Biden Administration Split over Ethanol's Role in Aviation Fuel Subsidy Program

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August 02, 2023

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by Jarrett Renshaw, Stephanie Kelly and Leah Douglas (Reuters) The Biden administration is divided over whether to grant a request from the U.S. biofuel industry that would make it easier for sustainable aviation fuel made from corn-based ethanol to qualify for subsidies under the White House's signature climate law, according to two sources familiar with the discussions.

The indecision has touched off a lobbying battle between two big stakeholders - Farm Belt backers who view sustainable aviation fuel (SAF) as crucial to ethanol's growth and environmental advocates who say clearing land to grow crops for fuel is counterproductive to solving global warming.

At issue is a requirement in last year's Inflation Reduction Act (IRA) that SAF producers seeking tax credits must demonstrate with an approved scientific model that their fuel generates 50% less greenhouse gas emissions over its lifecycle than petroleum fuel.

Midwest ethanol producers have asked the Biden administration to adopt a model that would enable ethanol-based SAF to qualify while environmentalists want standards that would favor inputs like used cooking oil and animal fat.

Officials at the Environmental Protection Agency and agriculture and energy departments are divided over which model to use, and White House Climate Czar John Podesta is seeking to resolve the question, according to the sources.

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The Biden administration has a goal to supply at least 3 billion gallons of SAF per year by 2030 as part of its broader effort to decarbonize the transport sector. By 2050, it hopes the SAF industry - which is now miniscule - will meet 100% of aviation fuel demand at around 35 billion gallons per year.

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"Mark my words: the next 20 years, farmers are going to be providing 95% of all the sustainable airline fuel," Biden told a crowd in Maine last week.

The IRA says producers must use the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) developed by the International Civil Aviation Organization, or a "similar methodology", for measuring SAF's emissions.

The ethanol industry wants to use the U.S. Department of Energy's Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model.

CORSIA is more likely than GREET to exclude ethanol-based SAF from the subsidy program because of the way it evaluates the emissions of so-called indirect land-use change, the displacement of existing farmland or natural vegetation to grow crops.

The administration is considering a compromise that would incorporate certain aspects of the GREET system into a new methodology, a source familiar with the matter said. However, it was unclear how that would work. READ MORE

Debate Over Ethanol Qualifying for SAF Credits (AgWeb/Pro Farmers)

Tensions Rise Over US SAF Subsidies Spat (Aviation Week)

The politics and science of jet fuel (Wall Street Journal)

Protecting the future of low-carbon aviation (Growth Energy/Ethanol Producer Magazine)

NATSO, SIGMA URGE IRS TO ADOPT STRINGENT LIFECYCLE GREENHOUSE GAS MODELING REQUIREMENTS FOR SUSTAINABLE AVIATION FUEL (NATSO and SIGMA/PR Newswire)

New Research Shows Major US Airline and Biofuel Industries Push for Weaker US Sustainable Aviation Fuel Policy -- Industry lobbying policymakers for weaker rules for sustainable aviation fuels (SAFs) qualifying for government incentives that may harm decarbonization efforts (Influence Map)

US airlines ally with farmers to seek subsidies for corn as jet fuel (Financial Times)

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Excerpt from Growth Energy/Ethanol Producer Magazine: Currently, farm-based feedstocks – including bioethanol and corn oil, among others – are the only viable sources of clean, renewable energy available in large enough volumes to meet projected demand for sustainable aviation fuel (SAF). In fact, the U.S. ethanol industry accounts for over 80 percent of biofuel production capacity in the U.S. at 17.4 billion gallons per year. Just last week, President Biden acknowledged as much, saying, “Mark my words: the next 20 years, farmers are going to be providing 95 percent of all the sustainable airline fuel.

Unfortunately, a handful of groups have been encouraging the U.S. Treasury to decide who can earn credit for making SAF based on an emissions model used in Europe. Their misguided campaign re-emerged this week, with the anti-agriculture crowd falsely telling Reuters that renewable fuels will promote “clearing land to grow crops,” despite decades of data showing U.S. cropland is on the decline as farmers increase the productivity of each acre.

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There is a better way. The DOE and Argonne National Laboratory have invested decades into building the world’s best lifecycle analysis (LCA) model for transportation emissions. It’s called the Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model.

GREET was created by researchers with real-world expertise examining both the domestic agricultural supply chain and the latest hard data from the U.S. Department of Agriculture and the U.S. Environmental Protection Agency. The gold standard for lifecycle modeling, it harnesses the latest data on everything, including yield, fertilizer, and agriculture inputs.

In fact, several provisions of the IRA specifically require the use of GREET to calculate the benefits of other transportation fuels, such as hydrogen and non-aviation low carbon fuels. Unfortunately, the legislation didn’t offer the same clear guidance on SAF – an omission that could keep U.S. SAF production grounded for good.

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Leaders at the U.S. Treasury could easily avoid that outcome by relying on the GREET model, which would incentivize further emissions reductions and advance the IRA’s climate goals.

As Growth Energy noted in our letter to the IRS this July, “When implementing the Section 40B and 45Z SAF tax credits, IRS must ensure LCA methodologies used for calculation of credits reflect the best available science so as to incentivize increased production of low carbon-intensity SAF in order to further Congress’ core objective of accelerating the reduction of GHG emissions from the U.S transportation system. Implementing the statute in this matter is critical to the decarbonization and continued economic competitiveness of the U.S. aviation sector."

Lawmakers agree, and a bipartisan coalition of 16 senators recently warned Treasury Secretary Janet Yellen that, “[f]ailure to provide businesses with the certainty and reliability of a science-based, United States government-developed model to determine eligibility for IRA tax credits could have dire consequences.” House champions, led by Representatives Mark Pocan (R-Wisc.), Ashley Hinson (R-Iowa), and Angie Craig (D-Minn.) issued a similar letter on July 28.

In short, experts agree it would be climate malpractice to anchor our SAF ambitions to outdated, foreign models that disregard U.S. innovations in biofuel production and climate-smart agriculture and tie U.S.-based carbon incentives to inaccurate foreign carbon models. READ MORE

Excerpt from NATSO ans SIGMA/PR Newswire: Because renewable diesel and SAF utilize the same limited feedstocks, and renewable diesel is more efficient and environmentally compelling than SAF, Congress stipulated that SAF should only get a higher tax credit if it can meet higher environmental standards. Inviting industry to disregard CORSIA would represent an affirmative decision by the Biden Administration to increase diesel emissions and increase fuel prices.

"Until there is tax parity between sustainable aviation fuel and other biofuels, SAF producers will threaten to siphon feedstocks away from those biofuels used in over-the-road transportation, potentially eliminating America's biodiesel and renewable diesel market. READ MORE