Fueling Innovation: Biden Administration's Bold Move to Green Aviation Takes Flight!

This initiative aims to create jobs while combating climate change by encouraging innovation in aviation. Producers of SAF showing a minimum 50% reduction in greenhouse gas emissions compared to traditional jet fuel can benefit from tax credits ranging from $1.25 to $1.75 per gallon. With the introduction of the 40B SAF-GREET 2024 model and a USDA pilot program promoting Climate Smart Agriculture practices, the administration is leading the charge toward a cleaner, greener future for aviation.

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have provided guidance concerning the Sustainable Aviation Fuel (SAF) Credit, which was established under the Inflation Reduction Act (IRA). This initiative forms a part of President Biden's Investing in America agenda, aimed at creating high-quality employment opportunities and addressing climate pollution by fostering innovation in the aviation sector. The Treasury Department worked closely with various partners within the Biden-Harris Administration, including the Environmental Protection Agency (EPA), Department of Transportation (DOT), Department of Agriculture (USDA), and Department of Energy (DOE), on the 30th of April.

 “President Biden’s Inflation Reduction Act is driving American innovation to create good-paying jobs and help the U.S. clear hurdles in our clean energy transition,” said U.S. Secretary of the Treasury Janet L. Yellen. “Incentives in the law are helping to scale production of low-carbon fuels and cut emissions from the aviation sector, one of the most difficult-to-transition sectors of our economy. Today’s guidance provides additional clarity and certainty to companies and producers.

“Sustainable aviation fuel is a key part of the Biden-Harris Administration's efforts to transition the American economy to a clean energy future and rebuild the middle class from the bottom up to the middle out in rural America,” said U.S. Secretary of Agriculture Tom Vilsack. “Today’s announcement is an important stepping stone as it acknowledges the important role farmers can play in lowering greenhouse gas emissions and begins to reward them through that contribution in the production of new fuels. This is a great beginning as we develop new markets for sustainable aviation fuel that use home grown agricultural crops produced using climate smart agricultural practices. USDA will continue to work with our federal agency partners to expand opportunities in the future for climate smart agriculture in producing sustainable aviation fuel.”

The Treasury Department's guidance provides important clarification regarding eligibility for the Sustainable Aviation Fuel (SAF) Credit, which incentivizes the production of SAF demonstrating a minimum 50% reduction in lifecycle greenhouse gas emissions compared to conventional petroleum-based jet fuel. Producers meeting this criterion can qualify for a tax credit ranging from $1.25 to $1.75 per gallon. For SAF exceeding the 50% emissions reduction threshold, an additional credit of $0.01 per gallon is granted for each percentage point beyond the 50% reduction, capped at $0.50 per gallon.

The SAF Interagency Working Group (IWG) is introducing the 40B SAF-GREET 2024 model to help SAF producers measure their greenhouse gas emissions and qualify for the SAF Credit. This updated model includes new data and better calculations for feedstocks and processes used in aviation fuel production, as well as indirect emissions. It also suggests ways to reduce emissions, like carbon capture and renewable energy. Additionally, the notice includes a trial program from the USDA promoting specific Climate Smart Agriculture (CSA) practices for SAF feedstocks. By using these practices, SAF production can reduce overall greenhouse gas emissions and improve soil and water quality. For corn ethanol-to-jet and soybean-to-jet, the pilot program offers credits for reducing greenhouse gases if certain CSA practices are followed. This pilot initiative is only for the years 2023 and 2024.To recognize Climate Smart Agriculture (CSA) practices under the Clean Fuel Production Credit (45Z), which will be accessible starting in 2025, additional efforts will be undertaken by the agencies to refine modelling, gather data, make assumptions, and establish verification processes. A new model, 45Z-GREET, will be created specifically for utilization with the 45Z tax credit..