US issues new tax credit guidelines for SAF

The U.S. Treasury Department and IRS’s new guidelines for sustainable aviation fuel credits under the Biden administration’s 2022 Inflation Reduction Act will be finalized early this year. Producers of sustainable aviation fuel (SAF) blends that reduce greenhouse gas emissions by 50% or more will qualify for a credit of between $1.25 and $1.75 per gallon, according to an IRS release. Blends that offer reductions beyond 50% will earn an additional credit of 1 cent per percentage point, the release stated. Following a year marked by significant milestones in green aviation, the latest guidelines , which were issued in December, aim to promote further SAF production and cost reductions in the U.S., Richard “Pat” Anderson , professor of aerospace engineering and the director of the Eagle Flight Research Center at Embry‑Riddle Aeronautical University , told Air Cargo Next . “I think we understand sustainable aviation fuels,” he said. “I think we've proven that they are viable... And I think, really, what we need to see is the mass production of these, which I think is the difficult part, the scaling part. And so, what I think you're seeing is the government trying to attract people to scale up the production of SAF because we realize that it works.” There are two standards for determining whether SAF blends meet the requirements for the latest incentives — the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and the Clean Air Act (CAA). The Environmental Protection Agency ’s Renewable Fuel Standard (RFS) will be used as an additional “safe harbor,” according to the release. The RFS meets both CORSIA and CAA standards, the release stated. Feedstock challenges SAF production must increase to meet the targets set by IATA ’s 2050 net-zero goals, estimated at 450 billion liters, according to TIACA . While SAF production doubled globally in 2023 to 600 million liters, this is only 0.5% of aviation’s total need, according to IATA. “As to available feedstock, any areas with agricultural, forestry, pulping industries could potentially have byproduct, which would be good source material for SAF production,” TIACA’s Director General Glyn Hughes previously told Air Cargo Next . “However, SAF production is very expensive compared to traditional jet kerosene production. Hence why we believe governments should incentivize and support research and development as SAF is significantly more beneficial for the planet.” Governments around the globe have increasingly pursued green aviation over the past year, but some environmentalists have questioned the pathway to get there. “The challenge is that not all SAFs are created equal — and without the right federal safeguards, some fuels could make our climate worse or release cancer-causing toxins,” the Environmental Defense Fund stated in a report ahead of the tax guideline announcement. “Irreplaceable forests could be wiped out, vulnerable communities threatened and the ecosystems we all depend on put in danger.” Waste oils, agricultural residue, undigestible animal fats, algae and vegetable oils are used to produce SAFs. There are understandable concerns over certain feedstocks, such as corn, which is widely produced in the U.S. and uses larges amounts of water to produce, Brandon Fried , executive director of the Airforwarders Association , told Air Cargo Next . However, net-zero aviation will require more than one solution, he sai d . “We emphasize that SAF production should prioritize feedstocks like waste oils and fats, minimizing any potential impact on food security or water resources,” Fried said. “Sustainable practices throughout the supply chain are paramount, and we encourage ongoing research and development of next-generation SAF technologies that rely on even less land- and water-intensive feedstocks. “Ultimately, a diversified approach to SAF production, coupled with continued government support through financial incentives and research funding, is crucial to meeting the aviation industry's growing demand for this essential low-carbon fuel,” he said.

US issues new tax credit guidelines for SAF

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