The NBAA and NATA have welcomed the inclusion of a blenders tax credit for producers of sustainable aviation fuel (SAF), as part of the Inflation Reduction Act of 2022.
Passed on 7 August by the US Senate, the budget reconciliation legislation includes a $1.25 per gallon credit available for each gallon of SAF sold as part of a qualified fuel mixture, if the SAF has a demonstrated lifecycle greenhouse gas (GHG) reduction of at least 50 per cent compared to conventional jet fuel.
The stand-alone SAF tax credit, which increases by one cent for each percentage point by which the lifecycle GHG emissions reduction of such fuel exceeds 50 per cent, up to $1.75 per gallon, would be effective for two years beginning 1 January, 2023.
After 1 January, 2025 the new Clean Fuel Production Credit (CFPC) would apply to all transportation fuels, with an enhanced baseline credit for SAF. The CFPC is based on the level of GHG reduction performance of a fuel versus a baseline emissions factor. Under this system, SAF is eligible for a credit of up to $1.75 per gallon for fuels with a 100 per cent GHG reduction, with lower credits for fuels demonstrating lower levels of GHG reduction. The CFPC would expire on 31 December, 2027 unless extended by Congress.
“Through the Business Aviation Commitment on Climate Change, our industry has pledged to achieve net zero CO2 emissions by 2050, and increasing the availability of SAF at general aviation airports is crucial to achieving our goal,” says NBAA president and CEO Ed Bolen. “Establishing a robust federal tax credit for SAF is the single most important thing policymakers can do to increase production and availability, and NBAA applauds the members of Congress and staff who tirelessly worked to advance this legislation.”
“Just as business aviation closes distances, propels innovation and supports vibrant economic growth throughout our nation, the commercialisation and scale up of sustainable aviation fuel will accelerate our industry's progress to net zero carbon emissions. The SAF tax credits included in the Inflation Reduction Act of 2022 are a crucial first step toward meeting the Biden Administration's SAF Grand Challenge goal of three billion gallons of domestically produced SAF by 2030; equally crucial is the removal of regulatory roadblocks that hinder SAF participation in the Environmental Protection Agency's Renewable Fuel Standard programme. NATA applauds the US Senate for taking action to incentivise SAF production, and we encourage Congress to work just as diligently to equip federal agencies, including EPA, with the necessary tools to support SAF production in line with industry demand,” says NATA president and CEO Timothy Obitts.
The stand-alone SAF blenders tax credit was initially introduced as part of the Sustainable Skies Act.
“NATA thanks Senate negotiators for including SAF in the clean energy provisions of the Inflation Reduction Act, and we recognise the tireless leadership of Sustainable Skies Act sponsors on this critical issue," adds Obitts. "Sustainable aviation fuel represents a lower-carbon, domestically produced energy source that will reduce aviation's CO2 emissions, extend American global leadership and support high-paying jobs. Today's vote is another step toward bridging the gap between federal incentives for energy innovation and the associated costs of establishing a vibrant domestic SAF industry. The business aviation industry has already demonstrated a consistent demand for SAF; now we call on government leaders to adopt sound legislative and regulatory policies to foster consistent production.”
The Inflation Reduction Act will now move to the US House for debate and a final vote reconciliation. If passed, the legislation will go to the president to be signed into law.