Pressing for GREET Model Update Details for SAF Tax Credits Delayed, But Will 'Send Right Signal,' Ag Secretary Says

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March 22, 2024

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by Chris Clayton (DTN Progressive Farmer) While groups are clamoring for certainty on how the Department of Treasury calculates tax credits for sustainable aviation fuel, Agriculture Secretary Tom Vilsack said the adjustments to the greenhouse gas model, or "GREET" model, won't be completed until next month but will "send the right signal" to both farmers and biofuel producers.

Yet, the farm practices eventually recognized by the Treasury Department for the Sustainable Aviation Fuel "40B" tax credit may need to be broadened to help provide more benefits to biofuel producers and farmers under the Clean Fuel Production "45Z" tax credits, Vilsack said.

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A group of 26 farm and biofuel organizations from 13 states on Thursday wrote Biden administration officials, expressing disappointment that federal agencies missed their own self-imposed deadline to update the GREET model, "but we appreciate the importance of getting the modeling right." Cosigners of the statement included Growth Energy, Clean Fuels Alliance America, National Corn Growers Association, National Farmers Union, National Oilseed Processors Association, and the Renewable Fuels Association.

The various groups warned officials against changing the GREET model "that would stack unwarranted penalties on agricultural feedstocks, cut rural America out of a promising green energy market and undermine any realistic path to achieving U.S. SAF goals."

At a House agricultural appropriations hearing, Rep. Ashley Hinson, R-Iowa, asked Vilsack about the status of GREET model changes. Talking about biofuel production in Iowa, Hinson noted the tax credits will be "absolutely critical for our industry" and it is important that the GREET model recognizes farmers' conservation practices. Hinson asked Vilsack for an update on the status of the GREET and to "ensure that the scientists are driving that review."

To garner the 40B and 45Z tax credits, an aviation fuel must show at least a 50% reduction in greenhouse gas emissions compared to traditional aviation fuels. A key for biofuels such as ethanol will be to consider farm practices and get credit for practices that lower greenhouse emissions of the feedstocks going into biofuel plants as part of that lifecycle modeling.

Along with using the GREET model, Vilsack said right now it's important to make sure the Treasury Department and others "are fully aware of what steps farmers do, in fact, take to be more sustainable in the production of corn and soybeans as a feedstock for sustainability."

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Vilsack added, "I'm confident there's a recognition that no-till, cover crops and energy-efficient fertilizer are the kinds of things that ought to be included as factors to calculate whether a particular sustainable aviation fuel meets a threshold of ... 50% improvement. So, I think I'm confident we're going to send the right signal."

There will need to be a broader conversation on the 45Z tax credit to see whether "other aspects of climate-smart agriculture -- sustainable agriculture -- ought to be considered" in the GREET calculations. "I think there's a recognition that farmers are going to play an integral role in the development of SAF here," Vilsack said.

Lanza Jet, which built a 10-million-gallon SAF plant in Georgia, is importing ethanol made from Brazilian sugar cane so the aviation fuel can qualify for an EPA renewable identification number (RINs) credit.

HINSON: FARMERS NEED TO BE RECOGNIZED

DTN asked Hinson about whether groups are raking issues over ensuring domestic SAF also qualifies for an EPA biofuel credit under the Renewable Fuels Standard. Hinson said she had just met Thursday morning with corn farmers on that issue.

"Certainly, it's about being able to be competitive with Brazil," Hinson said. "And the last thing I want to see us do no matter what model we're using or the tax credit specifically, is ceding any ground to allow for the importation of ethanol from or those products from Brazil is cutting into our markets."

Hinson added it also is important that farmers are recognized for their conservation practices.

The 40B tax credit sunsets at the end of 2024 and the 45Z tax credit sunsets at the end of 2027. Hinson also was asked about extending those tax credits. She said she is putting together a coalition specifically to look at extending those SAF tax credits and others.

Vilsack, acknowledging the 40B tax credit won't provide as much benefit long-term, said recognizing climate practices provides the right "messaging" for the 45Z tax credits down the line. Vilsack told reporters it's important that the GREET outcome provides incentives for biofuel producers and farmers when it comes to conservation practices.

"So, you want to send the right message that climate-smart, sustainable agriculture, that folks understand it is a significant factor in producing the feedstocks necessary to produce this sustainable aviation fuel."

EDUCATION PROCESS RECOMMENDED

While some practices are well-known, other farm practices that reduce emissions or sequester carbon on the farm may not be as understood, so there will need to be an education process, as well as some verification to prove those emission benefits are there to get below that 50% emission reduction for the fuel.

