Aviation Fuel Tax Credits Give Agriculture a Lift

The Treasury Department will allow U.S.-made ethanol and other biofuels to qualify for a sustainable aviation fuel tax credit under the Inflation Reduction Act, but the scope is more limited than some agriculture advocates had hoped. Environmentalists also voiced disappointment, arguing the tax credit doesn’t sufficiently incentivize cleaner fuels.

The tax credit offers up to $1.25 per gallon for fuels reducing carbon emissions by 50% compared to conventional jet fuel, with a maximum of $1.75 for higher reductions. The Treasury Department decided to use a modified version of the GREET (Greenhouse gases, Regulated Emissions, and Energy use in Technology) model for emissions calculations, favored by the agricultural industry.

Agriculture Secretary Tom Vilsack sees this as recognition of farmers’ role in reducing greenhouse gases through biofuel production. However, ethanol industry groups worry that requiring farmers to adopt at least three climate-smart practices may make it hard for some producers to qualify. Senator Chuck Grassley (R-Iowa) mentioned that verifying practices like reduced tillage could be challenging because crops are often mixed at ethanol plants.

Environmental groups had advocated for the CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) model, which they claim better accounts for land-use changes and other environmental impacts.

The tax credit applies to sustainable aviation fuel produced in 2023 and 2024. A separate formula for 2025 is in development. Despite concerns, the American Coalition for Ethanol sees this as an “important tailwind” for biofuels in the clean energy transition.

Source: EENews.net