The U.S. Division of the Treasury and Inside Income Service launched Dec. 15 their much-anticipated steering on the sustainable aviation gasoline (SAF) tax credit score established by the Inflation Discount Act.
Contentious debate has ensued over the previous a number of months on which emissions mannequin the treasury division will use to find out greenhouse-gas (GHG) reductions—U.S. DOE’s GREET mannequin or the Worldwide Civil Aviation Authority’s Carbon Offsetting and Discount Scheme for Worldwide Aviation.
This may decide how a lot of the SAF tax credit score a gasoline will likely be eligible for, if in any respect.
IRA laws said that CORSIA or “an analogous methodology” could be the usual used to find out emissions efficiency and, thus, eligibility for the profitable tax credit score.
Feedstock, biofuel and agriculture associations—most notably the corn and ethanol foyer—joined by SAF challenge builders, some airways and aviation teams, and others have argued GREET ought to be an allowable methodology.
In the meantime, sure environmental and transportation teams together with the Worldwide Council on Clear Transportation, the World Wildlife Fund and the Environmental Protection Fund, together with the journey plaza and truck cease affiliation NATSO and gasoline advertising and marketing group SIGMA, contend GREET is just not stringent sufficient and lobbied for CORSIA to be the usual.
The IRS stated Dec. 15 that the present GREET mannequin doesn’t fulfill the relevant statutory necessities for the SAF credit score however DOE is collaborating with different federal businesses to develop a modified model that may.
The SAF tax credit score requires eligible fuels display no less than a 50 % discount in GHG emissions in comparison with baseline petroleum-based fossil jet gasoline to obtain the $1.25 per gallon credit score.
Fuels that scale back GHG emissions past 50 % are eligible for 1 cent per gallon extra, along with the bottom $1.25 per gallon, for every proportion level the discount exceeds 50 %—as much as an extra 50 cents per gallon.
The utmost credit score potential is $1.75 per gallon.
“Underneath the steering issued as we speak, quite a few fuels will qualify for the credit score, together with legitimate biomass-based diesel, superior biofuels, cellulosic biofuel, or cellulosic diesel which were accredited by EPA beneath the Renewable Gasoline Normal,” the treasury division said.
Corn ethanol doesn’t meet the 50 % GHG-reduction threshold beneath RFS and due to this fact doesn’t qualify as a sophisticated biofuel.
The up to date mannequin will incorporate new information and science, together with new modeling of key feedstocks and processes utilized in aviation gasoline.
The up to date mannequin will even combine different classes of oblique emissions like crop manufacturing and livestock exercise, along with finest accessible science and emissions modeling of oblique land-use change.
It would additionally combine key methods for GHG-emission reductions corresponding to carbon seize and storage, renewable pure gasoline, renewable electrical energy, and climate-smart agriculture practices.
“Immediately’s steering from treasury offers certainty that a number of pathways can be found to producers as they compete to decarbonize the aviation sector,” stated John Podesta, senior advisor to the president for clean-energy innovation and implementation.
As as to if SAF produced from corn ethanol will likely be eligible for the SAF tax credit score—the query on the coronary heart of the controversy over the previous a number of months—the reply is just not so clear.
“Immediately, beneath this steering, SAF produced from different biofuels together with Brazilian cane bioethanol qualifies for the 40B tax credit score, however the path for American-made corn-based bioethanol stays unclear,” stated Emily Skor, CEO of Progress Vitality. “U.S. tax coverage shouldn’t benefit overseas corporations over home ones.”
Skor added that new investments in SAF are “extremely dependent” on the pending GREET-modeling updates.
“The business wants extra readability across the proposed adjustments earlier than we’ve certainty round market entry,” she stated.
Regardless of the potential considerations with pending updates and the dearth of readability the steering has supplied, Skor stated the Biden administration’s recognition of the deserves of utilizing the GREET mannequin is “an vital first step.”
Geoff Cooper, president and CEO of the Renewable Fuels Affiliation, additionally stated the steering is a step in the appropriate path.
