The US Department of the Treasury and Internal Revenue Service (IRS) have released guidance on the SAF credit scheme established by the Inflation Reduction Act, aiming to incentive production of US-produced sustainable aviation fuel through tax credits of $1.25 to $1.75 a gallon.
“Today’s announcement… acknowledges the important role farmers can play in lowering greenhouse gas emissions and begins to reward them through that contribution in the production of new fuels,” commented US Secretary of Agriculture Tom Vilsak. US Secretary of Transportation Pete Buttigieg added that the scheme would strengthen America’s position as a leader in the production of sustainable aviation fuels.
The credit scheme – applicable for SAF production that achieves a lifecycle greenhouse gas emissions reduction of at least 50% as compared with conventional fuel – will see producers eligible for tax credits. SAF surpassing the minimum 50% reduction margin will also be eligible for an additional $0.01 per gallon, up to $0.50 per gallon.
A modified ‘GREET’ model released as part of the updated Treasury Department’s guidance also provides another methodology for SAF producers to determine their lifecycle greenhouse gas emissions: using new data, updated feedstock modelling and integrating key emission reduction strategies. Additionally, under a new pilot programme, specific farming practices will also qualify for credits.
US Secretary of the Treasury Janet Yellen concluded that “today’s guidance provides additional clarity and certainty to companies and producers”.
According to IATA data, North American airlines reported a 28.3% annual traffic rise in 2023 compared to 2022; highlighting a strong continued demand for aviation fuel. IATA’s director Willie Walsh commented on the importance of governments providing “cost-efficient infrastructure to meet [growing] demand, incentivising sustainable aviation fuel production to meet our net zero carbon emission goal by 2050, and adopting regulations that deliver a clear cost-benefit”.
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