Trump 2.0: Turbulence ahead for SAF?

opinion

by Fayaz Hussain

November 11, 2024

In an interview from his first term, US President-elect Trump once quipped that his tough negotiations with biofuel producers felt “more difficult than dealing with the Taliban”.

The US sustainable aviation fuel (SAF) industry will now have its chance to sit opposite him at the table. Like other industries it is busy trying to work out what the second Trump presidency will mean for SAF.

One concern is Trump’s proposed 10% tariff on all US imports, with additional duties on Chinese goods. This could make imported feedstocks more expensive. The US renewable fuels industry relies increasingly on imported feedstocks like used cooking oil (UCO) and tallow, which support biodiesel and SAF production.

Alastair Blanshard, director of Sustainable Aviation at ICF, points to broader risks tied to global trade responses, cautioning that: “The risk of retaliatory tariffs that other countries may impose on US products could reduce the export opportunities for US SAF producers.”

A closed-border approach could shrink access to valuable export markets just as the EU and UK ramp up their SAF mandates, potentially stifling growth in an area where the US might otherwise have competitive advantages.

The industry is also worried about how the Inflation Reduction Act (IRA) will be implanted.

The Biden administration planned to replace the current Blenders Tax Credit (BTC) in 2025. It plans to do this with a Clean Fuel Production Credit under section 45Z of the Inflation Reduction Act. But this has not been clarified yet. Particularly for foreign feedstock imports.

Trump has been a critic of the Inflation Reduction Act referring to it as a “Green New Scam.”

Any reduction in Clean Fuel Production Credit under a Trump administration could hurt SAF’s trajectory just as the market is beginning to gain traction. Trump’s previous stance on biofuel blending requirements – and his willingness to reduce Renewable Fuel Standard compliance costs for refineries – could signal further cuts to biofuel blending incentives, impacting feedstock demand and creating volatility in the SAF market.

Blanshard acknowledges, however, that “a considerable volume of funding from the IRA is flowing to Republican-held states,” which might drive opposition to sweeping cuts in SAF and renewable incentives. “Key components of the IRA are supported by strong industrial lobbies”.

Though federal actions under a Trump presidency could introduce volatility, state-level initiatives could maintain momentum in SAF. States like California, Oregon and Washington have implemented clean fuel standards that incentivise renewable fuels independently of federal programmes.

“State-level schemes … might even accelerate the overall transition as policymakers … increasingly see jobs and investment flowing to their constituents,” Blanshard says. This dynamic could drive local investments in SAF infrastructure and production, even if federal support wavers.

As Trump steps back into the Oval Office next year, the SAF industry finds itself in another round of those unpredictable “tough negotiations” that only his administration can bring.