The biofuel industry is eagerly awaiting the Biden administration’s update of a model that will be used to measure the carbon intensity of sustainable aviation feedstocks and determine their eligibility for a valuable new tax incentives. But industry officials caution that the update is only one in several policy actions that will be needed to get SAF production off the ground.
For one thing, the key tax credit created for SAF by the Inflation Reduction Act and worth up to $1.75 a gallon is only temporary. The credit, known as 45Z, takes effect in 2025 but sunsets in 2027, leaving investors without any long-term confidence in the federal financial support.
Another challenge for a major SAF feedstock, corn ethanol, is the Renewable Fuel Standard. Under the Renewable Fuel Standard, corn ethanol can’t qualify as an advanced biofuel, making it ineligible for valuable credits, or D4 RINs. But EPA could potentially allow SAF made from corn ethanol to be eligible for D4 RINs under the RFS, if the carbon intensity score is lowered sufficiently, industry officials say.
A small, ethanol-to-SAF plant now in operation in Georgia, owned by LanzaJet, is going to rely on lower-carbon Brazilian sugarcane ethanol, not U.S. corn ethanol, because the Brazilian product qualifies for D4 RINs and corn ethanol doesn’t, says Alex Menotti, vice president of government affairs, policy and sustainability for LanzaJet.
Alex Menotti, LanzaJet“We have 17 billion gallons of corn ethanol available in the United States, which can be converted to 11 billion gallons of more energy-dense SAF,” Menotti said, speaking at the recent Agri-Pulse Ag and Food Policy Summit. He went on, “We would love to use that 17 billion gallons of corn ethanol. … That is the most scalable feedstock. We certainly believe in the low carbon nature of U.S. production.”The Treasury Department is going to allow the use of a model, known as GREET, to determine the eligibility of SAF feedstocks for tax credits. Agriculture Secretary Tom Vilsack has assured farm and biofuel groups that pending updates of the GREET model will allow the use of corn ethanol for SAF that has been produced with practices that reduce the biofuel’s greenhouse gas emissions. Those measures are expected to include conservation tillage as well as carbon capture and sequestration.
What’s not at all clear is what, or when, EPA will do to update the way it measures the carbon intensity of biofuel feedstocks for the RFS.
The agency currently relies heavily on a life-cycle analysis, or LCA, of biofuels that hasn’t been updated since 2010. The agency admits that the analysis is outdated. “We acknowledge that our previous framework is comparatively old, and that a better understanding of these newer models and data is needed,” the agency said in a report released last year that compared several ways, including GREET, to measure the carbon intensity of corn ethanol.
The agency report concluded there were wide variations in the various models it studied and didn’t decide which one would be best. The report highlighted potential areas for new research and didn’t say what the agency would do next.
Agriculture Secretary Tom Vilsack told reporters late last week that the GREET update should be out “within a month,” and he indicated that it will continue to be modified as more is learned about the impact of climate-smart farming practices on carbon emissions. He said that “may take a little work.”
He didn’t say whether EPA would incorporate GREET into the RFS. “I don't know that I can answer that question today,” Vilsack said. Pressed as to whether USDA has discussed the RFS issue with EPA, he declined to say anything more.
Using the 2010 modeling, USDA currently considers corn ethanol to have 21% lower greenhouse gas emissions than gasoline. Advanced biofuels must be at least 50% lower to qualify for D4 credits.
More recent modeling favored by the ethanol industry put the carbon intensity score of ethanol at closer to 45% below gasoline. The use of carbon-saving farming practices, such as no-till or carbon sequestration, as well as carbon sequestration pipelines could reduce the score significantly more.
“We're very excited about the GREET model and the discussion around the tax credit … but that is half the battle in terms of corn ethanol alcohol-to-jet (SAF) in the United States. The other half is EPA updating their own rules to recognize the ... climate benefits of corn ethanol,” Menotti said.
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Another company planning to produce SAF from ethanol, Gevo, also argues that EPA should incorporate the updated GREET model in its RFS analysis. At the same time, the company is preparing a petition to the agency for an RFS pathway for corn ethanol that incorporates measures to reduce the carbon footprint.
Gevo is leading a project funded through USDA’s Partnerships for Climate-Smart Commodities initiative to verify the impact of climate-smart practices on the fuel’s carbon intensity.
“We encourage federal agencies to expedite updates to GREET and designate it as a methodology meeting both tax credit and RFS criteria. This designation would offer EPA ample justification to fully embrace GREET for RFS purposes, a move we wholeheartedly support. Importantly, we don’t believe it will be difficult to reach the D4 RIN pathway, given our extensive efforts and the robustness of our approach,” the company said in a statement to Agri-Pulse.
Menotti also said it’s crucial for Congress to extend the 45Z tax credit, which will be available to any biofuel that can meet the greenhouse gas emission reductions. While the IRA credit doesn’t expire until 2027, a possible extension could get tied into negotiations over extending key provisions of the 2017 Tax Cuts and Jobs Act that expire in 2025. Those include reductions in individual tax rates, a business tax deduction, and an expansion of estate tax exemptions.
A coalition of business groups interested in SAF is behind the push for a 10-year extension of the credit, he said.
To get that done, the industry likely will need significant support from congressional Republicans. The IRA was enacted in 2022 only because Democrats controlled both houses of Congress and the White House, and were able to take advantage of budget rules that allowed the bill to pass the Senate with a simple majority vote.
Midwest Republicans organized to protect the tax credits in a GOP debt-ceiling bill last year, and “we’ll certainly go to bat for them again,” said Rep. Ashley Hinson, R-Iowa.
Hinson also told reporters the RFS issue is critical for the corn ethanol industry when it comes to the potential SAF market. “The last thing I want to see us do, no matter what model we're using … is concede any ground to allow for continued importation of ethanol,” she said.
Ethanol isn’t the only feedstock for SAF but it is one of the most widely available. SAF is currently being made from animal fats and used cooking oil but there are only limited amounts of those feedstocks available worldwide. Soybean oil can be used as well, but it also has competing food and fuel markets.
Other oilseeds, including camelina, winter canola and a new variety of pennycress called CoverCress, could provide significant quantities of SAF feedstocks with lower carbon scores than corn ethanol currently has, but the industry still needs to coax a lot of farmers to grow those commodities as second crops.
The airline industry as well as biofuel developers also have been pushing for state incentives to add to the mix of subsidies for SAF. Illinois, Washington state and now Minnesota have created tax credits for SAF produced in those states, which are home to hub airports for Alaska, American, Delta and United. Delta Air Lines also has testified in favor of a tax incentive in Michigan, another state where it has another hub.
Airline industry officials say they can only get their customers to pay for so much of the extra cost of SAF. The airline has committed to using 3 billion gallons of SAF by 2030; only a fraction is currently being produced. The new LanzaJet plant has a capacity of just 10 million gallons a year.
“We're decades away from being able to truly walk that green premium down to zero, so we're going to need some help,” said Amelia DeLuca, chief sustainability office for Delta.
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