45Z Tax Credit Is Trading Higher Than Many Predicted, and Carryback Strategies Explain a Lot of It

When §45Z clean fuel credits first started showing up in the transferable market in 2025, pretty much everyone expected them to trade at a steep discount. New credit type. Variable value tied to carbon intensity. No final IRS guidance at the time. The working assumption across most tax desks was that 45Z tax credit pricing would settle somewhere in the low-to-mid 80s, well below where solar and wind ITCs had already established themselves.

That’s not what happened.

According to Crux’s market data, 45Z tax credit pricing averaged $0.908 in 2025, with the broader deal range landing between $0.88 and $0.93 per dollar. For a brand-new credit category with pending regulations, those numbers caught people off guard. Crux estimates roughly $1 billion in §45Z credits transacted in 2025, with industry projections suggesting $2 to $3 billion in annual eligible supply.

So why is this credit trading tighter than expected? A big piece of the answer sits in how buyers are using carrybacks.

What Makes the 45Z Tax Credit Different

The §45Z clean fuel production credit isn’t a fixed-value instrument. Unlike a solar ITC where the credit is a flat percentage of eligible costs, the 45Z tax credit adjusts based on the lifecycle greenhouse gas emissions of the fuel produced. Lower emissions, higher credit, up to $1.00 per gallon for producers meeting prevailing wage and apprenticeship requirements. Fuels must come in below 50 kg CO2 equivalent per million BTUs to qualify at all.

That variability initially spooked buyers. But proposed regulations released February 4, 2026, clarified key eligibility and emissions rate rules. Two safe harbors gave both sides enough confidence to transact. The OBBBA’s extension of the credit through 2029 (up from the original 2027 sunset) gave the market a longer runway. And deals are typically fully insured, with the seller procuring a policy that takes emissions-rate risk off the buyer’s plate.

How Carryback Strategies Are Lifting Pricing

Here’s where the pricing story gets interesting.

Corporate buyers of transferable tax credits can carry unused credits back three years. A company that purchases 2025 45Z tax credit volume first applies credits against its 2025 liability up to the 75% statutory cap, then carries any remaining amount back to 2022, then 2023, then 2024. Each prior year absorbs credits up to its own 75% cap before moving forward.

According to Reunion Infra, credits trading at wider discounts, like §45Z in the low $0.90s, are particularly well-suited for carrybacks. The buyer purchases at a discount, applies it to prior-year liability, and files for a refund using IRS Form 1139. The IRS has been processing those forms within roughly 90 days, and it pays interest on refunds that take longer than 45 calendar days.

That refund dynamic means the effective return on a carryback purchase can meaningfully exceed what the face discount suggests. A buyer paying 91 cents and receiving a dollar-for-dollar refund on 2022 taxes, plus interest, is looking at economics that make 91 cents look cheap.

That’s why buyers with significant prior-year liability, particularly companies that experienced a large taxable event like a divestiture within the three-year window, are bidding more aggressively for §45Z credits than the market initially expected.

The Carryback Demand Signal Is Real

This isn’t a niche strategy. According to Crux’s 2025 Market Intelligence Report, nearly half of all tax credits purchased in 2025 were allocated to tax years other than the credit year.

Reunion Infra reported supporting over a dozen 2024 tax credit transfers in September 2025 alone, many involving carryback allocations. The firm also noted supporting a large publicly traded buyer who purchased 2025 §45 PTCs for a carryback with delayed payment into June 2026.

That kind of flexibility, matching credit vintage to prior-year liability and negotiating payment timing around the refund cycle, is what’s making 45Z tax credit carrybacks attractive to a buyer pool that extends well beyond traditional clean energy finance participants.

For sellers, the carryback demand creates a pricing tailwind. Buyers willing to pay 90 to 93 cents because they’ll recover par plus interest on a prior-year refund are setting a floor that wouldn’t exist if credits were only applied to current-year liability.

What Still Keeps Some Buyers Cautious

The market isn’t without friction.

Larger refund requests exceeding $5 million go through the Joint Committee on Taxation, which can push processing from 90 days to six or nine months. That extended timeline reduces the time-value-of-money benefit buyers are counting on.

Feedstock origin rules add a layer too. For fuel produced after December 31, 2025, feedstocks must originate from the US, Mexico, or Canada. And the FEOC restrictions apply; specified foreign entities can’t claim the 45Z tax credit for taxable years beginning after July 4, 2025.

None of these are dealbreakers. But they explain why pricing still sits slightly below ITCs and PTCs from investment-grade sellers rather than fully converging.

Conclusion

The 45Z tax credit entered the transferable market as an unknown. Variable value, pending guidance, unfamiliar asset class. By the end of 2025, it had established a pricing band between $0.88 and $0.93 that pretty much exceeded everyone’s early expectations, and carryback strategies explain a meaningful portion of that strength.

For corporate buyers with prior-year liability, the math is straightforward. Buy at a discount, carry back, file for a refund, collect interest on anything the IRS takes longer than 45 days to process.

For clean fuel producers selling credits through a clean energy tax credit marketplace, the carryback dynamic tells you who your buyer is and why they’re willing to pay what they’re paying. The strongest bids aren’t coming from buyers offsetting current-year liability. They’re coming from buyers with three years of prior tax to recover.

That’s the real story behind 45Z pricing. And it’s one the market is only starting to fully price in.