The Biden administration has announced guidelines for tax breaks intended to promote the production of sustainable aviation fuel in order to reduce emissions from commercial airplanes. The Treasury Department’s actions will allow for tax credits for corn-based ethanol producers who adhere to “climate-smart agriculture practices.” However, the announcement received mixed reactions, with the ethanol industry welcoming the move while environmentalists expressed concerns.
In order to qualify for the tax credits, sustainable aviation fuel (SAF) must reduce greenhouse gas emissions by at least half compared to conventional jet fuel made from oil. The credits range from $1.25 to $1.75 per gallon and were approved by Congress as part of Biden’s 2022 climate and health care bill. Commercial aviation, which includes passenger and cargo airlines, currently accounts for 10% of fuel consumed by transportation and 2% of U.S. carbon emissions.
The Renewable Fuels Association, a trade group representing the ethanol industry, commended the Treasury guidelines for opening opportunities for U.S. ethanol producers and farmers to enter the sustainable aviation fuel market. However, the group expressed disappointment that producers will have to adhere to specific agricultural practices to claim the tax credit. Some critics are concerned that a significant portion of the tax credits may end up benefitting ethanol and other biofuels instead of cleaner emerging fuels.
The Environmental Defense Fund expressed reservations about the decision, emphasizing the importance of science and careful examination before forming final conclusions. While aviation’s carbon emissions are relatively small compared to other industries, they are growing at a faster rate due to the lagging technology for electric planes. President Biden set ambitious goals in 2021 to reduce aviation emissions by 20% by 2030 as a step towards achieving net-zero emissions by 2050.
Despite major airlines investing in sustainable aviation fuel and its rapid growth in recent years, its usage remains relatively low. In 2022, only 15.8 million gallons of SAF were used, accounting for less than 0.1% of all fuel burned by major U.S. airlines. The White House aims to increase production to 3 billion gallons per year by 2030, highlighting the need for significant advancements in sustainable aviation fuel technology and production to meet climate goals.
