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Biden Administration Releases Guidance on Tax Credits for Sustainable Aviation Fuel

by Anna

The Biden administration released long-awaited guidance on tax credits for aviation fuel aimed at reducing greenhouse gas emissions compared to traditional crude oil-based fuels. The guidance provides a framework for tax credits, part of President Joe Biden’s Inflation Reduction Act of 2022, designed to encourage the production and adoption of sustainable aviation fuel (SAF) and address the high cost of such fuels.

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Producers of SAF will be eligible for tax credits ranging from $1.25 to $1.75 per gallon based on the emissions reduction achieved compared to conventional products like kerosene-based jet fuel. However, environmentalists have raised concerns about potential credits for fuels derived from crops like corn, citing resource-intensive cultivation methods.

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Midwest lawmakers and companies supporting corn-based ethanol praised the guidelines, but uncertainty lingers as the Treasury Department plans to update the emission reduction model by March 1. The update will consider the impact on emissions from growing crops used in fuel production.

The Treasury Department accepted the U.S. Energy Department’s emission reduction model, supported by the ethanol industry, to measure reductions. However, critics argue that the current guidelines might lead to credits for fuels derived from non-sustainable sources like sugar cane, soybean, and rapeseed, potentially conflicting with international standards.

The Environmental Defense Fund expressed cautiousness and indicated that it would withhold final judgment until the model update in March. Meanwhile, ethanol supporters believe the Energy Department’s model provides an accurate measurement of the benefits of agricultural feedstocks in SAF.

Senator Joni Ernst, a Republican from Iowa, a significant corn-producing state, praised the Treasury’s acceptance of the Energy Department’s model.

Airlines for America, a trade group representing major U.S. carriers, welcomed the Treasury guidelines, stating that they would stimulate investment and accelerate SAF production and availability. The aviation industry aims to address its environmental impact, with approximately 2% to 3% of global greenhouse gas emissions attributed to aviation. As air travel continues to grow, sustainable alternatives like SAF play a crucial role in mitigating emissions while electric-powered airplanes remain a long-term goal.

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