The recent Treasury Department decision to allow U.S.-made ethanol and other biofuels to qualify for a sustainable aviation fuel (SAF) tax credit under the Inflation Reduction Act (IRA/Climate Bill) has sparked a range of reactions from different stakeholders. The tax credit aims to incentivize the production of cleaner aviation fuels by offering up to $1.25 per gallon for fuels that reduce carbon emissions by 50% compared to conventional jet fuel, and up to $1.75 per gallon for fuels that cut emissions by more than 50%.
The Treasury Department chose to use a modified version of the GREET (Greenhouse gases, Regulated Emissions and Energy use in Technology) model to calculate emissions reductions, a decision favored by the agriculture industry. This model acknowledges the role of farmers in lowering greenhouse gas emissions and rewards them for their contributions to producing new fuels.
Sen. Grassley highlighted practical challenges in meeting the new requirements. He pointed out that it can be difficult to verify whether farmers have adopted specific climate-smart conservation practices, such as reduced tillage. Additionally, once corn from different farms is mixed at an ethanol plant, it becomes challenging to trace its origins and ensure compliance with the new standards.
Ethanol industry groups have expressed mixed feelings about the announcement. While they see it as a step forward, they are concerned the stringent requirements may be overly prescriptive and difficult for producers to meet. The American Coalition for Ethanol described the announcement as a “tailwind” for biofuels but criticized the government for overestimating the impact of land-use changes.
