Congressional Democrats’ massive Build Back Better spending plan would create a new subsidy for renewable jet fuel while also extending the existing tax credit for biodiesel and renewable diesel through 2031.
The biofuel subsidies are included in a package of clean energy incentives that the House Ways and Means Committee will consider on Tuesday as part of the $3.5 trillion Build Back Better measure that Democrats are pushing through Congress under the budget reconciliation process.
The tax credit for sustainable aviation fuel, or SAF, would start at $1.25 a gallon and increase based on the carbon content of the biofuel.
The subsidy is a major priority for the U.S. airline industry, which has joined the Biden administration in setting a goal of using at least 3 billion gallons of SAF by 2030.
The extension of the $1-a-gallon credit for biodiesel and renewable diesel would be a major victory for that industry, which has long struggled with periodic lapses in the subsidy. Renewable diesel, like SAF, is produced in conventional refineries and can be used interchangeably with conventional diesel.
To qualify for the renewable jet fuel credit the product must reduce greenhouse gas emissions by at least 50% in comparison to conventional fuel; the carbon footprint will vary depending on the feedstock from which the SAF is made. The credit will rise from $1.25 by an additional penny for each percentage point by which the product’s lifecycle emissions reduction exceeds 50%.
SAF can be made from soybean oil and a number of other feedstocks, including oilseeds, grease and waste fats, in conventional petroleum refineries. But the legislative language includes a methodology adopted by the International Civil Aviation Organization for measuring greenhouse-gas impact that a biofuel industry source said would preclude SAF made from soybean oil and corn ethanol from qualifying for the credit.
The credit would continue in effect through 2031.
Airlines for America, the industry trade group, was seeking a credit worth $1.50 to $2 a gallon.
"While the $1.25 – $1.75 per gallon amount is lower than A4A and a broad coalition of stakeholders had sought, we call on Congress to approve the credit," the group said in a statement Saturday. "We are hopeful that it will provide a sufficient financial incentive for fuel companies to integrate more SAF into the fuel supply and offer it at a price that will allow U.S. airlines to use more of it."
The legislation also would extend through 2031 a $1.01-per-gallon, second-generation biofuel tax credit for fuels such as ethanol made from plant cellulose.
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The National Biodiesel Board welcomed the inclusion of the tax credit extension for biodiesel and renewable diesel.
"Biodiesel and renewable diesel are clean, low-carbon fuels that are widely available today to achieve the carbon reductions Congress is seeking,” said Kurt Kovarik, NBB’s vice president of federal affairs.
“These fuels are 74% less carbon intensive than petroleum diesel on average and have prevented more than 140 million tons of carbon emissions since 2010. Moreover, they substantially cut emissions of particulate matter that impact cancer rates.”
The legislation also expands incentives for electric vehicles. A refundable income tax credit for EVs would start at $4,000, with an additional $3,500 for vehicles sold after Jan. 1, 2027 that have a battery capacity of at least 40 kilowatt hours, and for vehicles with battery capacity of at least 50 kilowatt hours after that.
Additional Build Back Better provisions under consideration by the House Agriculture Committee include $960 million in aid for biofuel infrastructure.
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