Exclusive: Biden Administration's Initial SAF Subsidy Model to Raise Climate Hurdle for Ethanol

April 06, 2024

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by Jarrett Renshaw (Reuters) The Biden administration will release a preliminary climate model for its sustainable aviation fuel (SAF) subsidy program in the coming weeks that is more restrictive than what the corn-based ethanol industry had expected, two sources familiar with the matter told Reuters.

Under the preliminary model, which could be released by May 15, ethanol is not expected to automatically qualify as a feedstock in the SAF subsidy program unless the corn involved is sourced from farmers using one of just three sustainable agriculture techniques, the sources said.

Those techniques include efficient tilling, use of cover crops and efficient fertilizer application, the sources said. White House officials, the final arbiter of the model, had considered forcing producers to use all three techniques in a none-or-all approach, but have backed off that plan, the sources said.

The ethanol industry had expected a broader range of agriculture techniques to be included in the model to help the fuel qualify.

The sources said the model could be expanded to include a broader range of options when the administration considers a rule establishing the Clean Fuel Production Credit, or 45Z, later this year.

The White House had been reluctant to immediately expand the options amid intense debate over how to verify that farms are actually doing the practices and whether they deliver the carbon reduction as promised.

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To access SAF subsidies, producers must demonstrate their feedstock is 50% lower in emissions than jet fuel. Ethanol is expected to miss the 50% threshold after environmental penalties for converting land for fuel, something that would force the industry to rely on smart agriculture practices to get back above the credit threshold. READ MORE

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Excerpt from Reuters: Revisions to a key emissions model for sustainable aviation fuel feedstocks will be ready "in the very near future," said U.S. Environmental Protection Agency Administrator Michael Regan in Philadelphia on Friday.

The Biden administration pledged last year to update how the Department of Energy's Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model measures emissions from agricultural practices used by farmers producing biofuel feedstocks.

The revisions were delayed from an initial March 1 timeline after disputes among agencies about the changes, sources told Reuters at the time.

"In the very near future, we will have that model up and running," Regan told the Society for Environmental Journalists conference.

The model is favored by the biofuels industry for measuring ethanol emissions to determine whether the fuel qualifies for a $1.25 per gallon sustainable aviation fuel tax credit passed in the Inflation Reduction Act.

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The EPA, DOE, Department of Agriculture, Federal Aviation Administration, and White House have all been involved in discussions about implementing the credit. READ MORE

Excerpt from Brownfield Ag News: U.S. Ag Secretary Tom Vilsack says he’s hopeful updates to the GREET modeling used to measure transportation emissions for sustainable aviation fuel will be announced this month.

“Well I am particularly hopeful that we get some direction from Treasury in the next several weeks, sometime during the month of April. That’s the goal, (and) certainly our goal.”

The transportation emission guidelines for SAF were expected to be announced last month.

He says the initial framework will probably focus on 40B. READ MORE

Excerpt from Reuters: President Joe Biden's administration is offering farmers money for adopting practices that store carbon in the soil to fight climate change, but Reuters interviews with soil science experts and a review of U.S. Department of Agriculture research indicate doubt that the approach will be effective.

Farm practices like planting cover crops and reducing farmland tilling are key to the USDA's plan for slashing agriculture's 10% contribution to U.S. greenhouse gas emissions as the U.S. pursues net-zero by 2050. Ethanol producers also hope those practices will help them secure lucrative tax credits for sustainable aviation fuel (SAF) passed in the Inflation Reduction Act (IRA).

But the farming techniques, which will receive an extra funding boost from Biden's signature climate law, may not permanently sequester much atmospheric carbon in the soil, according to five soil scientists and researchers who spoke to Reuters about the current science.

Four other soil scientists, and the USDA, said the practices can store various amounts of soil carbon, but circumstances will dictate how much and for how long.

The White House referred Reuters to the USDA for comment.

A USDA spokesperson said "the adoption and persistent use of no-till and cover crops are key for the sequestration of carbon on working croplands."

All the experts interviewed by Reuters agreed that no-till and cover crops can have significant environmental benefits such as preventing soil erosion and increasing biodiversity. Yet five of them expressed skepticism about tying climate policy and public money to the practices.

"Will it help with climate adaptation? Absolutely. Should it serve as an offset for more permanent and long-lived pollutants? Absolutely not," said Daniel Rath, an agricultural soil carbon scientist at the Natural Resources Defense Council.

The USDA has spent $1.3 billion in financial assistance to farmers for planting and managing cover crops and $224 million for implementing no-or reduced-till since 2014, according to agency data. That figure is miniscule compared to total USDA spending, but does amount to about 8% of its farm conservation spending in that period.

"If we really want to offset or mitigate climate change, we need to think about different systems," said Humberto Blanco, an agronomy professor at the University of Nebraska-Lincoln. "We need to think about more aggressive strategies."

IT ALL DEPENDS

Adoption of cover crops and no-till has risen in the past decade; now, 11% of farms plant cover crops and about 40% use minimal or no tilling, according to the most recent USDA agricultural census.

Under the right conditions, planting cover crops and reducing tilling can be positive for the climate, scientists told Reuters.

"If a farmer is using cover crops and getting good growth in the fall and spring, and they’re doing minimal tillage, on most soils, they’re going to add soil carbon over time," said Robert Myers, a professor at the University of Missouri and regional director of extension programs at a USDA research site.

A USDA spokesperson said the benefits largely depend on factors like growing climate, soil type, crop rotation, and other factors.

Five other experts told Reuters that no-till farming commonly results in a higher concentration of carbon in the soil surface but a decrease deeper in the soil profile, resulting in a net zero gain.

Seven experts said the climate benefits of no-till and cover crop techniques can be lessened or reversed if farmers plow their fields again.

"Even if you do build up some extra carbon under reduced tillage, if you then do a traditional plowing, the evidence seems to be that you quite quickly lose the carbon that you’ve been building up," said David Powlson, senior fellow at Rothamsted Research, an agricultural research institution.

Only 21% of farmers report using no-till continuously, according to the 2022 farm census, and about a third alternate reduced tilling with conventional tilling, showed a 2018 USDA report.

A USDA standards document for no-till says loss of carbon in the soil is directly tied to the amount and intensity of the tilling, and other factors like soil moisture and temperature.

As for the SAF tax credit, the Treasury Department is expected to finalize details in coming weeks. The $1.25 per gallon credit is aimed at producers who prove their fuel can cut emissions 50% from those of straight jet fuel.

The program will likely require ethanol producers to source corn from farmers using cover crops, reduced tilling, or efficient fertilizer application, sources told Reuters.

The USDA declined to comment on what the fertilizer application would entail.

The ethanol industry hopes to account for a significant portion of the 35 billion gallons of SAF the Biden administration has pledged to produce by 2050.

The IRA includes some $19.5 billion for farm climate programs over 10 years, and in 2023, about $52.5 million of that money went to cover crops and no-till. READ MORE