US government backs ethanol SAF tax credits
The US Government said it will adopt the GREET methodology for emissions estimates for sustainable aviation fuel SAF firms seeking to claim tax credits for producing SAF from corn ethanol.
However, the US Treasury Department said it will be updating the Greet methodology, prepared by the US Department of Energy (DoE), by March 1st 2024. The move is likely to result in confusion as the industry will have wait till March update on the exact methodology used to calculate emissions.
The US Treasury Department’s guidance, which comes after an 18-month delay, provides important clarity around eligibility for the SAF credit.
The credit incentivizes SAF production that achieves a lifecycle greenhouse gas emissions reduction of at least 50% as compared with petroleum-based jet fuel.
Producers of SAF are eligible for a tax credit of $1.25 to $1.75 per gallon. SAF that decreases GHG emissions by 50% is eligible for the $1.25 credit per gallon amount, and SAF that decreases GHG emissions by more than 50% is eligible for an additional $0.01 per gallon for each percentage point the reduction exceeds 50%, up to $0.50 per gallon.
Fuels that achieve a 50% or greater reduction in lifecycle greenhouse gas emissions under the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) standard will continue to qualify under today’s guidance.
However, the Treasury Department said the Environmental Protection Agency, Department of Transport, US Department of Agriculture, and Department of Energy are announcing their commitment to release an updated version of DOE’s GREET model by March 1, 2024.
The updated GREET model will provide another methodology for SAF producers to determine the lifecycle GHG emissions rates of their production for the purposes of qualifying for the SAF credit for SAF sold or used during 2023 and 2024.
The updated model will incorporate new data and science, including new modelling of key feedstocks and processes used in aviation fuel. It will also integrate other categories of indirect emissions like crop production and livestock activity, in addition to best available science and modelling of indirect land use change emissions. Moreover, the greenhouse gas emission reduction strategies such as carbon capture and storage, renewable natural gas, renewable electricity, and climate-smart agriculture practices will also be addressed in the updated version.
We did a detailed analysis on the consequences of US government’s decision here.