The SAF credit’s difficult landing

Source: By Jael Holzman, Axios • Posted: Thursday, December 14, 2023

Illustration of a pattern of airplanes.
Illustration: Brendan Lynch/Axios

Brace for a clash over the IRA tax break for “sustainable” jet fuel.

Why it matters: The Biden team might just make the ethanol crowd happy with its rollout of the tax credit.

  • If they do, it’s sure to upset climate advocates — and some in the road transportation sector, where at least one group is threatening to sue over the matter.

Driving the news: The Treasury Department will roll out implementation plans for the tax break as soon as this week, department spokesperson Ashley Schapitl told Axios.

  • Remember, the IRA created a credit for companies producing “sustainable aviation fuel,” a form of jet fuel that’s supposed to produce fewer planet-warming carbon emissions.
  • To qualify, SAF producers must certify their products resulted in at least 50% fewer lifecycle emissions than traditional jet fuel.

What we’re watching: If Treasury clarifies a dispute over whether the government must use an international metric for measuring carbon emissions specified in the IRA…

  • Or regulators may measure fuel with GREET, a U.S. model previously used to measure biofuel for the purposes of qualifying for the federal renewable fuel standard.

Ag-state lawmakers, backed by leading airlines, want GREET because it would likely allow more fuel to count, including biofuel made with farm crops.

Yes, but: There’s a risk in allowing more crops intended for biofuel used by cars and trucks to enter the jet fuel space.

  • The administration would agitate traditional consumers of biofuel, particularly road transit.
  • Allowing GREET may invite legal challenges, according to David Fialkov, legislative director for the National Association of Truck Stop Operators.
  • “I anticipate that if Treasury comes out with guidance or any type of policy that threatens to prompt feedstock to migrate away from over-the-road use cases, towards aviation, I think it’s safe to assume that we’ll litigate that,” Fialkov told Axios.

Of note: GREET is more lenient on emissions impacts than the international model called for in the IRA. It could invite a climate world backlash much like the renewable fuel standard.

tate of play: It’s anyone’s guess what Treasury will say on the modeling matter. But some tea leaves dropped during COP28 indicate the agency may make the biofuel folks happy.

  • Senate Ag Chair Debbie Stabenow — who wants some version of GREET to be allowed for the credit — told Axios yesterday that she hadn’t heard clarity from Treasury.
  • Sen. Tammy Duckworth told Axios on Wednesday that it was her “understanding” that Treasury may be incorporating the GREET model, but she hadn’t gotten “final word yet.”

At COP28, Agriculture Secretary Tom Vilsack told reporters that fuel made from “a variety of feedstocks” will be eligible for the credit.

  • Meanwhile, White House climate czar John Podesta told Heatmap News they have “a game plan” on the credit that may require updating the GREET model.
  • Treasury declined to comment on the modeling matter.