For the foreseeable future, sustainable aviation fuel (SAF) is the best available option for decarbonizing air transportation. Accordingly, the United States has joined the global effort and set aggressive goals for producing SAF for domestic markets.In 2023, the U.S. used 24.5 million gallons of renewable jet fuel. Reaching the nation’s goal of producing 3 billion gallons of SAF by 2030 will require doubling that amount every single year. Meeting the future goals will depend on building new supply chains with new feedstock sources, production facilities and technologies.Unfortunately, uncertainty in new tax policies is already delaying the necessary investments. In August 2022, Congress adopted a new Section 40B Sustainable Aviation Fuel excise tax credit as part of the Inflation Reduction Act. This revised credit is only available to taxpayers for 2023 and 2024, since it is scheduled to be replaced by the new Section 45Z Clean Fuel Production Credit in 2025. The law designates the International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation model to demonstrate the required emissions reduction and calculate both the 40B and 45Z tax credit values for SAF.Potential SAF producers waited all 2023 for guidance from the U.S. Treasury and Internal Revenue Service. One question was whether they would be allowed to use the Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions and Energy Use in Technologies model as a similar methodology. The GREET model is familiar to the industry because it is incorporated in California’s Low Carbon Fuel Standard.Unfortunately, the IRS’s December 2023 guidance indicated that the existing GREET model was not sufficiently comparable to CORSIA. The only existing model that Treasury determined to be similar to CORSIA is the EPA’s Renewable Fuel Standard lifecycle modeling. EPA has not updated its RFS modeling since 2010. The CORSIA model incorporates the GREET model; however, it does not utilize the most up-to-date data from GREET; some of the values used in CORSIA are from 2013.Lifecycle greenhouse gas emissions (GHG) analysis has evolved considerably in the last decade. The GREET model is updated every year to incorporate real-world data.The IRS guidance further promised that an interagency working group composed of EPA, USDA, and the Departments of Energy and Transportation would develop a modified “40B SAF GREET” model by March 1 that would be sufficiently similar to the CORSIA model for use in the tax credit.Environmental groups went on record to insist that the outdated indirect land use change estimates from CORSIA or EPA’s 2010 model be used in this new modified GREET model. The groups disparage the Argonne model as “industry friendly” because it utilizes recent data reflecting advances in biofuel and crop production.The problem with waiting until March 1 to answer these questions is that biofuel producers are already negotiating and setting feedstock contracts for 2025. Those contracts will determine whether they expand production or not. It’s too late for the 40B tax credit to incentivize additional production for 2024.Producers are looking for the new modified GREET model as a signal of what to expect in 2025 and beyond with the new 45Z credit. The Treasury is expected to start a rulemaking process for that credit later this year.In July 2023, President Biden predicted that over “the next 20 years, farmers are going to be providing 95% of all the sustainable airline fuel.” The roadmap for the SAF Grand Challenge makes very clear that reaching the 3-billion-gallon goal this decade will unquestionably require U.S. grown crops as a major feedstock.The real question is whether U.S. businesses can rely on the tax credit as an incentive for long-term investments necessary to meet the Grand Challenge. Those investments will only make sense if there is potential to incorporate new low-carbon technologies and agricultural practices over time. There should be no room in the modified GREET model for outdated data.

2024-03-12 - US Businesses Need Certainty to Meet SAF Goals (SAF Magazine)

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There should be no room in the modified GREET model for outdated data.

US Businesses Need Certainty to Meet SAF Goals

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