"So, whatever comes out on 40B, I don't think you want to say, 'Well, that's the universe.' It's not. It's a signal that climate-smart sustainability is in," Vilsack added. "There is more work to see how expansive the 45Z, -- which is the real, that's the real deal -- how expensive that can be, and that may take a little more work."

Asked if the changes made to GREET for the tax credits will apply to the Renewable Fuels Standard overseen by EPA, Vilsack said, "I don't know if I can answer that question today. I'm just trying to make sure we get the messaging right."

Biofuel groups and others are already developing different partnerships to help calculate farm practices. On Thursday, Siouxland Energy Cooperative of Sioux Center, Iowa, and Continuum Ag of Washington, Iowa, announced an agreement to "provide farmers a path to receive potential premiums associated with Carbon Intensity (CI) Certified Grain. Continuum Ag will provide farmers with the certification to participate while Siouxland intends to be a buyer for the certified bushels. The goal is to offer premiums for certified grain and capitalize on the pending 45Z Clean Fuel Production tax credits," the companies stated. READ MORE

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U.S. Farm & Biofuel Leaders Seek Certainty on Sustainable Aviation Fuel (Renewable Fuels Association)
U.S. Farm & Biofuel Leaders Seek Certainty on Sustainable Aviation Fuel (Growth Energy)
Farm and Biofuel Groups Urge Adoption of GREET Model (Energy.AgWired.com; includes AUDIO)
GREET’s just the start. Some in biofuel industry look to EPA action on jet fuel, too (Agri-Pulse)
What Happened After the National Ethanol Conference? Tax Credit; Carbon Intensity; Investment (DTN)
Ethanol Report on GREET Model Delay (Energy.AgWired.com; includes AUDIO)
White House yet to release sustainable jet fuel tax credit rules; corn farmers eager to mix in ethanol -- The lucrative federal tax credit created by the Inflation Reduction Act could be a boon for corn farmers, if it's ever released. (Star Tribune)
White House yet to release sustainable jet fuel tax credit rules; corn farmers eager to mix in ethanol -- The lucrative federal tax credit created by the Inflation Reduction Act could be a boon for corn farmers, if it's ever released. (Star Tribune)
PATIENCE RUNNING LOW AS INDUSTRY AWAITS GREET MODEL UPDATE (Brownfield Ag News)
UPDATES TO GREET MODEL FOR SUSTAINABLE AVIATION FUEL EXPECTED VERY SOON (Brownfield Ag News)

Excerpt from Renewable Fuels Association: A multi-state coalition of biofuel and farm advocates called on President Biden’s Treasury Department to swiftly resolve any questions standing in the way of efforts to scale up U.S. production of Sustainable Aviation Fuel (SAF). Specifically, they urged the administration to quickly adopt the U.S. Department of Energy’s GREET model for the calculation of SAF tax credits (40B) under the Inflation Reduction Act – completing a process that was originally scheduled to conclude by March 1.

“We are disappointed that the administration did not fulfill its commitment to release a modified GREET model by March 1, but we appreciate the importance of getting the modeling right,” wrote 26 organizations across 13 states, including the Renewable Fuels Association, Clean Fuels Alliance America, Growth Energy, National Corn Growers Association, National Farmers Union and the National Oilseed Processors Association. “At the same time, we caution against contradictory changes to GREET that would stack unwarranted penalties on agricultural feedstocks, cut rural America out of a promising green energy market, and undermine any realistic path to achieving U.S. SAF goals.”

SAF advocates emphasized the availability of well-established methodologies for certifying climate smart agriculture (CSA) practices, in contrast to speculative and unverifiable penalties for indirect land use change (ILUC) favored by opponents of U.S. agriculture.

“Failing to value regenerative and CSA advancements, as well as the full suite of biorefining innovations cited in guidance to date, would leave substantial carbon emissions reductions on the table and represent a missed opportunity to energize these promising sectors,” they wrote. “A consistent approach to ILUC and CSA is a vital part of giving farmers and SAF producers a credible, durable, and predictable framework for making the commitments necessary to effectuate IRA and the SAF Grand Challenge.”

The full text of the letter and a list of signers can be found here. READ MORE

Excerpt from Energy.AgWired.com: In this interview, South Dakota farmer Ron Alverson with Dakota Ethanol gives a good explanation of the GREET model and the importance of including climate smart agriculture (CSA) practices and making sure land use change is evaluated correctly.
Play Ron Alverson, South Dakota 7:58 READ MORE