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Tax Policy

Congress has instituted a variety of tax credits to incentivize the production and blending of biofuels into the U.S. transportation fuel supply. Every $1 credit incentivizing the use of renewable fuel over fossil-based fuel equates to a tangible emissions reduction of CO2 in the atmosphere – in many cases ranging from 10 to 20 pounds per dollar.

However, to the detriment of many of ABFA’s member companies, a lack of long-term certainty around these credits over the last decade has plagued these incentives’ ability to drive forward-thinking investment in the advanced biofuels industry. Businesses and lenders cannot plan around last-minute and, in many cases, retroactive extenders.

It wasn’t until 2019 that the credits were extended on a multi-year basis, and since then, investment has flourished. To ensure this trend continues, building a lower-carbon future for the U.S., ABFA supports the existing tax incentive framework beyond the current sunset of 2023. To support President Biden’s target of reducing US carbon emissions by 50-52% by 2030, ABFA encourages Congress to provide certainty for these credits through the end of the decade.

Furthermore, ABFA supports a technology-neutral approach to these credits in the future that would tie incentives to increasing carbon reduction. ABFA also supports an economy-wide carbon tax that would incentivize low-carbon advanced biofuels and a specific credit to incentivize sustainable aviation fuel (SAF).

Biodiesel Blenders and Renewable Diesel Credits:

Provides biodiesel producers and blenders with a $1.00 credit per gallon of biodiesel or renewable diesel delivered to the tank of a vehicle, used as on-road fuel in their trade or business, or used during a blending process in the U.S. Expires December 31, 2022.

Second Generation Biofuel Producer Credit:

Provides second generation producers with a credit of up to $1.01 per gallon blended or sold. Eligible for fuels derived from renewable lignocellulosic or hemicellulosic matter or algae, cyanobacteria, or lemna. Expires January 1, 2021.

Alternative Fuel Mixture Excise Credit:

Provides blenders with a credit of up to $0.50 per gallon of alternative fuel used to produce a mixture, including CNG, LNG, LPG, P-Series fuel, liquid fuel derived from coal through the Fischer-Tropsch process, and compressed or liquefied gas derived from biomass. Expired December 31, 2020.

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