The biofuel industry said it is ready for full-throttle production of low-carbon fuel for airplanes, now that the Biden administration has released guidelines for sustainable aviation fuel (SAF), potentially a 36 billion-gallon-a-year market.
The guidelines allow tax credits of up to $1.75 a gallon, expected to be a powerful inducement for production of cleaner-burning fuels.
Ethanol groups said the guidance, issued by the Treasury Department and the IRS on Friday, was an important first step. It will be coupled with an administration update, due by March, of the so-called GREET model for calculating the life-cycle carbon emissions of fuels. The industry expects a flood of biofuels will qualify under GREET for SAF credits, awarded to fuels that produce half as many greenhouse gases as petroleum-based jet fuel. At present, only a portion of renewable fuels are credited with a 50 percent reduction.
“The puzzle pieces are already in place to ramp up ethanol-to-jet fuel production,” said Geoff Cooper of the Renewable Fuels Association, pointing to the long-established corn ethanol industry. “Today’s guidance is a step in the right direction and gives up hope that the U.S. ethanol industry will be able to participate in the remarkable opportunity to de-carbonize the aviation sector.”
The RFA says corn ethanol reduces emissions by 44-52 percent, according to work by the Argonne National Laboratory, which developed GREET. Corn ethanol is the lion’s share of renewable fuel produced in the United States.
“We will be watching closely for any updates to the [GREET] model to ensure they accurately reflect the carbon reductions that clean fuels are already achieving,” said Clean Fuels Alliance America, a trade group for biodiesel, renewable diesel and sustainable aviation fuel producers, distributors and feedstock providers.
For now, SAF credits will be available to fuels approved by the EPA as reducing emissions by at least 50 percent. They include some types of biomass-based diesel, so-called advanced biofuels, and cellulosic biofuel or cellulosic diesel. The credits start at $1.25 a gallon and grow by 1 cent for each percentage point reduction above 50 percent, to a maximum of 50 cents.
“New investments in SAF are highly dependent on the pending GREET modeling updates, however, and the industry needs more clarity around the proposed changes before we have certainty around market access,” said Emily Skor of Growth Energy, a biofuel trade group. Skor noted that Brazilian ethanol made from sugarcane qualifies for SAF credits now.
Treasury Secretary Janet Yellen said the SAF credits, created in the 2022 climate law, “are helping to scale production of low-carbon fuels and cut emissions from the aviation sector, one of the most difficult-to-transition sectors of our economy.” Agriculture Secretary Tom Vilsack said the 36 billion-gallon SAF market was an economic opportunity for farmers. “By powering aviation through low-carbon fuels, farmers can earn extra income, tap into value-added climate-smart agriculture markets, and meet the demand of the aviation industry that seeks to accelerate sustainable production.”
Around 35 percent of this year’s U.S. corn crop would be used in making ethanol and 47 percent of oil crushed from this year’s soybean crop would be used in biofuels such as biomass-based diesel, said the USDA.
“Given that GREET was created by the U.S. government and is widely respected for its ability to measure reductions in greenhouse gas emissions from the farm to the plane, we are encouraged that Treasury will adopt some version of this model,” said Minnesota farmer Harold Wolle, president of the National Corn Growers Association. North Dakota farmer Josh Gackle, president of the American Soybean Association, said, “[W]ith this guidance supporting soy and other plant-based feedstocks going into sustainable aviation fuel, the sky truly is the limit for soy.”
The Sustainable Aviation Fuel guidance is available here.