What President Trump’s One Big Beautiful Bill means for SAF

opinion

by Fayaz Hussain

February 23, 2026

It can be hard keeping up with the US news cycle. In January it was the acquisition of Greenland. Last week was about UFOs and aliens, following former President Barack Obama’s remarks.

In the midst of all this the US Department of Treasury issued a Notice of Proposed Rulemaking (NOPR) formalising the Section 45Z Clean Fuel Production framework. Behind the jargon were codifying provisions relating to sustainable aviation fuel (SAF) announced under President Trump’s One Big Beautiful Bill (OBBB).

When the OBBB passed, it sent a wave of concern through the US SAF industry. While on one hand the extension of credits to 2029 offered some relief, the tightened feedstock eligibility and reduced incentives sent a policy signal that many in the industry feared was moving in the wrong direction.

The concern was mainly about how the OBBB would influence the SAF-specific premium. Under the original Inflation Reduction Act framework, SAF producers could claim up to $1.75 per gallon under Section 45Z. The OBBB eliminated that premium entirely, bringing SAF credits into line with other clean fuels at up to $1.00 per gallon.

“I have seen data that says the credit reduction lowers IRRs [a metric used to estimate return on investment] on projects by several points,” Kenneth Hill, MD at BioCarbon Strategies – the global advisory for energy transition – tells SAF Investor. “Without the bonus credit, existing producers are more incentivised to produce renewable diesel versus SAF, unless consumers – airlines – are willing to pay a higher premium.” The impact on production can be tangible, warns Hill. “It may be that 2026 sees lower SAF production than 2025 as a result,” he says.

The feedstock provisions in the OBBB have proved equally contentious. The bill effectively restricts feedstocks to those grown in the US, Mexico or Canada. This means the Brazilian sugarcane ethanol, sought after by ethanol-to-jet producers as the most carbon-efficient and cost-competitive feedstocks is excluded from the list.

This is a serious setback for projects looking to use imported ethanol as feedstock. Add to this the anti-double-counting provisions – which prevents ethanol producers from claiming the 45Z incentive when their fuel is converted to SAF – and the path for AtJ producers has shrunk significantly.

LanzaJet, operating the world’s first commercial-scale ethanol-to-fuels plant, announced on Thursday that it will use low carbon, waste-based ethanol produced domestically in the US to produce SAF at the Freedom Pines plant in Georgia, US. The company initially planned to source ethanol from Brazil due to its low carbon intensity score.

The proposed rules also offer clarity on emissions-rate methodology, qualified facility definitions, sales documentation and the treatment of related-party transactions. Under these rules, SAF producers will be able to choose between CORSIA Default, CORSIA Actual, or the 45ZCF-GREET model for carbon intensity calculations – a flexibility that has been long sought by the industry.

“These are mostly positive for incentivising SAF production and provide a fair amount of flexibility to target lower CI scores,” Hill tells us. But this clarity cannot offset the cut in incentive. And with rules just recently announced, finalisation is unlikely before late summer 2026. “I think this means that many SAF projects will be on hold or may die due to lack of funding while they wait,” Hill warns. “Certainly, I think this means there will be very few final investment decisions in the US this year.”

To counter this low SAF premium under the OBBB, bipartisan legislation called the Securing America’s Fuels Act was introduced in both chambers of Congress that would restore the $1.75 per gallon SAF premium. The Act also seeks to extend the 45Z credit until 2033. It has drawn broad support from aviation, agriculture and fuel producer groups.

“If the SAF Act passes this year, SAF now becomes bipartisan,” says Hill. “This is a huge deal for the stability of SAF policy going forward.” The probability of this bill passing is better than 50%, he adds. However, the Act would not unwind the feedstock restrictions even if the premium is restored.

“Industry stakeholders argue that reinstating the premium and extending credit lifespan would help close the cost gap with conventional jet fuel, improve project IRRs, encourage capital deployment and support broader supply chain commitments (including agriculture and feedstock development),” concludes Hill. “Such stability can lower investment risk, spur facility construction and accelerate decarbonization goals.”

Gene Gebolys, CEO of World Energy says rules should deliver predictability. “More than anything, what we’re looking for is predictability and certainty and at least clarity,” he tells SAF Investor. He says that World Energy supports the government putting out clear rules and maintaining them as consistently as possible.

Whether that stability arrives in time to rescue stalled development projects – or prevent the production dip now widely anticipated in 2026 – remains the defining question for the year ahead.