Congress Approves Tax Credits to Boost Sustainable Aviation Fuel
Midwest lawmakers and companies in the corn-based ethanol industry are celebrating the recent approval of tax credits by Congress. These credits were included as part of President Joe Biden’s Inflation Reduction Act of 2022, which aims to boost sustainable aviation fuel (SAF) production. The tax credits are intended to increase the supply of SAF and bring down the current high prices.
Tax Credits Based on Emission Reductions
Under the approved guidelines, producers of sustainable aviation fuel will be eligible for tax credits ranging from $1.25 to $1.75 per gallon. The amount of the credit will depend on the extent to which the fuel reduces emissions compared to conventional products like kerosene-based jet fuel. This approach aligns with a key issue that the Treasury Department has been deliberating on for months.
Use of Energy Department Model
The Treasury Department has accepted the use of a model developed by the U.S. Energy Department to measure emission reductions. This model has received support from the ethanol industry. However, the Biden administration plans to update the model by March 1, which introduces uncertainty regarding the tax treatment of ethanol used for aviation fuel. The update will consider the impact of emissions from growing crops used in fuel production.
Divided Opinions on the Guidelines
While Midwest lawmakers and ethanol supporters view the Energy Department model as a precise way to measure the benefits of agricultural feedstocks used in sustainable aviation fuel, other groups have raised concerns. The Environmental Defense Fund has stated that the guidelines could allow fuels made from unsustainable sources such as sugar cane, soybean, and rapeseed. They argue that this goes against Congress’ intent and may put the U.S. out of step with international standards.
Response from Supporters
Supporters of the guidelines, including Senator Joni Ernst from Iowa, a major corn-producing state, emphasize the benefits of the Energy Department model. They believe it provides an accurate measure of the positive impact agricultural feedstocks have on sustainable aviation fuel production. Airlines for America, a trade group representing major U.S. carriers, also praised the guidelines, stating that they will stimulate new investment and accelerate the production and availability of SAF.
The Importance of Sustainable Aviation Fuel
Aviation accounts for an estimated 2% to 3% of global greenhouse gas emissions, a figure expected to rise as air travel continues to grow. While electric-powered airplanes are still a long way from widespread use, the development and adoption of sustainable aviation fuel are crucial steps towards reducing the industry’s environmental impact.
