[originally published in Biofuels Digest]

In Washington, the U.S. Department of the Treasury and Internal Revenue Service released guidance on the Sustainable Aviation Fuel Credit established by the Inflation Reduction Act, and said that pending further guidance from the Treasury Department, an updated GREET model will provide another methodology for SAF producers to determine the lifecycle GHG emissions rates of their production for the purposes of qualifying for the SAF Credit for SAF sold or used during calendar years 2023 and 2024.

In addition, EPA, DOT, USDA, and DOE are announcing their commitment to release an updated version of DOE’s GREET model by March 1, 2024.

The Credit Backstory

The credit incentivizes the production of SAF that achieves a lifecycle greenhouse gas emissions reduction of at least 50% as compared with petroleum-based jet fuel. Producers of SAF are eligible for a tax credit of $1.25 to $1.75 per gallon. SAF that decreases GHG emissions by 50% is eligible for the $1.25 credit per gallon amount, and SAF that decreases GHG emissions by more than 50% is eligible for an additional $0.01 per gallon for each percentage point the reduction exceeds 50%, up to $0.50 per gallon.

Fuels that achieve a 50% or greater reduction in lifecycle greenhouse gas emissions under the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) standard will continue to qualify under today’s guidance. The updated model will incorporate new data and science, including new modeling of key feedstocks and processes used in aviation fuel. The updated model will also integrate other categories of indirect emissions like crop production and livestock activity, in addition to best available science and modeling of indirect land use change emissions. The updated model will also integrate key greenhouse gas emission reduction strategies such as Carbon Capture and Storage, Renewable Natural Gas, Renewable Electricity, and Climate-Smart Agriculture Practices.  The Treasury Department first provided SAF credit guidance in December 2022.

The Bottom Line

First of all, pop the cork for this one, it’s Christmas and New Years comes early. Second, put a word of thanks for Tom Vilsack in your bedside prayers tonight. This victory has a thousand parents, but exactly one quarterback, the Big V.

Reaction from the Stakeholders

U.S. Secretary of Agriculture Tom Vilsack

“The Biden-Harris Administration is committed to harnessing the potential of sustainable aviation fuel to develop new economic opportunities for American agricultural producers. Today’s announcement is the next step in making this 36-billion-gallon industry all the more possible. By powering aviation through low-carbon fuels, farmers can earn extra income, tap into value-added climate-smart agriculture markets, and meet the demand for an aviation industry that seeks to accelerate sustainable production.”

Secretary of the Treasury Janet L. Yellen

“The Biden Administration is driving American innovation to create good-paying jobs and help the U.S. clear hurdles in our clean energy transition. Incentives in the Inflation Reduction 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.”

U.S. Secretary of Energy Jennifer M. Granholm

“President Biden’s Investing in America agenda is creating pathways and incentives for innovators to create a cleaner, more sustainable future. Sustainable aviation fuel will provide low carbon fuel made here in America to help decarbonize the hardest to reach areas in the transportation sector, and DOE is committed to supporting this effort which will lead to cleaner skies for all.”

 U.S. Transportation Secretary Pete Buttigieg

“America ushered in the jet age, and aviation is a key part of our economy, society, and way of life. But the safety and sustainability of aviation depend on its ability to reach its goal of net-zero carbon emissions by 2050. The time is now.  That’s why President Biden is advancing the development of sustainable aviation fuels that will help us reduce carbon pollution while supporting economic growth and creating opportunity in American aviation.”

John Podesta, Senior Advisor to the President for Clean Energy Innovation and Implementation

“Sustainable aviation fuel is a critical tool for tackling the climate crisis. Today’s guidance from Treasury provides certainty that multiple pathways are available to producers as they compete to decarbonize the aviation sector.”

Mike McAdams, president, Advanced Biofuels Association

“The Advanced Biofuels Association is grateful for the methodology and modeling flexibility outlined in the Treasury Department’s guidelines on Sustainable Aviation Fuel (SAF) tax credits. Recognizing that a one-size-fits-all approach is impractical, the Biden Administration’s acknowledgment of this reality is crucial for achieving significant carbon reductions in air travel. We extend our thanks to the Treasury Department, Department of Energy, Department of Transportation, Environmental Protection Agency, and the Department of Agriculture for their thoughtful guidance and the prompt announcement following an intensive and collaborative effort.

Harold Wolle, President, National Corn Growers Association  

“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. At the end of the day, we are eager to help the aviation sector lower its carbon footprint, and we look forward to working with the involved agencies over the coming months to ensure the final model helps us achieve that goal.”

Geoff Cooper, CEO, Renewable Fuels Association

“Grain-based ethanol is, hands down, the most abundant and most cost-competitive source for large-scale SAF production. With nearly 200 ethanol biorefineries spread across the country, a well-established transportation and storage network, and the capacity to produce almost 18 billion gallons of low-carbon renewable fuel, the puzzle pieces are already in place to ramp up ethanol-to-jet fuel production. Today’s guidance is a step in the right direction and gives us hope that the U.S. ethanol industry will be able to participate in this remarkable opportunity to decarbonize the aviation sector.”

Emily Skor, CEO, Growth Energy

“New investments in SAF are highly dependent on the pending GREET modeling updates, and the industry needs more clarity around the proposed changes before we have certainty around market access. Today, under this guidance, SAF produced from other biofuels including Brazilian cane bioethanol qualifies for the 40B tax credit, but the path for American-made corn-based bioethanol remains unclear. U.S. tax policy shouldn’t advantage foreign firms over domestic ones.”

Kurt Kovarik, Vice President of Federal Affairs for Clean Fuels

“We appreciate President Biden recognizing that American farmers and clean fuel producers will be providing essentially all of the sustainable aviation fuel available over the next 20 years to meet the administration’s Grand Challenge. Enabling U.S. taxpayers to access a lifecycle model developed by U.S. national labs is clearly the best way to provide assurance to fuel producers and meet the demand for low-carbon fuels from airlines and passengers.”

Dr. Patrick Gruber, CEO of Gevo

“Gevo greatly appreciates the Biden Administration’s intent to use the Argonne GREET method and model for sustainable aviation fuel (SAF). Today’s guidance is a much-needed step forward for SAF investment and innovation. Designating GREET for the 40B credit sets an accurate, science-based precedent for transparent carbon accounting across the SAF supply chain, from farm fields to the end use of the fuel. The details and certainty matter.”

American Coalition for Ethanol CEO Brian Jennings  

“Today’s decision helps clear the runway for ethanol-to-jet. Treasury made the right call to enable the use of GREET to determine the carbon intensity of SAF because it is the global gold-standard for calculating GHGs from transportation fuels and GREET is the most up-to-date, accurate model reflecting the best-available science, including farm practices. Treasury’s decision will enable corn ethanol to emerge as a significant SAF feedstock in the years to come and fulfill President Biden’s pledge that farmers would be providing 95 percent of SAF in the next 20 years.

Iowa Renewable Fuels Association Executive Director Monte Shaw

“Anti-agriculture agitators both in the U.S. and Europe have been pushing the Biden Administration to only recognize models with outdated data and debunked penalties against farm feedstocks like corn and soybeans. IRFA appreciates the Treasury Department for standing with the best science available.”