DOE grants or Section 48 Investment Tax Credit extensions) remain possible.
• RNG projects not reliant on IRA funding for initial capital will have less direct impact.

2. Section 45 Production Tax Credit (PTC)

Section 45 of the Internal Revenue Code offers a federal tax credit aimed at promoting renewable energy development by providing a per-kilowatt-hour (kWh) credit for electricity generated by qualified facilities and sold to unrelated third parties. Known as the Production Tax Credit (PTC), it has supported various renewable technologies including wind, biomass, and landfill gas. However, under the new legislation, Section 45 will not be extended for new facilities. To qualify, projects must be placed in service by the end of 2025. This creates urgency for developers to complete construction and begin operations on an accelerated timeline or explore alternative tax credit options.

3. Section 45Z Clean Fuel Production Credit

The final OBBB extends the credit through 2031, giving RNG producers more time to benefit. Section 45Z is a performance-based, technology-neutral tax credit for domestic production of clean transportation fuels, effective January 1, 2025. The value of the credit depends on the fuel’s lifecycle greenhouse gas emissions compared to a baseline threshold.

• To achieve a carbon intensity (CI) of 0 kg CO₂e/MMBtu under Section 45Z, a company must demonstrate through lifecycle analysis that its RNG production results in net-zero greenhouse gas emissions.
• This typically requires capturing methane from high-emission sources such as dairy manure or landfills, minimizing upstream energy use, and preventing fugitive methane emissions.
• The analysis must follow the U.S. Department of Energy’s GREET model or another EPA-approved methodology.
• Only RNG from animal manure sources is eligible for negative CI scoring; other fuels cannot claim sub-zero benefits.
• RNG qualifies when used in transportation and assigned a favorable carbon intensity (CI) score.
• The credit provides up to $1.00 per gallon of ethanol-equivalent fuel depending on CI and compliance with prevailing wage and apprenticeship requirements.

4. Renewable Fuel Standard (RFS) and RINs

The Renewable Fuel Standard (RFS) requires refiners and importers of transportation fuel to blend a certain volume of renewable fuels into the national fuel supply. Renewable Identification Numbers (RINs) are credits generated for each gallon of qualifying renewable fuel produced or imported and used to track compliance with federal Renewable Volume Obligations (RVOs). D3 RINs are a specific category assigned to cellulosic biofuels, including RNG, that achieve at least a 60% reduction in lifecycle greenhouse gas (GHG) emissions compared to petroleum-based fuels.

The RFS mandates blending of renewable fuels into the U.S. transportation fuel supply, with RNG qualifying for high-value D3 RINs.

Although not addressed directly in the final OBBB, historical precedent under the Trump administration saw widespread approval of Small Refinery Exemptions (SREs), which reduced RVO compliance obligations and contributed to lower D3 RIN prices.

RINs are tracked through the EPA’s online Moderated Transaction System (EMTS) and used by obligated parties (refiners and importers) to demonstrate compliance with Renewable Volume Obligations (RVOs).

5. Investment Tax Credit (ITC) and Sections 45Y and 48E

As part of the federal government’s shift toward performance-based energy incentives, the Inflation Reduction Act introduced Sections 45Y and 48E to replace legacy technology-specific credits like the Investment Tax Credit (ITC). These new provisions prioritize emissions performance over energy source, applying only to facilities that achieve net-zero or sub-zero lifecycle greenhouse gas emissions. While 45Y rewards energy output, 48E supports capital investment. This gives flexibility for clean power projects, including those integrated with RNG systems.

The OBBB affirms and modifies provisions under Sections 45Y and 48E. It preserves and stabilizes the ITC framework for RNG-aligned projects, offering developers a clear path through at least 2033.

The following summarizes Sections 45Y and 48E under the final OBBB:

Section 45Y – Clean Electricity Production Tax Credit (PTC)

• Serves as the emissions-focused successor to the traditional Section 45 Production Tax Credit.
• Offers a per kilowatt hour credit for electricity sold from qualified facilities.
• Applies to projects beginning construction after 2024.
• Eligibility is based on net-zero or sub-zero lifecycle GHG emissions.
• Credit value is tied to prevailing wage and apprenticeship standards.
• Supports any generation source that meets emissions criteria, including RNG-powered systems.
• Provides full (100%) credit for projects starting construction in 2025.
• Phases down for wind and solar projects: 60% in 2026, 20% in 2027, and expires after 2027.
• Preserves full credit through 2033 for geothermal, nuclear, hydropower, and energy storage. Introduces a gradual phaseout for those technologies from 2034 to 2036.
• Maintains credit transferability to support financing flexibility for RNG and biogas systems.

Section 48E – Clean Electricity Investment Tax Credit (ITC)

• Provides a capital investment tax credit based on the cost of installing clean electricity or energy storage systems that meet emissions criteria.
• Offers a base credit of 6%, with potential to reach 30% if wage, apprenticeship, and bonus criteria (e.g., domestic content, low-income siting) are met.
• Preserves full credit through 2033 for geothermal, nuclear, hydropower, and energy storage, with a gradual phaseout beginning in 2034 and ending in 2036.
• Maintains transferability, enhancing financial structuring options for RNG-related clean power investments.

6. EPA Set Rule 2.0 (2023–2025 RVOs)

The EPA’s Set Rule 2.0 is a regulatory action establishing Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard for the years 2023 through 2025. It mandates volumes of renewable fuels, including RNG, that must be blended into transportation fuel by obligated parties.

