[originally published in RealClear Energy]

The U.S. Treasury’s recent update to the model for Sustainable Aviation Fuel (SAF) tax credits marks a significant step towards expanding low-carbon jet fuel. With clear guidance for aviation fuel producers in place, our nation is on a flightpath toward lower carbon emissions.

In 2022, Congress set the stage for alternative, non-petroleum aviation fuels with the passage of the Inflation Reduction Act (IRA). The landmark legislation provided a tax credit of $1.25 per gallon for all SAF that reduces greenhouse gas (GHG) emissions by at least 50% compared to traditional fuels, with an additional one cent per gallon for each percentage point over 50%, up to $1.75 – aligned with previous advanced biofuel standards.

Until recently, however, the lack of detailed regulations regarding eligibility for the tax credits created uncertainty in the market for SAF producers. The Treasury Department’s final rule of the “40B Greenhouse Gases, Regulated Emissions and Energy Use in Transportation (GREET) Model” has provided much-needed clarity on which fuels qualify, and crucial flexibility to enable different technology approaches to address one of the largest sources of greenhouse gas emissions on the planet.

One company impacted by this update is World Energy, who specializes in low-carbon energy and is a global leader in the production of SAF. Their CEO, Gene Gebolys, has highlighted that “The making of the fuel wasn’t the problem; the making of the market was.” With clear guidelines on which fuels qualify, companies like World Energy can confidently and economically bring their proven fuel technologies to a broader market.  They have already powered flights successfully, including the world’s first transatlantic flight powered 100% by SAF.

Aviation alone accounted for 2% of all global GHG emissions in 2022. Achieving meaningful carbon emissions reduction will necessitate a significant shift in the types of fuels airlines use.

Recognizing this, President Biden set the SAF Grand Challenge, aiming to reduce aviation emissions 20% by 2030 through the production of 3 billion gallons of SAF domestically each year. However, as of 2023, the U.S. produced only 24.5 million gallons of SAF, well short of the target. The 40B credit has been designed to support producers that can help to fill this gap.

To support the entire SAF value-chain and further spur innovation, regulators have introduced a pilot program that rewards farmers for deploying climate-smart agriculture practices for SAF feedstocks, such as no-till farming, cover crops, and efficient fertilizer use. This approach ensures emissions reductions at the beginning of the SAF supply chain and will increase the adoption of climate-smart agricultural practices.

Gevo, a leading SAF producer whose fuel has powered more than 35 airlines across 4 continents, independently rewards farmers through its farm-to-flight program and supports the decision to incentivize farmers further. Gevo’s approach of measuring and rewarding farmers directly aligns with this goal, as their CEO and Director Dr. Pat Gruber explained to me recently, “We are trying to cause economically driven improvement at a field level. So, we are big time proponents of just measure it and pay farmers for what they do.”

While the 40B credit is a promising start, it expires at the end of this year. The upcoming 45Z credit, which will be in effect from 2025 – 2027 and is set to be announced later this year, must be similarly flexible and crafted in partnership with industry leaders. Learning from 40B and improving the usability of the tax credits is crucial for accelerating investments in SAF infrastructure and meeting production goals.

As Gevo’s VP of Government Relations Lindsay Fitzgerald emphasized to me, “[40B] sets the bar for continuous improvement. And that’s a change and something we haven’t seen in policy in the past.”

While there are opportunities for improvement between 40B and when 45Z is released, the Treasury Department’s final 40B model is a promising first step. If we are to combat the climate crisis effectively, we need an all-of-the-above solution.

Dr. Gruber put the opportunity in proper perspective: “This is the very first time in my career where I can say that there’s a chance that we could pull this whole big system off and do it on a large scale.” With clear guidance and continued support, our nation can chart a greener aviation future.

Michael McAdams is the president of the Advanced Biofuels Association.