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Corn ethanol-based SAF’s eligibility for US tax credit still unclear after federal guidance issued

The U.S. Department of the Treasury and Internal Revenue Service released Dec. 15 their much-anticipated guidance on the sustainable aviation fuel (SAF) tax credit established by the Inflation Reduction Act.


Contentious debate has ensued over the past several months on which emissions model the treasury department will use to determine greenhouse-gas (GHG) reductions—U.S. DOE’s GREET model or the International Civil Aviation Authority’s Carbon Offsetting and Reduction Scheme for International Aviation.
This will determine how much of the SAF tax credit a fuel will be eligible for, if at all.
IRA legislation stated that CORSIA or “a similar methodology” would be the standard used to determine emissions performance and, thus, eligibility for the lucrative tax credit.
Feedstock, biofuel and agriculture associations—most notably the corn and ethanol lobby—joined by SAF project developers, some airlines and aviation groups, and others have argued GREET should be an allowable methodology.
Meanwhile, certain environmental and transportation groups including the International Council on Clean Transportation, the World Wildlife Fund and the Environmental Defense Fund, along with the travel plaza and truck stop association NATSO and fuel marketing group SIGMA, contend GREET is not stringent enough and lobbied for CORSIA to be the standard.
The IRS said Dec. 15 that the current GREET model does not satisfy the applicable statutory requirements for the SAF credit but DOE is collaborating with other federal agencies to develop a modified version that would.
The SAF tax credit requires eligible fuels demonstrate at least a 50 percent reduction in GHG emissions compared to baseline petroleum-based fossil jet fuel to receive the $1.25 per gallon credit.
Fuels that reduce GHG emissions beyond 50 percent are eligible for 1 cent per gallon more, in addition to the base $1.25 per gallon, for each percentage point the reduction exceeds 50 percent—up to an additional 50 cents per gallon.
The maximum credit possible is $1.75 per gallon.
“Under the guidance issued today, numerous fuels will qualify for the credit, including valid biomass-based diesel, advanced biofuels, cellulosic biofuel, or cellulosic diesel that have been approved by EPA under the Renewable Fuel Standard,” the treasury department stated.
Corn ethanol does not meet the 50 percent GHG-reduction threshold under RFS and therefore does not qualify as an advanced biofuel.
“Fuels that achieve a 50 percent or greater reduction in lifecycle GHG emissions under the most recent CORSIA standard will continue to qualify under today’s guidance,” the treasury department continued. “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. Pending further guidance from the treasury department, the 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.”
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 emissions modeling of indirect land-use change.
It will also integrate key strategies for GHG-emission reductions such as carbon capture and storage, renewable natural gas, renewable electricity, and climate-smart agriculture practices.
“Today’s guidance from treasury provides certainty that multiple pathways are available to producers as they compete to decarbonize the aviation sector,” said John Podesta, senior advisor to the president for clean-energy innovation and implementation.
As to whether SAF made from corn ethanol will be eligible for the SAF tax credit—the question at the heart of the debate over the past several months—the answer is not so clear.
“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,” said Emily Skor, CEO of Growth Energy. “U.S. tax policy shouldn’t advantage foreign firms over domestic ones.”
Skor added that new investments in SAF are “highly dependent” on the pending GREET-modeling updates.
“The industry needs more clarity around the proposed changes before we have certainty around market access,” she said.
Despite the potential concerns with pending updates and the lack of clarity the guidance has provided, Skor said the Biden administration’s recognition of the merits of using the GREET model is “an important first step.”
Geoff Cooper, president and CEO of the Renewable Fuels Association, also said the guidance is a step in the right direction.

“[It] gives us hope that the U.S. ethanol industry will be able to participate in this remarkable opportunity to decarbonize the aviation sector,” Cooper said. “While there are important carbon-modeling updates and details that still need to be worked out, we are cautiously optimistic that today’s guidance could open the door to an enormous opportunity for America’s farmers, ethanol producers and airlines.”  


By specifying that an updated GREET model will be an acceptable methodology for determining eligibility, Cooper said the treasury department “has strengthened the credibility, transparency and scientific robustness of the SAF tax-credit program.”  


Michael McAdams, president of the Advanced Biofuels Association, said his organization is grateful for the methodology and modeling flexibility outlined in the guidance.


“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,” McAdams said.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the key to unlocking the SAF market for ethanol continues to be carbon capture and sequestration (CCS).

“Without CCS to reduce the carbon-intensity score of ethanol, it is nearly impossible for our homegrown ethanol to qualify for SAF—even with the GREET model,” he said.

Those representing the soybean industry are welcoming the new guidance.

“We are very pleased with this guidance and the opportunities it could bring for soy,” said Josh Gackle, American Soybean Association president and North Dakota soybean farmer. “Biofuels continue to be not only a viable market but a growing market when it comes to U.S. roadways and workforce fleets. There is legislation on the table that would expand biofuels’ great functionality and environmental benefits to ocean-going vessels. And now, with this guidance supporting soy and other plant-based feedstocks going into sustainable aviation fuel, the sky truly is the limit for soy.”


ASA noted that it and other organizations in the biofuels industry have pushed for use of the GREET model to determine eligibility for the SAF credit.

“However, EPA determined GREET was insufficient on its own to satisfy the parameters set forth by the Clean Air Act to determine lifecycle-GHG emissions,” ASA stated. “Instead, EPA will work with other agencies to develop a new GREET methodology to be released March 1 that incorporates all aspects of a feedstock, including climate-smart agriculture practices.”

Importantly, EPA did determine that the methodology it uses for the RFS program does satisfy these requirements.

“Given that, treasury has determined SAF that currently qualifies as biomass-based diesel (D4) or advanced biofuel (D5) under the RFS will be considered as having a 50 percent GHG reduction for the purposes of this credit,” ASA stated. “This action is positive for soy-based SAF, which will be eligible for the SAF credit at the $1.25-per-gallon rate.”

Paul Winters, director of public affairs and federal communications for Clean Fuels Alliance America, told Biobased Diesel Daily® that the RFS safe-harbor provision was intended to give current producers some assurance.

“They can get the base credit if they’ve already got an advanced RFS pathway,” Winters said.

Like other associations, Clean Fuels also welcomed the new guidance.

The organization noted that while companies currently producing SAF under RFS have access the base value of the tax incentive, the new guidance defers allowing producers to use the GREET model to calculate additional credit until the updates are completed in March.

“We look forward to … providing real-world data on fuel production and feedstocks, and ensuring the GREET model remains up to date,” said Kurt Kovarik, vice president of federal affairs for Clean Fuels. “We will be watching closely for any updates to the model to ensure they accurately reflect the carbon reductions that clean fuels are already achieving.”

Winters added that, “We’re all waiting on what DOE comes out with in this new GREET model.”

Furthermore, Winters said there was hope the guidance issued Dec. 15 would give some insight on the 45Z clean fuel production credit that will apply to biodiesel, renewable diesel and SAF beginning next year.

“Unfortunately, it creates some uncertainty,” he told Biobased Diesel Daily®.