Treasury issues guidelines aviation fuel credit
The Biden administration released long-awaited guidance on Friday around tax credits for aviation fuel that reduces emissions of greenhouse gases compared with fuel made from crude oil.
Some environmentalists expressed concern that the Treasury Department guidelines could allow credits for fuel made from corn and other crops that they consider poor choices because of the water and other resources needed to grow them.
Midwest lawmakers and companies that produce cornbased ethanol praised the guidelines, although their enthusiasm could be short-lived.
Congress approved the credits as part of President Joe Biden’s Inflation Reduction Act of 2022, which included provisions designed to boost cleaner energy. The credits are designed to increase the supply and bring down the current high price of sustainable aviation fuel, or SAF.
Producers will be eligible for tax credits ranging from $1.25 to $1.75 per gallon, depending on how much their fuel reduces emissions compared with conventional products such as kerosene-based jet fuel.
On a key issue — and after months of deliberations — the Treasury Department accepted measuring those emission reductions by using a model that was developed by the US Energy Department and which is supported by the ethanol industry.
However, Treasury said the Biden administration plans to update the model by March 1, leaving uncertainty around the eventual tax treatment of ethanol used to power airplanes.
Treasury said the update will include “new modeling of key feedstocks and processes used in aviation fuel,” and will consider the impact on emissions from growing crops used to make the fuel.
The Environmental Defense Fund said it would withhold final judgment on the guidelines until March, but that Friday’s guidelines could put the US out of step with international standards.