Stakeholders react to SAF tax credit move

WASHINGTON — The announcement of guidance on eligibility for the sustainable aviation fuel tax credit was met with both concern and optimism.

The Department of Treasury used the new Greenhouse Gases, Regulation Emissions, and Energy Use in Technologies, or GREET, model that provides guidance on how corn, soybeans and other feedstocks could qualify for SAF under the 40B tax credit in the Inflation Reduction Act.

The Inflation Reduction Act, passed in 2022, allocates tax credits for biofuels that can demonstrate that they cut greenhouse gas emissions by 50% or more. After the law was passed, the Department of Treasury and Environmental Protection Agency were charged with choosing a model that would measure emissions throughout the life cycle of biofuels.

“The announcement is an important stepping stone as it acknowledges the important role farmers can play in lowering gas emissions and begin to reward them through that contribution in the production of new fuels,” said Agriculture Secretary Tom Vilsack.

“This is a great beginning as we develop new markets for sustainable aviation fuel that is homegrown agricultural crops produced using climate-smart agricultural practices.”

The GREET piece includes a greenhouse gas reduction credit for corn and soybeans if certain Climate Smart Agriculture practices are met, including cover crops for both cash crops.

Other practices to be SAF tax credit eligible are enhanced efficiency fertilizer for corn and no-till in both corn and soybeans.

There were glass half-full and glass half-empty reactions to the April 30 ruling. Here’s what stakeholders had to say.

“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. ASA appreciates USDA’s work to ensure improved carbon intensity reduction scores for soybeans, but asks that more be done to create an inclusive program — and one that considers sustainability practices that are feasible across all soy states.”

Josh Gackle, president

American Soybean Association

“The guidance and modified GREET model help position ethanol-based SAF for takeoff, but more work is needed to fully clear the runway and get this opportunity off the ground. We are encouraged that, for the first time ever, this carbon scoring framework will recognize and credit certain climate-smart agricultural practices. We’re also pleased to see the integration of other carbon reduction strategies — like renewable process energy and carbon capture and sequestration — into the model. 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. We view the 40B announcement as the starting point — not the ending point — for additional modeling improvements, further integration of individual climate-smart agriculture practices and emerging bio-refinery technologies. The 45Z ethanol production tax credit is where the rubber really meets the road. We look forward to working with USDA and other agencies across the administration to ensure 45Z is implemented in a way that truly swings the door wide open for farmers and ethanol producers to participate in the enormous decarbonization opportunity.”

Geoff Cooper, president and CEO

Renewable Fuels Association

“The announcement is complicated and concerning to corn farmers across the country. As corn demand decreases with the EPA’s recent emissions rule, our family farmers need other markets to sell grain. The administration’s announcement forces voluntary practices to become mandatory for farmers to access previously promised markets. We hope that more flexibility can be incorporated in the 45Z rulemaking that comes next, but with decreasing prices and a questionable profitability proposition, our industry is in jeopardy. Illinois farmers are in a precarious position. We need the market and are now pressed to risk the market based on an agency promise that farmer concerns will be seriously considered in the rulemaking process for 45Z. This would make anyone nervous. The details of the announcement are so complicated and technical that some guidance is still needed. What is certain is that a one-size-fits-all approach to considering on-farm practices is unworkable. The University of Illinois’ state climatologist reports growing seasons in Illinois vary from 215 days in southern Illinois to 180 days in northern Illinois. The difference in climate, soil and season makes it difficult for Illinois farmers to subscribe to the same conservation regimen in all areas of the state, much less in all areas of the country. The administration’s decision will limit SAF production, as the logistics of separating grain grown according to the prescribed practices is unfeasible for most storage sites and transportation models. This will limit corn production and use for SAF.”

Dave Rylander, president

Illinois Corn Growers Association

“The Biden administration is providing an important tailwind for corn ethanol produced with no-till, cover crops and enhanced efficiency fertilizers to qualify as a feedstock for SAF under 40B so long as all three of these Climate Smart Agriculture practices are adopted. This marks the first time a regulatory body has formally acknowledged the role CSA practices play in reducing corn ethanol’s GHG emissions, in this case enabling some ethanol-to-jet to qualify for the 40B credit. The USDA and Department Energy deserve praise for diligently ensuring this first step is being taken with respect to CSA practices. ACE is particularly grateful to Agriculture Secretary Vilsack for successfully advocating that corn ethanol is part of the solution to fulfill the Biden administration SAF goals and for his leadership on CSA pathways for corn ethanol under the new 45Z credit. While this announcement is a step in the right direction, ethanol-to-jet continues to face headwinds such as artificially inflated land use change penalties in 40B GREET and the initial all or none requirement to bundle three CSA practices in order to produce qualifying corn ethanol feedstock for SAF. With the 2024 planting season underway and the expiration of the 40B credit on Dec. 31, 2024, Treasury’s SAF guidance speaks more to the administration codifying the important role CSA practices play in decarbonizing liquid fuels than the amount of ethanol-to-jet that will qualify for the 40B credit. The announcement provides ACE a roadmap for how to prevent the conditions placed on CSA practices in 40B from being applied as 45Z is implemented. Ultimately, we need to enable farmers and ethanol companies to recoup value from these tax credits for their investments to reduce greenhouse gas emissions.”

Brian Jennings, CEO

American Coalition for Ethanol

“The science matters and we are concerned this decision may have missed the mark, but we are carefully reviewing the details before reaching any final conclusions. These actions highlight that significant questions remain as to whether and how to credit certain beneficial agricultural practices in the context of implementing the 40B sustainable aviation fuel tax credit. The bottom line is that to decarbonize aviation, U.S. airlines need a volume of alternative fuels that sustainable biomass alone cannot meet. EDF will continue to urge policymakers to focus future IRA tax subsidies on scaling next generation aviation fuels essential to reducing climate pollution and creating a competitive advantage for innovative U.S. alternative fuel suppliers.”

Mark Brownstein, senior vice president of energy transition

Energy Defense Fund