The Biden administration released initial guidance on its sustainable aviation fuel (SAF) subsidy program, which includes three climate-smart practices for corn-based ethanol to qualify; two qualifying practices for soy-based biodiesel. SAF can be made from corn, soy or other agricultural products, but to access SAF subsidies, refiners must demonstrate their fuel is 50% lower in emissions than petroleum jet fuel. SAF made from corn-based ethanol can meet that threshold only if the corn farmers that supply it use no-till, cover cropping and efficient fertilizer applications. Soy-based biodiesel only qualifies if it originates from farms using no-till and cover crops. Previous media reports signaled the administration was likely to require one of those climate-smart practices, not all of them.
Producers of SAF are eligible for a tax credit of $1.25 to $1.75 per gallon. SAF that achieves a GHG emissions reduction of 50% is eligible for the $1.25 credit, while SAF that achieves a GHG emissions reduction of more than 50% is eligible for an additional $0.01 per gallon for each percentage point the reduction exceeds 50%, up to $0.50 per gallon.
The new 40B GREET model will recognize GHG reductions from carbon capture and sequestration (CCS), renewable natural gas and renewable power used to produce ethanol for qualifying SAF and include a “safe harbor” pilot program for corn ethanol produced with bundled climate-smart agriculture (CSA) practices. Treasury also announced it will develop pathways for ethanol from CSA practices under the 45Z clean fuel production tax credit set to go into effect on Jan. 1, 2025.
American Coalition for Ethanol (ACE) CEO Brian Jennings said: “The Biden administration is providing an important tailwind for corn ethanol produced with no-till, cover crops and enhanced efficiency fertilizers to qualify as a feedstock for SAF under 40B so long as all three of these climate-smart agriculture practices (CSA) are adopted. This marks the first time a regulatory body has formally acknowledged the role CSA practices play in reducing corn ethanol’s GHG emissions, in this case enabling some ethanol-to-jet to qualify for the 40B credit. While today’s announcement is a step in the right direction, ethanol-to-jet continues to face headwinds such as artificially inflated land use change (LUC) penalties in 40B GREET and the initial all or none requirement to bundle three CSA practices in order to produce qualifying corn ethanol feedstock for SAF.”
