The Biden administration said Friday it will allow ethanol-based fuels to be included in its Sustainable Aviation Fuel tax credit qualifications, delivering a victory to U.S. corn growers.
According to the Treasury Department, which published the tax credit guidance, fuels that reduce greenhouse gas emissions by at least 50% are eligible for the credit— thus allowing the ethanol-based fuel to qualify.
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But it will also update the methodology by March 1, meaning that any victory could be short-lived.
“Sustainable aviation fuel will provide low carbon fuel made here in America to help decarbonize the hardest to reach areas in the transportation sector,” Energy Secretary Jennifer Granholm said in a statement released along with the guidance from the Treasury.
The SAF guidance, which allows qualifying fuels to receive a credit of up to $1.25 per gallon, comes after months of debate within the Biden administration over the issue. Divisions were centered around whether to use the Department of Energy’s Greenhouse Gases, Regulated Emissions and Energy Use in Technologies formula (GREET), or a European model that would allow inclusion of fewer fuels.
The decision had been closely watched by Midwestern states and the U.S. corn lobby, which viewed the decision as one of the only ways to grow ethanol demand at a time when more drivers are opting to purchase electric vehicles, rather than gas-powered vehicles—in part due to the consumer tax credits included in the Inflation Reduction Act passed in 2022 by Democrats.
The guidance was praised by Advanced Biofuels Association. “Recognizing that a one-size-fits-all approach is impractical, the Biden Administration’s acknowledgment of this reality is crucial for achieving significant carbon reductions in air travel,” the group’s president, Michael McAdams, said in a statement Friday.
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Still, he added: “Our members stand ready to provide the country and world with sustainable low-carbon fuels. But their carbon reduction potential cannot be realized without governmental cooperation. As we await the full scope of this guidance when the rules are finalized on March 1, 2024, we will continue to advocate for the key role that SAF and other advanced biofuels will play in the energy transition to a low-carbon future.”
