(Washington) On Tuesday, the U.S. Department of the Treasury and Internal Revenue Service (IRS) released guidance on the Sustainable Aviation Fuel (SAF) Credit established by the Inflation Reduction Act (IRA). This credit is part of President Biden’s Investing in America agenda to create good-paying jobs and reduce climate pollution by spurring innovation in the aviation industry.
Speaking in front of farm broadcasters in Washington, D.C., U.S. Ag Secretary Tom Vilsack stated the Treasury Department released guidance on how entities producing sustainable aviation fuel can qualify for a tax credit under Section 40(b) of the Internal Revenue Code. Vilsack says this credit is available for biofuels produced as sustainable aviation fuel for 2023-2024. He says it also guides a road map governing production in 2025 and beyond under tax credit 45(z).
According to the press release, The Treasury Department’s guidance provides important clarity around eligibility for the SAF Credit. The credit incentivizes the production of SAF, which achieves a lifecycle reduction of at least 50% in greenhouse gas emissions compared to petroleum-based jet fuel. Producers of SAF are eligible for a tax credit of $1.25 to $1.75 per gallon. SAF that decreases GHG emissions by 50% is eligible for the $1.25 credit per gallon amount, and SAF that reduces GHG emissions by more than 50% is eligible for an additional $0.01 per gallon for each percentage point the reduction exceeds 50%, up to $0.50 per gallon.
The Treasury Department worked closely with Biden-Harris Administration partners, including the Environmental Protection Agency (EPA), Department of Transportation (DOT), Department of Agriculture (USDA), and Department of Energy (DOE) on Tuesday’s Notice.
Under the guidance, numerous fuels will qualify for the credit, including valid biomass-based diesel, advanced biofuels, cellulosic biofuel, or cellulosic diesel approved by EPA under the Renewable Fuel Standard (RFS).
Fuels that achieve a 50% or greater reduction in lifecycle greenhouse gas emissions under the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) standard will continue to qualify under today’s guidance. In addition, EPA, DOT, USDA, and DOE are announcing their commitment to release an updated version of DOE’s GREET model. Pending further guidance from the Treasury Department, the updated GREET model will provide another methodology for SAF producers to determine their production’s lifecycle GHG emissions rates to qualify for the SAF Credit for SAF sold or used during calendar years 2023 and 2024.
The updated model will incorporate new data and science, including new modeling of key feedstocks and processes used in aviation fuel. It will also integrate other categories of indirect emissions, like crop production and livestock activity, in addition to the best available science and modeling of indirect land use change emissions. The updated model will also integrate key greenhouse gas emission reduction strategies, such as carbon capture and storage, renewable natural gas, renewable electricity, and Climate-saving agricultural practices.