by Matthew Cope (Argus Media) ... SAF output rose to an all-time high of 196mn USG through November of this year compared to 39mn USG in all of 2024, according to US Environmental Protection Agency (EPA) data. But growth next year is uncertain as the industry awaits final rules on a new biofuel tax credit, nearly a year after the US issued preliminary guidance.
The Inflation Reduction Act's 40B SAF tax credit expired after 2024, ending a minimum $1.25/USG subsidy for producers and blenders of a fuel that produces half as many emissions as petroleum jet fuel. The move this year to the 45Z tax credit for all types of domestic clean fuel production was always expected to be rocky — in part because stricter carbon intensity rules left most types of SAF with less of a tax break than in 2024 — but the market also has been hurt by delayed final rules.
The US government now expects to issue final regulations in the second quarter of 2026, though interim guidance could come sooner. Nonetheless, producers have begun selling 45Z credits at a discount to the book value of the credit. With producers looking for the market to rebound after a year of depressed margins and a drop in SAF values, this revenue stream is expected to become more common in future years but will still hinge on policy certainty.
In a similar fashion, EPA expects to finalize new biofuel blend mandates in the first quarter next year, another delayed regulatory program affecting SAF margins. While jet fuel is not obligated under the program like conventional gasoline and diesel, SAF generates a D4 RIN that is used by refiners to show compliance with the EPA's standards.
...
At the state level, multiple jurisdictions offer tax credits geared toward rewarding producers and airlines that increase SAF usage. The one that has made the most difference in boosting SAF demand is Illinois' $1.50/USG airline tax credit for SAF use. Minnesota has a similar policy.
Washington, Nebraska and, most recently, Arkansas have enacted incentives available to SAF producers within their states. But those states have not produced any SAF that is not co-processed with petroleum fuel and they have no facilities being commissioned, according to Argus estimates.
Uncertainty over federal policy continues to act as a roadblock for SAF producers looking to develop, finance, and bring their products to market in a timely and efficient way.
...
President Donald Trump's attacks on climate change policy has eroded industry-wide SAF demand. SAF prices reached all time lows in December, valued as low as $3.52/USG in the US west coast. But that's still a considerable premium to petroleum jet fuel, meaning uptake will be limited in the US absent new policies. READ MORE
Related articles
- Industry leaders say policy support key to growing Minnesota’s SAF market (Brownfield Ag News; includes AUDIO)
Excerpt from Brownfield Ag News: Lawmakers in Minnesota are expected to revisit legislation that supports the advancement of sustainable aviation fuels.
Minnesota Biofuels Association executive director Brian Werner tells Brownfield the state legislature failed to pass a bill in 2025 that would’ve expanded resources through a SAF tax credit.
“We made a lot of progress on that, but unfortunately that provision fell out at the eleventh hour at the end of last session. So we’re really going to redouble our efforts here in 2026.”
He suggests more state and federal support is necessary to create a sustainable SAF market.
“The truth is sustainable aviation fuel is just not to the price level of traditional jet fuel yet without some of these incentives. So to really get production moving in the state of Minnesota, we need a more stable policy framework to get that going.”
U.S. Representatives Tracey Mann and Sharice Davids of Kansas recently helped introduce the Securing America’s Fuels Act, bipartisan legislation designed to strengthen the sustainable aviation fuel industry, create economic opportunities for farmers, and reduce emissions in the transportation sector. Nebraska’s Mike Flood is a co-sponsor. READ MORE
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