In a significant move towards reducing climate pollution and creating more sustainable practices in the aviation industry, the U.S. Department of the Treasury and Internal Revenue Service (IRS) have collaborated with various Biden-Harris Administration partners to release guidance on the sustainable aviation fuel (SAF) credit. This credit was established by the Inflation Reduction Act (IRA), which is part of President Biden's Investing in America agenda.

The Treasury Department, in coordination with the Environmental Protection Agency (EPA), Department of Transportation (DOT), Department of Agriculture (USDA), and Department of Energy (DOE), issued a notice today outlining the eligibility criteria for the SAF credit. This initiative aims to incentivize the production of low-carbon fuels and reduce emissions from the aviation sector, which has historically been one of the most challenging areas to transition to cleaner energy sources.

According to Secretary of the Treasury, Janet L. Yellen, the Biden Administration is driving American innovation and job creation in the clean energy transition. The Treasury Department's guidance provides clarity on eligibility for the SAF credit, with a focus on SAF that achieves a lifecycle greenhouse gas emissions reduction of at least 50% compared to petroleum-based jet fuel.

Under the outlined guidelines, producers of SAF can benefit from a tax credit ranging from $1.25 to $1.75 per gallon. SAF that achieves a 50% reduction in GHG emissions is eligible for the $1.25 credit per gallon, with additional credits of $0.01 per gallon for each percentage point the reduction exceeds 50%, up to $0.50 per gallon.

The updated guidance also allows for various fuels that have been approved by the EPA under the Renewable Fuel Standard (RFS) to qualify for the credit. This includes biomass-based diesel, advanced biofuels, cellulosic biofuel, and cellulosic diesel.

In addition, the EPA, DOT, USDA, and DOE have committed to releasing an updated version of DOE's Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model by March 2024. This updated model will provide an alternative methodology for SAF producers to determine the lifecycle GHG emissions rates of their production, specifically for the purposes of qualifying for the SAF credit during the years 2023 and 2024.

The updated GREET model will incorporate the latest data and scientific advancements, including new modeling of key feedstocks and processes used in aviation fuel production. It will also integrate additional categories of indirect emissions, such as crop production and livestock activity, along with the best available science on indirect land use change emissions. Moreover, the updated model will incorporate strategies to reduce greenhouse gas emissions, including Carbon Capture and Storage, Renewable Natural Gas, Renewable Electricity, and Climate-Smart Agriculture Practices.

This collaborative effort by the Biden-Harris Administration and its partners underscores the commitment to clean energy and sustainable practices within the aviation industry. By providing financial incentives and clear guidelines for SAF production, the administration aims to accelerate the decarbonization of aviation and create economic opportunities for American agricultural producers.

As the aviation sector remains a crucial component of the American economy, society, and way of life, this coordinated effort signifies the administration's determination to achieve net-zero carbon emissions in aviation by 2050. By investing in sustainable aviation fuels and encouraging innovation, the administration is paving the way for a cleaner and more sustainable future for air travel.

Overall, the release of the updated GREET model and the guidance on the SAF credit marks a significant step forward in the Biden-Harris Administration's efforts to combat climate change, promote job growth, and foster American leadership in clean energy initiatives.