What if a value-add attribute didn't have to be attached to the physical product or practice that attribute was derived from? And what if that attribute could be sold independently in an open market?

Such a scenario, described by many as “Book and Claim”, has worked its way to the forefront of grain production and biofuel industry discussions as leaders continue to review strategies to successfully implement the looming 45Z Clean Fuel Production Credit.

While the conversation may have significant momentum, a scenario where feedstock producers could generate a value-add attribute (Carbon Intensity score) and then market those scores to any interested biofuel producer, regardless of the feasibility of delivery of grain to that producer, carries with it significant complexities.

There are a wide range of benefits, challenges, risks, and opportunities associated with a proposed Book and Claim. Join us as we unpack a few of the key “pros” and “cons” of such a system.

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Book and Claim 101:
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In a "Book and Claim" system, feedstock producers generate environmental attributes or certificates (often referred to as "credits") based on sustainable practices or lower-than-average CI scores achieved during the production of their crop. These attributes are then sold or traded independently of the physical commodity. The buyer of these attributes can claim the environmental benefits without having to purchase or use the physical product itself and “retires” the attribute to prevent double-counting. This system is similar to how renewable energy credits (RECs) work in the electricity market, where consumers can buy RECs from renewable energy producers to offset their carbon footprint even if they don’t consume the actual renewable electricity. Such a system is often contrasted by a “Mass Balance” which would only allow a buyer of physical commodities to apply a weighted average of the environmental attributes associated with the committees they source directly.

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‍‍‍“Pros” of a Book and Claim System:

1. Expanded Market Participation:
The "Book and Claim" scenario for recognition of CI scores within IRA 45Z would enable a far broader swath of the corn production industry to engage in CI scoring. With little-to-no barrier to entry, producers in regions without direct access to ethanol plants could still participate in premium markets that reward lower CI scores. This could dramatically expand access and encourage widespread adoption of climate-smart agricultural practices. Such a system would allow diverse farming practices to contribute to CI reduction goals without geographical limitations.

2. Increased Flexibility and Revenue Streams:
By allowing farmers to decouple their CI attributes from their physical crop, they’re enabled to sell these attributes while continuing to deliver their physical product to local markets. This flexibility can create (and in theory maximize) new revenue opportunities for farmers, especially those who may not be directly linked to biofuel production. This approach could allow farmers and grain marketers in an open market to capture the maximum value of their attribute, without the limitations of bidding to a geographically limited market.

3. Alignment with Current Grain Supply Chain:
The current grain production and aggregation supply chain has been refined over generations to maximize efficiencies, streamline transportation, and service grain producers in the most efficient and cost effective manner possible. A book and claim system would bring with it minimal risk in disrupting those efficiencies and market dynamics where a mass balance may encourage low-CI feedstock suppliers to dramatically change their grain marketing and delivery strategies.
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4. Encouragement of Sustainable Practices:
Decoupling CI attributes from physical products could spur the adoption of a wider range of conservation practices. Farmers could be rewarded for implementing practices such as no-till farming, cover cropping, and precision nutrient management, even if their corn does not physically reach a biofuel plant. This would provide the opportunity for a flexible system that allows farmers to innovate and adopt practices tailored to their unique conditions.
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“Cons” of a Book and Claim System:

1. Compliance and Verification Complexities:
‍The separation of environmental attributes from physical products increases the risk of fraudulent claims and double-counting. Without an established, centralized compliance system, the opportunity for mismanagement of CI attributes greatly increases. Robust verification mechanisms are essential to prevent misuse. Standardized verification should rely on detailed farm management records, satellite imagery, and/or periodic independent audits. This could increase the administrative burden and cost for farms and complicate the overall compliance landscape.

2. Eroding Advantages for Early Adopters:
‍Biofuel producers who are amongst the early adopters of CI scoring related to farming practices could see their market advantage eroded under a "Book and Claim" system. If environmental attributes can be freely traded, these first movers who have spent years establishing a local base of low-CI feedstocks will likely find it harder to differentiate their product, as producers with minimal historic investments in local feedstock CI scoring can simply purchase attributes to meet their needs. Such a scenario could diminish the incentives for continued investment in sustainable practices and programs.

3. Reduced Accountability and Stakeholder Engagement:
A potential drawback of decoupling CI attributes from physical deliveries is that it may reduce the sense of accountability among farmers. When CI attributes are not tied to physical deliveries, the direct relationship between sustainable practices and market rewards is weakened. This could lead to less engaged stakeholders and a diminished focus on long-term environmental outcomes. And an increased focus on finding independent scoring and verification agencies who will provide the “lowest” score to the farmer, at the cheapest price.
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4. Market Volatility and Price Manipulation:
A book and claim system could lead to market volatility, as the price for CI attributes may fluctuate independently of the actual value of sustainable practices. Without protections in place, many marketers of low-CI scores would be incentivized to “sit and hold” their attributes until the last minute in a marketing/tax year, then market their attributes to the highest bidder, creating significant logistical and timing challenges. This could distort market signals and make it difficult for farmers to plan and invest in long-term sustainability initiatives.

5. Impacting Competitive Balance:
A “con” for some, and a “pro” for others. With a book and claim system, diversified entities with robust grain aggregation networks, sophisticated marketing systems, multiple biofuel production facilities, and wide ranging physical draw territories would see a significant advantage in book and claim as it allows those entities to further maximize their economies of scale and diversified investments. Conversely, the independently-owned single-location biofuel plant, who has traditionally only “competed” against other grain aggregators in its physical draw territory may see a greater competitive disadvantage when comparing their CI reduction strategy and opportunities to a more wide-ranging diversified organization.
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Conclusion:

‍A "Book and Claim" system offers promising opportunities for expanding participation in CI scoring and enhancing market flexibility. It could incentivize more farmers to adopt sustainable practices and allow biofuel producers to meet their CI reduction goals more efficiently. However, the potential downsides—including reduced investment from early adopters, increased risk of fraud, and compliance complexities—must be carefully managed.As the USDA and other federal stakeholders continue to refine the 45Z framework, it is crucial to design a system that balances the need for broad participation with the integrity, transparency, and competition necessary to achieve true benefits. Industry leaders across agriculture and biofuels continue to underscore the importance of a thoughtful approach that recognizes the unique challenges and opportunities of decoupling CI attributes from physical corn deliveries. There’s no doubt that value creation regarding environmental attributes in biofuel production brings with it tremendous potential for positive change, but that change will only be realized if the systems it is built upon enhance its potential versus undermining it.

Preston Brown
‍President & Founder
Incite.ag
preston@incite.ag
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Incite.ag guides producers across the agricultural supply chain to Turn Emissions into Income. Incite.ag’s CI scoring system unlocks novel revenue streams and empowers producers to take control of their unique CI Scores. Learn more by hitting the link below or reach out to the team directly at success@incite.ag or 815.373.0177.