By Ryan Hanrahan
Reuters reported Tuesday evening that “President Joe Biden’s administration on Tuesday released guidance on its sustainable aviation fuel (SAF) subsidy program that allows corn-based ethanol to qualify for the program if it is sourced from farms using climate-friendly growing techniques.”
“SAF can be made from corn, soy or other agricultural products,” Reuters reported. “But to access the SAF subsidies that make it economically viable to produce, refiners must demonstrate their fuel is at least 50% lower in emissions than petroleum jet fuel.”
“Ethanol-based SAF can meet that threshold, according to the guidance, only if corn farmers use a bundle of agriculture practices that include no-till, cover cropping and efficient fertilizer application that hold carbon in the soil,” Reuters reported. “Soy-based biodiesel will also qualify if the soy farms use a combination of no-till and cover cropping, according to the announcement.”
“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,” Agriculture Secretary Tom Vilsack said in a press release. “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.”
How Much Are the Subsidies?
The Pro Farmer Editors reported Tuesday that “producers of SAF are eligible for a tax credit of $1.25 to $1.75 per gallon. SAF that achieves a Greenhouse Gas emissions reduction of 50% is eligible for the $1.25 credit, while SAF that achieves a GHG emissions reduction of 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.”
Industry Reaction
While the tax credit guidance has only been out for about 12 hours, Successful Farming’s Cassidy Walter reported that “industry leaders appear excited about the pilot program while also calling for more flexibility.”
Geoff Cooper, CEO of the Renewable Fuels Association, said that “we are encouraged that, for the first time ever, this carbon scoring framework will recognize and credit certain climate-smart agricultural practices. …However, RFA believes less prescription on ag practices, more flexibility, and additional low-carbon technologies and practices should be added to the modeling framework to better reflect the innovation occurring throughout the supply chain.”
Not all reactions were positive, however, including from Josh Gackle, president of the American Soybean Association, who said that “for growers like me here in North Dakota, short growing seasons and unpredictable fall weather make the cover crop requirement alone next to impossible. Growers in the Northern Plains do so when possible. However, employing both no till and cover cropping is contrary to what Mother Nature will allow, no matter what the guidance specifies.”
Iowa Renewable Fuels Association Executive Director Monte Shaw said that “the approved bundle of farm practices won’t work for many Iowa farmers, let alone farmers throughout the Midwest. Given the range of climates and soil types, farmers do not want one-size-fits-all bundles mandated from D.C.”
Guidance Effective for Only for 2023 and 2024
Agri-Pulse’s Philip Brasher reported that the rules announced Tuesday “will have minimal impact on production of the biofuel, since the Section 40B tax credit is only in effect through the end of the year, when a broader tax incentive, known as 45Z, will take effect.”
“Administration officials say the 40B requirements will lay the groundwork for the 45Z tax credit rules and should signal to SAF investors that agricultural feedstocks will be eligible for the incentive,” Brasher reported. “Relatively little SAF is currently being made, but the airline industry has committed to using 3 billion gallons annually by 2030, or 10% of their projected fuel needs.”
Progressive Farmer’s Chris Clayton reported that the 45Z tax credit will “reach up to $1.75 a gallon, starting Jan. 1, 2025, until the end of 2027. The 45Z tax credit is considered more valuable long-term for biofuel-to-jet fuel because right now so little aviation fuel is being produced to qualify for the 40B tax credit.”
“‘The guidance provided by the Treasury Department is going to provide a clear pathway to how best to qualify for the 40B tax credits and it is also going to create a process to expand opportunities under 45Z,’ (Ag Secretary Tom) Vilsack said,” according to Clayton.
“Right now, there are no details on when the guidance will be ready for the 45Z tax credits,” Clayton reported. “Also unknown is when EPA will take the new GREET model and apply it to the Renewable Fuels Standard.”
Source : illinois.edu