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WILMINGTON, DELAWARE – NOVEMBER 05: Democratic presidential nominee Joe Biden speaks while flanked by vice presidential nominee, Sen. Kamala Harris (D-CA), at The Queen theater on November 05, 2020 in Wilmington, Delaware. Biden attended internal meetings with staff as votes are still being counted in his tight race against incumbent U.S. President Donald Trump which remains too close to call. (Photo by Drew Angerer/Getty Images)
The United States President, Joe Biden administration on Friday said it will recognize a methodology favoured by the ethanol industry in guidance to companies looking to claim tax credits for Sustainable Aviation Fuel (SAF).
This has he said the administration will also update the methodology by March 1, which leaves some uncertainty for corn-based ethanol producers, as it could ultimately tighten requirements around SAF feedstocks.
The global aviation industry, which reaped net profits of over $20 billion in 2023 and accounts for about 2% of global energy-related carbon dioxide emissions, is one of the hardest sectors to decarbonize, as the equipment is not easy to electrify.
Airlines argue that incentives are needed to boost the market for SAF, which can generate 50% less greenhouse gas emissions over its lifecycle than petroleum fuel but is typically two to three times more expensive than fossil-fuel-based jet fuel.
For months, the Biden administration has been divided over whether to recognize the Department of Energy’s Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model.
That model enables ethanol-based SAF to qualify for tax credits under the Inflation Reduction Act, President Joe Biden’s climate law.
Ethanol producers and corn farmers in rural states such as Iowa and Illinois have been awaiting updates, as the industry sees SAF as one of the only routes to grow ethanol demand amid rising sales of electric vehicles.
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Biden, who, is seeking re-election will depend on votes from closely contested Midwestern states that are the heaviest corn producers.
While the guidance aims to reduce the price gap between SAF and traditional jet fuel, administration officials could not provide data to show the extent to which the incentives would reduce price discrepancies between the fuels.
Ethanol groups have lobbied the Biden administration fiercely to recognize the GREET model for IRA credits, battling environmentalists who want standards that elevate feedstocks like used cooking oil and animal fat instead.
Farmers, ranchers and producers have the capacity to provide feedstocks to help airlines and the transportation industry meet a potentially 36-billion-gallon market, said Agriculture Secretary Tom Vilsack on a call with reporters.
“Key to this was the Treasury recognizing and appreciating the importance of the GREET platform for providing a pathway for corn-based ethanol and [other] biobased fuels to qualify for significant tax credits that were included in the IRA,” Vilsack said.
Still, the GREET model now will be updated to incorporate new data and modelling on emissions sources like land use change and livestock activity, as well as strategies producers can use to lower emissions like CCS, renewable natural gas, and climate-friendly farming practices, the Internal Revenue Service said on Friday.
Under the new changes, fuel produced in 2023 that meets the new GREET standards will be eligible for the credit, administration.
