Battle Brews over Climate Law Credits for Aviation Biofuels

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April 05, 2023

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by Brian Dabbs (E&E News Energywire) The Inflation Reduction Act is setting up a fight over the climate footprint of biofuels for aviation, with significant implications for the nation’s emissions trajectory, the U.S. transportation sector and rural communities.

In coming weeks, the Treasury Department will unveil a new sustainable aviation fuel (SAF) tax credit called for in the climate law last summer. It will give up to $1.75 to producers for each gallon of sustainable fuel, based on the amount of carbon reductions in the product compared to conventional jet fuel.

The credit could provide a major boon to biofuel products made of wastes and oils, but producers are also eyeing a big new market for corn-based ethanol.

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The push for sustainable aviation fuel unites both producers and environmentalists, who say it will slash emissions. But the two camps disagree on how best to measure the greenhouse gas reductions of individual SAF gallons, raising questions about how the tax credit will be implemented and whether it can help achieve Biden’s climate goals. The debate echoes those of other fuels like hydrogen and natural gas, where analysts disagree on what is defined as “clean.”

So far, the U.S. government has largely failed in bolstering SAF, which is generally defined as a non-petroleum-based biofuel that can power jet engines with less greenhouse gas emissions than traditional kerosene-based fuel.

More than a decade ago, the Federal Aviation Administration set a goal for U.S. airlines to use 1 billion gallons of sustainable aviation fuel annually by 2018. Last year, U.S. production reached a fraction of that — 15.8 million gallons — or less than 0.1 percent of total fuel consumed by U.S. airlines. The U.S. development comes amid skyrocketing growth in the fuel globally, with Finland-based Neste set to produce 500 million gallons of waste-based SAF annually by the end of 2023.

Ahead of the Treasury decision, industry and environmentalists are backing two different models for calculating life-cycle greenhouse gas emission reductions in each gallon of SAF. The calculations determine if a given biofuel undercuts jet fuel emissions by 50 percent per gallon, in which case a producer would receive $1.25-a-gallon credit. Each additional percentage in carbon reduction earns the producer another cent a gallon, up to $1.75. Experts say that incentive could go a long way in making SAF cost-competitive with jet fuel.

Environmentalists prefer a European methodology known as CORSIA run by the International Civil Aviation Organization (ICAO) to calculate emissions per gallon, arguing that the methodology best assesses land use changes that they say can spike greenhouse gas emissions on farms, such as the removal of trees and wetlands for crops.

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Producers say the U.S. GREET model, which is run by the Department of Energy’s Argonne National Laboratory, is more accurate than ICAO and does not overly penalize farmers for using land to cultivate crops. They say GREET better considers precision farming tactics that lower emissions like strip-tilling, which uses less diesel fuel emissions than standard tilling, and nitrogen fixation, which reduces the need for nitrogen fertilizer.

The Inflation Reduction Act calls on Treasury to authorize the European tool, along with “any similar methodology” that meets Clean Air Act requirements. That could potentially include GREET. ICAO already uses GREET to influence its findings.

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Ethanol proponents say huge strides are being made on corn and other farms to cut emissions that the Treasury Department can best reward using the GREET model.

“If they actually give producers the ability to take credit for upstream efficiency improvements, then you are going to see a situation where farmers and individual farms and rural America get sucked into a best carbon practices value proposition,” said Brooke Coleman, executive director of the Advanced Biofuels Business Council, referring to precision farming tactics like nitrogen fixation.

“ICAO has an overarching massive and outdated land use change penalty that will distort markets away from land-based biofuels relative to other solutions,” he said. “From a U.S. interest perspective, we have one primary advantage globally. It’s arable land.”

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DOE is “actively engaged” with Treasury on the SAF credit, according to a Ramzey Smith, a DOE spokesperson.

A Government Accountability Office report last month faults the Biden administration for not establishing “performance measures to monitor, evaluate, and report the results” of all federal tax and grant programs that could help deliver on the 3-billion-gallon-a-year White House target. The GAO report does not discuss the methodology dispute between environmentalists and producers.

The departments of Energy, Transportation and Agriculture agreed with recommendations from GAO for greater coordination among agencies.

The fight over the tax credit comes as Capitol Hill lawmakers are watching administration ethanol and sustainable fuel policies closely. Last week, Senate Commerce Chair Maria Cantwell (D-Wash.) called for tripling funding for an FAA emissions reduction program, potentially as part of a new FAA reauthorization bill.

“Sustainable aviation fuel presents the most promising near-term tool to dramatically reduce aviation emissions and will be critical to longer-term efforts to decarbonize aviation,” Kevin Welsh, executive director of the Federal Aviation Administration’s Office of Environment and Energy, said at the hearing. READ MORE

New Sustainable Aviation Fuels (SAF) technology pathways under development (United Nations' International Civil Aviation Organization (ICAO))

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Jetfuel (Sustainable Aviation Fuel (SAF)) Aviation Fuel/Sustainable Aviation Fuel (SAF) Agricultural Policy environmental policy Transportation Fuels Policy GREET Greenhouse Gases Regulated Emissions and Energy Use in Transportation Model CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) United Nations' International Civil Aviation Organization (ICAO) ethanol/bioethanol alcohol-to-jet (ATJ)/ethanol-to-jet (ETJ) Finland BioRefineries/Renewable Fuel Production Treasury Department Regulations-Federal land use land use change land use policy GHG (Greenhouse Gas Emissions) energy crops Biofuel Crops Government Accountability Office (GAO) Department of Energy (DOE) Department of Agriculture (USDA) Department of Transportation (DOT) Legislation-Federal Carbon Intensity (CI)/Carbon Footprint life cycle analysis (LCA) Sustainability Federal Aviation Administration (FAA) corn/maize corn ethanol waste-to-fuel aviation fuel (SAF) tax credit used cooking oil (UCO) waste oil Investing government investment precursors/biointermediates

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