The U.S. Treasury Department recently rolled out new guidance that has the potential to bring large opportunities for farmers and ethanol producers in the form of an Inflation Reduction Act (IRA) sustainable aviation fuel (SAF) tax credit. But questions remain surrounding eligibility and implementation guidance.
“As it stands right now,” says Donna Funk, lead biofuel advisor for Pinion, “the new guidance looks promising as a tax benefit in coordination with expected updates to the GREET model being released by the Department of Energy early next year.” Funk cautions, “As with all updated and new legislation, we will need clarifications and finalized guidance to determine who and how eligibility for the SAF tax credit can be applied.”
Precautions Ahead: Uncertainty remains around how the updated GREET model’s methodology will be used to determine eligibility for the tax credit.
- Corn starch ethanol to jet fuel is not a guarantee for SAF credits under the new guidance.
- Modification of the GREET model is required and will be key to the emissions reductions assigned to corn starch ethanol.
- Food security is already being brought up by anti-ethanol groups as a reason to prevent corn- based ethanol to jet from qualifying.
- Ethanol plants could find themselves in a position of having to undergo Quality Assurance Programs (QAP) and third-party certifications before they are considered to have demonstrated the lower emissions factor.
- Farming practices will be important, but it is still very unclear as to how much individual adjustments will be allowed with the GREET model being developed for the SAF tax credit.
Funk adds, “If everything aligns as we hope, both ethanol producers and farmers stand to benefit significantly from the SAF tax credit. Additional guidance will really allow us to dig into who is eligible to benefit and how much.”
Stay Tuned for Additional Guidance
The soon-to-be-updated version of the Department of Energy’s GREET model will be among the methodologies used to determine eligibility for the tax credit. The Biden administration is aiming to finalize the GREET model revisions, develop additional SAF pathways, and determine implementation details by March 1, 2024.
View the U.S. Department of the Treasury press release and current guidance here: https://home.treasury.gov/news/press-releases/jy1998
For questions surrounding the GREET model implementation and verification, or tax credit eligibility and strategy, contact a Pinion biofuels advisor.
