Climate-Smart Practices Offer Jet-Fuel Market Opportunity for Corn, Soybean Farmers

US Treasury Department Provides Guidance on Sustainable Aviation Fuel Tax Credits

Introduction

The US Treasury Department has released guidance on tax credits for sustainable aviation fuel (SAF) production. The guidance aims to incentivize biofuel producers to enter the SAF market and promote sustainable practices in agriculture. This report discusses the key details of the guidance and its implications for the aviation industry and biofuel producers.

Background

Currently, the production of sustainable jet fuel is limited, with only one facility in Georgia dedicated to its production. To meet the demand, Lanza Jet, the owner of the facility, imports ethanol from Brazilian sugar cane. The Treasury Department’s guidance sets the stage for qualifying aviation fuels for the Clean Fuels Production Tax Credit, which can reach up to $1.75 per gallon from January 1, 2025, until the end of 2027. This tax credit is considered more valuable in the long term for biofuel-to-jet fuel production.

Importance of Sustainable Development Goals (SDGs)

The Treasury Department’s guidance aligns with the Sustainable Development Goals (SDGs) set by the United Nations. By promoting sustainable aviation fuel production and incentivizing climate-smart agricultural practices, the guidance contributes to SDG 7 (Affordable and Clean Energy), SDG 13 (Climate Action), and SDG 15 (Life on Land).

Key Details of the Guidance

1. The Treasury Department’s guidance provides a clear pathway for biofuel producers to qualify for the Clean Fuels Production Tax Credit.
2. The guidance establishes a “safe harbor” for ethanol and biodiesel plants that can demonstrate the use of climate-smart practices in corn and soybean production.
3. The guidance aims to expand opportunities under the tax credit program and create a process for qualifying aviation fuels.

Implications for Biofuel Producers

The guidance incentivizes biofuel producers to identify farmers who employ climate-smart practices in growing corn and soybeans. By partnering with these farmers, biofuel producers can access tax credits and contribute to the development of sustainable aviation fuel.

Challenges and Questions

• Biofuel experts have questioned why the GREET model for the SAF blending credit should differ from the model used for other tax credits.
• There is uncertainty regarding whether the “safe harbor” provisions will apply to all tax credits, including the 45Z tax credits.
• The timeline for implementing the guidance for the 45Z tax credits and applying the updated GREET model to the Renewable Fuels Standard is unknown.

USDA’s Efforts in Climate-Smart Agriculture

The US Department of Agriculture (USDA) has been supporting climate-smart conservation practices through pilot projects and incentives for farmers. These efforts aim to reduce the carbon intensity of biofuel feedstocks and promote sustainable farming practices. The USDA is also working on measuring greenhouse gas emissions and sequestration potential in agriculture.

Conclusion

The Treasury Department’s guidance on sustainable aviation fuel tax credits is a significant step towards promoting the production of low-carbon jet fuel and encouraging sustainable agricultural practices. By aligning with the SDGs, the guidance contributes to global efforts to combat climate change and achieve sustainable development.

Contact Information

For further inquiries, please contact Chris Clayton at Chris.Clayton@dtn.com. You can also follow him on social platform X @ChrisClaytonDTN.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 7: Affordable and Clean Energy
• SDG 9: Industry, Innovation, and Infrastructure
• SDG 13: Climate Action
• SDG 15: Life on Land

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 7.2: Increase substantially the share of renewable energy in the global energy mix.
• SDG 9.4: Upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes.
• SDG 13.2: Integrate climate change measures into national policies, strategies, and planning.
• SDG 15.2: Promote the implementation of sustainable management of all types of forests, halt deforestation, restore degraded forests, and substantially increase afforestation and reforestation globally.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator for SDG 7.2: Share of renewable energy in the total energy consumption.
• Indicator for SDG 9.4: Proportion of industries using sustainable practices and technologies.
• Indicator for SDG 13.2: Number of countries with integrated climate change policies and plans.
• Indicator for SDG 15.2: Forest area as a proportion of total land area.

SDGs, Targets, and Indicators Table

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Fuente: dtnpf.com

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