Treasury Adds More Options For Clean Jet Fuel Tax Credit

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Treasury Adds More Options For Clean Jet Fuel Tax Credit

In a groundbreaking announcement, the U.S. Department of the Treasury declared a significant expansion of eligible biofuels for a transformative tax credit. This move is set to accelerate the production of low-carbon aviation fuels, including cutting-edge ethanol and soybean blends, reshaping the skies with a greener blueprint.

Treasury Adds More Options For Clean Jet Fuel Tax Credit : A Leap Toward Cleaner Skies

This tax credit, a beacon of hope for sustainable aviation fuel (SAF), extends to a broad spectrum of manufacturers. From those pioneering in biomass-based diesel to cellulosic diesel, the credit encompasses various mixtures sanctioned under the Environmental Protection Agency’s renewable fuel standard, as per Treasury Notice 2024-6.

Deputy Secretary Wally Adeyemo, in a riveting briefing, emphasized the potential of this credit to escalate fuel production and significantly slash emissions in the aviation sector, notoriously challenging to decarbonize.

From Fields to Flight: Agriculture Fuels the Future

The plan unfolds further with an intriguing twist: incorporating agricultural ingredients or ‘feedstocks’, like corn for ethanol and soybeans for biodiesel. This integration awaits the adaptation of the U.S. Energy Department’s GREET model for tax credit calculations – a model that intricately considers factors like land use in emission rates.

Treasury Adds More Options For Clean Jet Fuel Tax Credit: An Agricultural Game-Changer

GREET, an acronym that stands for greenhouse gases, regulated emissions, and energy use in technologies, marks a critical shift in emission calculation methodologies. It replaces the United Nations International Civil Aviation’s default international standard, a move long advocated by airlines, farm groups, and lawmakers.

A Promise of Progress: Agencies Rally for Rapid Implementation

Agencies like the EPA, the U.S. Department of Agriculture, and others, have pledged to finalize these updates by March 1. Agriculture Secretary Tom Vilsack highlighted this commitment as a cornerstone for the industry’s future planning, ensuring an agriculture-based methodology soon.

The Dawn of a Low-Carbon Era in Aviation

The SAF tax credit, birthed from the Inflation Reduction Act of August 2022, aims to bolster the production and use of low-carbon mixed fuels in aviation. SAF, derived from innovative practices using diverse feedstocks, marks a crucial step toward addressing the significant contribution of commercial and large business aircraft to global air pollution.

Treasury Adds More Options For Clean Jet Fuel Tax Credit : The Aviation Climate Action Plan

The White House’s 2021 aviation climate action plan paints a vivid picture of a future where sustainable aviation fuel accounts for 3 billion gallons annually by 2030, ultimately meeting 100% of domestic commercial jet fuel needs by 2050.

Incentivizing Change: The Mechanics of the SAF Credit

To ignite this transformative journey, producers must craft fuel that cuts greenhouse gas emissions by at least 50%. The credit, starting at $1.25 per gallon, increases incrementally for each percentage point above the 50% reduction threshold, maxing out at $1.75 per gallon. This incentive is applicable for eligible fuels sold or used from the dawn of 2023 until the end of 2024.

Embracing the Future: Updates and Innovations

Once the GREET model is updated, it will be instrumental in calculating emissions reductions for this period. Secretary Vilsack assured that the updates would integrate new data and scientific insights, spanning indirect emissions and innovative strategies like carbon capture and energy storage technologies.