“[It] provides us hope that the U.S. ethanol business will have the ability to take part on this exceptional alternative to decarbonize the aviation sector,” Cooper stated. “Whereas there are vital carbon-modeling updates and particulars that also must be labored out, we’re cautiously optimistic that as we speak’s steering might open the door to an infinite alternative for America’s farmers, ethanol producers and airways.”
By specifying that an up to date GREET mannequin will likely be an appropriate methodology for figuring out eligibility, Cooper stated the treasury division “has strengthened the credibility, transparency and scientific robustness of the SAF tax-credit program.”
Michael McAdams, president of the Superior Biofuels Affiliation, stated his group is grateful for the methodology and modeling flexibility outlined within the steering.
“Recognizing {that a} one-size-fits-all strategy is impractical, the Biden administration’s acknowledgment of this actuality is essential for reaching vital carbon reductions in air journey,” McAdams stated.
Monte Shaw, govt director of the Iowa Renewable Fuels Affiliation, stated the important thing to unlocking the SAF marketplace for ethanol continues to be carbon seize and sequestration (CCS).
“With out CCS to scale back the carbon-intensity rating of ethanol, it’s almost unattainable for our homegrown ethanol to qualify for SAF—even with the GREET mannequin,” he stated.
These representing the soybean business are welcoming the brand new steering.
“We’re very happy with this steering and the alternatives it might carry for soy,” stated Josh Gackle, American Soybean Affiliation president and North Dakota soybean farmer. “Biofuels proceed to be not solely a viable market however a rising market in relation to U.S. roadways and workforce fleets. There may be laws on the desk that may broaden biofuels’ nice performance and environmental advantages to ocean-going vessels. And now, with this steering supporting soy and different plant-based feedstocks going into sustainable aviation gasoline, the sky actually is the restrict for soy.”
ASA famous that it and different organizations within the biofuels business have pushed to be used of the GREET mannequin to find out eligibility for the SAF credit score.
“Nevertheless, EPA decided GREET was inadequate by itself to fulfill the parameters set forth by the Clear Air Act to find out lifecycle-GHG emissions,” ASA said. “As an alternative, EPA will work with different businesses to develop a brand new GREET methodology to be launched March 1 that comes with all facets of a feedstock, together with climate-smart agriculture practices.”
Importantly, EPA did decide that the methodology it makes use of for the RFS program does fulfill these necessities.
“Provided that, treasury has decided SAF that at present qualifies as biomass-based diesel (D4) or superior biofuel (D5) beneath the RFS will likely be thought of as having a 50 % GHG discount for the needs of this credit score,” ASA said. “This motion is optimistic for soy-based SAF, which will likely be eligible for the SAF credit score on the $1.25-per-gallon fee.”
Paul Winters, director of public affairs and federal communications for Clear Fuels Alliance America, informed Biobased Diesel Every day® that the RFS safe-harbor provision was supposed to offer present producers some assurance.
“They will get the bottom credit score in the event that they’ve already received a sophisticated RFS pathway,” Winters stated.
Like different associations, Clear Fuels additionally welcomed the brand new steering.
The group famous that whereas corporations at present producing SAF beneath RFS have entry the bottom worth of the tax incentive, the brand new steering defers permitting producers to make use of the GREET mannequin to calculate further credit score till the updates are accomplished in March.
“We stay up for … offering real-world information on gasoline manufacturing and feedstocks, and making certain the GREET mannequin stays updated,” stated Kurt Kovarik, vice chairman of federal affairs for Clear Fuels. “We will likely be watching carefully for any updates to the mannequin to make sure they precisely replicate the carbon reductions that clear fuels are already reaching.”
Winters added that, “We’re all ready on what DOE comes out with on this new GREET mannequin.”
Moreover, Winters stated there was hope the steering issued Dec. 15 would give some perception on the 45Z clear gasoline manufacturing credit score that may apply to biodiesel, renewable diesel and SAF starting subsequent yr.
“Sadly, it creates some uncertainty,” he informed Biobased Diesel Every day®.
