Biofuels Industry Reacts to New Rules for Sustainable Aviation Fuel Tax Credit
Industry leaders celebrate recognition of sustainable ag practices in new greenhouse gas reduction model.
The U.S. Department of Treasury released guidance on how sustainable farming practices can contribute to lowering the carbon intensity of corn-based ethanol and soybean oil used for sustainable aviation fuel production.
The department released an updated version of the GREET model that can be used to demonstrate the carbon intensity (CI) of sustainable aviation fuel (SAF) under the 40B SAF tax credit.
Qualifying SAF must demonstrate a 50% CI reduction to earn $1.25 a gallon. For every percentage point higher the SAF can achieve through a qualify greenhouse gas model, like GREET, the producer can earn an additional penny, up to $1.75.
SAF can be produced from a variety of feedstocks, including ethanol and soybean oil. Included in the announcement is a pilot program for accounting for sustainable farming practices in the CI calculation for those two feedstocks.
For corn-based ethanol, Treasury says corn produced using “no-till, cover crop, and enhanced efficiency fertilizer” will qualify for a greenhouse gas reduction under the pilot program.
Soybean oil from soybeans grown using cover crops and no-till will receive a reduction.
Industry leaders appear excited about the pilot program while also calling for more flexibility. Several reactions also focused on building on today's announcement for the 45Z Clean Fuel Production tax credit.
The 40B SAF tax credit expires at the end of this year. The 45Z Clean Fuel Production tax credit starts next year and will include SAF. In the announcement today the Treasury Department said another GREET update would be made specifically for 45Z.
Renewable Fuels Association
“We are encouraged that, for the first time ever, this carbon scoring framework will recognize and credit certain climate-smart agricultural practices,” says Geoff Cooper, CEO of the Renewable Fuels Association (RFA). “We’re also pleased to see the integration of other carbon reduction strategies—like renewable process energy and carbon capture and sequestration—into the model. However, RFA believes less prescription on ag practices, more flexibility, and additional low-carbon technologies and practices should be added to the modeling framework to better reflect the innovation occurring throughout the supply chain.”
Cooper continues, “We view today’s 40B announcement as the starting point — not the ending point — for additional modeling improvements, further integration of individual climate-smart agriculture practices, and emerging biorefinery technologies. 45Z is where the rubber really meets the road. We look forward to working with USDA and other agencies across the administration to ensure 45Z is implemented in a way that truly swings the door wide open for farmers and ethanol producers to participate in the enormous decarbonization opportunity.”
Growth Energy
“This guidance crosses an important threshold in carbon modeling, recognizing for the first time that farming techniques can reduce the carbon intensity of crops, and, by extension, bioethanol production,” says Emily Skor, CEO of Growth Energy. “It's also the first time Treasury has used the Argonne National Laboratory’s GREET model in federal tax policy. These are promising big-picture developments and signal that agriculture is a key part of our nation’s climate strategy.
“... Still, the administration's restrictive all-or-nothing approach to recognizing the value of climate-smart agriculture practices may ultimately limit innovation and make farmers, blenders, and producers less – not more – likely to invest in emissions-reducing technologies.”
American Soybean Association
“For growers like me here in North Dakota, short growing seasons and unpredictable fall weather make the cover crop requirement alone next to impossible,” says Josh Gackle, president of the American Soybean Association. “Growers in the Northern Plains do so when possible. However, employing both no till and cover cropping is contrary to what Mother Nature will allow, no matter what the guidance specifies.”
American Coalition for Ethanol
“While today’s announcement is a step in the right direction, ethanol-to-jet continues to face headwinds such as artificially inflated land use change penalties in 40B GREET and the initial all-or-none requirement to bundle three CSA [climate-smart agriculture] practices in order to produce qualifying corn ethanol feedstock for SAF,” says Brian Jennings, CEO of the American Coalition for Ethanol.
“With the 2024 planting season underway and the expiration of the 40B credit on December 31, 2024, Treasury’s SAF guidance speaks more to the administration codifying the important role CSA practices play in decarbonizing liquid fuels than the amount of ethanol-to-jet that will qualify for the 40B credit.”
Iowa Renewable Fuels Association
“We appreciate the Treasury Department for approving the use of the GREET model, and for USDA pushing to get farm practices included for the first time,” says the Iowa Renewable Fuels Association Executive Director Monte Shaw. “Those are landmark achievements that crack the door open for farmers to be rewarded for climate-smart agriculture practices. Having said that, today’s announcement also makes clear that a great deal of work remains to transition 40B to the new 45Z tax credit in 2025.”
Shaw adds, “The approved bundle of farm practices won’t work for many Iowa farmers, let alone farmers throughout the Midwest. Given the range of climates and soil types, farmers do not want one-size-fits-all bundles mandated from D.C.”
Clean Fuels Alliance America
“Clean Fuels and its members appreciate the significant work of USDA and other federal agencies to account for the role that U.S. farmers will play in decarbonizing the nation’s aviation fuel,” says Kurt Kovarik, vice president of federal affairs for Clean Fuels Alliance America. “U.S. farmers and SAF producers will continue to work with the agencies to rapidly expand SAF production over the next few years.”
Kovarik adds, “Biodiesel, renewable diesel, and SAF producers are already negotiating feedstock and fuel offtake contracts for 2025, so we look forward to working with Treasury and USDA to quickly turn attention to guidance for the Clean Fuel Production Credit that begins on January 1 next year. We believe there are additional climate-smart agriculture practices and industry data that can be incorporated in the GREET model to support the continued sustainable growth of the entire clean fuel industry.”
American Carbon Alliance
“The GREET model is the absolute gold standard when it comes to evaluating the environmental impacts of fuels,” says Tom Buis, CEO of the American Carbon Alliance. “It is an important first step for our industry that for the first time, the U.S. Treasury has used the GREET model in federal tax policy.
“Today’s guidance recognizes the pivotal role that corn ethanol can play as the feedstock for sustainable aviation fuels. This is a good first step. We look forward to improvements that are forthcoming, as Treasury develops guidance for the 45Z provisions, as outlined by Secretary Vilsack.”
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