The rule supports RNG by requiring increasing volumes of D3 RINs, but the projected growth rate for biogas RVOs has been reduced from over 20 percent to under 10 percent annually.

This slower growth trajectory, while still positive, could dampen investment enthusiasm for new RNG infrastructure.

• The rule currently supports RNG growth by requiring increasing volumes of D3 RINs.
• Though the rule is finalized, implementation could be weakened by broad use of SREs or reduced oversight.
• EPA has submitted the 2026 RVO proposal for OMB review. The proposed RVOs are slightly higher than past ROVs. Finalization is expected by December 2025. Stronger mandates could support continued RNG investment.

7. Section 179D – Commercial Buildings Energy Efficiency Deduction Section 179D provides a tax deduction for energy-efficient improvements in commercial buildings, including those that incorporate RNG-based heating or CHP systems.

• While 179D was made permanent in 2021, enhancements made under the IRA, such as higher deduction amounts and expanded eligibility, are being rolled back under the OBBB.
• The deduction itself remains in place, but the value of benefits could be lower for RNG integrators due to tighter qualification criteria and reduced incentive levels.

8. USDA Rural Energy for America Program (REAP) REAP continues to offer grants and loan guarantees for renewable energy and energy efficiency improvements in rural areas, including dairy or farm-based RNG systems. The OBBB redirects some USDA funding based on the Trump administration’s “Unleashing American Energy” executive order, which prioritizes domestic energy independence and fossil fuel development.

Some previously obligated REAP projects may be required to update scope or documentation to remain eligible based on the Unleashing American Energy order. While REAP remains operational, future awards for RNG could face delays or shifts in priority, depending on how USDA implements future revised guidance.

9. DOE Loan Programs Office (LPO) continues to provide loan guarantees under Title 17 (Clean Energy Financing Program established under the Energy Policy Act of 2005) for large-scale or innovative clean energy projects, including RNG facilities with novel technologies.

• Under the Trump administration, the LPO is undergoing active review, especially those issued in late 2024 are being reevaluated or paused.
• Projects relying on conditional loan guarantees could encounter delays or cancellations, affecting deployment timelines.

10. USDA EQIP – Environmental Quality Incentives Program EQIP supports conservation practices on agricultural lands, including funding for anaerobic digesters that produce RNG.

• EQIP remains authorized and funded through the long-term federal farm programs through 2031.
• The OBBB rescinded unobligated IRA funds that had been earmarked for EQIP and put them into the permanent EQIP baseline.
• This consolidation does not freeze EQIP, but it eliminates the temporary boost provided by the IRA, which had expanded EQIP’s capacity for climate-smart practices like anaerobic digestion.
• The rescission of IRA funds, combined with pending USDA implementation guidance, may create uncertainty for project developers, especially those planning anaerobic digesters for RNG production

11. Section 45Q – Carbon Capture and Sequestration Tax Credit Section 45Q provides federal tax credits for each metric ton of CO2 (and precursor CO) capture and sequestration, which may apply to certain RNG upgrading operations that capture CO2.

• Unlike other programs, 45Q is will remain viable due to industry support, especially from oil and gas sectors.
• RNG facilities, such as those upgrading biogas to pipeline-quality gas, often release CO2 during the purification process. By integrating carbon capture equipment, these facilities can capture this CO2, making them eligible for the 45Q tax credit, provided the project meets the minimum capture threshold.

Cimarron’s Response

Considering potential shifts in RNG credit programs, Cimarron is uniquely positioned to support operators with best-in-class lead times and advanced technology. Our gas-efficient thermal oxidizers and off-spec gas flares help customers maximize operational efficiency and cost savings—ensuring they are prepared to capitalize on remaining or future credit windows. These advanced systems give RNG operators a competitive edge, whether optimizing current incentives or adapting to evolving regulatory landscapes.

Summary

A broad array of federal programs continues to support RNG development, including performance-based tax credits, clean fuel production incentives, and fuel blending mandates. The One Big Beautiful Bill (OBBB) maintains and, in some cases, strengthens key programs like Section 45Z (Clean Fuel Production Credit), Section 48E (Clean Electricity Investment Tax Credit), and tax credit transferability—providing a reliable framework through at least 2031. While legacy programs like the Section 45 Production Tax Credit are not extended, alternatives such as 45Y and 48E offer emissions-based eligibility that supports RNG-powered systems.

The RFS remains in place, though compliance could be softened by expanded refinery exemptions. Meanwhile, USDA’s EQIP and REAP programs continue under longer-term farm authority, but face implementation delays or reorientation toward fossil-aligned priorities. Section 45Q also remains viable, with restored transferability and support for carbon capture in RNG operations. Together, these developments present a more stable and actionable policy environment for RNG, though project timing, CI scoring, and supply chain compliance remain critical factors.

Conclusion
The final OBBB preserves a framework for RNG development while narrowing the scope of broader clean energy programs. For RNG developers, the extension of Section 45Z through 2031, ongoing access to 48E investment credits, and favorable treatment under the RFS provide actionable opportunities. However, project developers must move quickly to capitalize on time-limited provisions like Section 45 and new 45Q timelines. The emerging emphasis on emissions performance, wage compliance, and domestic sourcing also requires proactive planning.