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Honeywell UOP has developed a process to produce sustainable aviation fuel from ethanol.
The Biden administration has released guidance on its tax credit for sustainable aviation fuel (SAF) that opens the door to using corn and soybeans produced by U.S. farmers as feedstocks.
The guidance is a win for the agricultural lobby but attempts to put safeguards in place to ensure the fuel produced meets emissions-reduction standards.
Established by the 2022 Inflation Reduction Act (IRA), the blender’s tax credit is intended to incentivize U.S. production of SAF to meet the Biden administration’s SAF Grand Challenge goal of producing 3 billion gal. of fuel a year by 2030 and 36 billion gal. by 2050.
Issued by the U.S. Treasury Department, the guidance clarifies how fuel producers qualify for the incentive, which ties the tax credit to the calculated reduction in life-cycle greenhouse gas emissions. To qualify, the SAF must provide a minimum 50% reduction. The credit starts at $1.25 per gal. and increases by $0.01 per gal. for each percentage point the reduction exceeds 50%, up to a maximum of $1.75 per gal.
To establish eligibility, fuel producers must use an approved life-cycle analysis (LCA) model. This has been a source of controversy. The IRA established the International Civil Aviation Organization (ICAO) CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) model as the principal LCA tool but allowed for use of similar methodologies.
The U.S. agricultural industry has lobbied for use of the U.S. Energy Department’s GREET (Greenhouse Gases, Regulated Emissions, and Energy use in Technologies) model as, using CORSIA, SAF made from corn-based ethanol of soy-based diesel would not qualify for the tax credit because of penalties for indirect land-use changes associated with energy crops. In November, U.S. airlines backed using the GREET model to allow SAF from corn ethanol to qualify for the tax credit.
The Treasury guidance keeps CORSIA as the primary LCA method allows a modified GREET model to be used to determine eligibility. This would provide a pathway for corn ethanol, soy-based diesel, and other bio-based fuels to qualify for tax credits, says U.S. Agriculture Secretary Tom Vilsak.
The Treasury guidance makes clear that the existing GREET model developed by the Argonne National Laboratory does not satisfy the requirements to calculate the emissions reduction percentage under the IRA.
As a result, the U.S. Environmental Protection Agency (EPA), the U.S. Transportation Department, and the U.S. Agriculture Department have committed to have a modified GREET model available by March 1, 2024. If accepted by the Treasury, the model can be used as an alternative to CORSIA to calculate eligibility for the tax credit for SAF sold or used in 2023-24.
“The updated model will incorporate new data and science, including new modeling of key feedstocks and processes used in aviation fuel,” the Treasury says. The modified GREET will integrate other categories of indirect emissions such as crop production and livestock activity, improve modeling of emissions from indirect land-use changes, and incorporate greenhouse gas (GHG) reduction strategies such as carbon capture and storage.
The Treasury’s decision to use the EPA’s Renewable Fuel Standard (RFS) methodology and intent to recognize the revised GREET model has been welcomed by alcohol-to-jet SAF producer LanzaJet. “This policy framework, which received broad support from the agriculture and aviation sectors, will [accelerate work to] meet the federal government’s SAF Grand Challenge goals,” CEO Jimmy Samartzis says.
“It is good to see the administration reaffirm rigorous environmental standards for SAFs,” says Dan Rutherford, aviation director at the nonprofit International Council for Clean Transportation (ICCT). “The next step is to make sure that any accounting changes for agricultural practices are evidence-based, not speculative.”
“I’m relieved to hear that the Treasury will be using EPA’s LCA under the RFS as a safe harbor provision for the tax credit and will be working closely with EPA on an update to greet rather than some un-vetted version,” says Nikita Pavlenko, ICCT fuels lead. “It’s possible to see a way forward that provides flexibility for incentivizing project-specific carbon intensity improvements without backsliding on the safeguards of the California Low Carbon Fuel Standard and RFS.”
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