The Biden administration has taken a major step toward allowing ag commodities to qualify for a new tax subsidy for sustainable aviation fuel, but key details that affect the eligibility of oilseeds and corn ethanol as feedstocks still need to be clarified.
In December, the Treasury Department issued guidance that will allow the carbon intensity of SAF feedstocks to be calculated using an updated version of the relatively ag-friendly GREET model developed by the Energy Department.
An alternative model that can also be used, known as CORSIA and developed by the International Civil Aviation Organization, penalizes commodities such as corn and soybeans in its assessment of their impact on global greenhouse gas emissions from land use.
The tax credit, known as 40B for its section of tax law, took effect this year and runs through 2024. The credit starts at $1.25 per gallon and can be worth as much as $1.75 per gallon based on the carbon intensity of the fuel, what it's made from and how it's processed.
The tax break was included in the Inflation Reduction Act to serve as a bridge to a broader clean fuels production credit that takes effect in 2025 under the law. Industry officials expect the guidance for the 40B credit to carry over to the clean fuels credit, known as 45Z.
Ethanol and vegetable oil are two of the largest potential sources of SAF feedstocks.
But there is some concern among farm groups and biofuel industry officials about changes to the GREET emissions factors that are used to calculate a product’s carbon intensity. To qualify for the tax credit, SAF can have no more than 50% of the emissions of petroleum-based jet fuel.
Nikita Pavlenko, International Council for Clean Transportation
An interagency statement released on Dec. 14 by USDA, DOE, the Transportation Department and the Environmental Protection Agency ahead of the Treasury announcement says the GREET modifications would “incorporate new data and science, including new modeling runs specific to key feedstocks and processes for use in aviation fuel.”
The statement goes on to say that the updated GREET would “integrate other categories of indirect emissions, such as crop production and livestock activity, in addition to land use change emissions as informed by GTAP-BIO and/or GCAM,” two methods of assessing carbon emissions from indirect land use changes, or ILUC.
GTAP-BIO, which was developed by Purdue University, is considered more favorable for U.S. ag commodities, according to industry officials. GCAM is the method used for ICAO’s CORSIA model.
Separate from the joint statement, EPA noted in a Dec. 13 letter to Treasury that “the developers of the GREET model have added indirect land use change emissions into the model, but the current version does not include all of the significant direct and indirect emissions that the EPA determined were necessary in 2010.”
Nikita Pavlenko, who follows SAF policy for the International Council for Clean Transportation, says in an analysis of the Biden administration’s actions that there is still considerable uncertainty about how SAF feedstocks will be treated in the GREET model.
While the interagency working group that’s working on modifying GREET “might seem like a nod to the agricultural industry and corn ethanol producers who have been pushing for use of this model, there’s still little clarity about how life-cycle greenhouse gas (GHG) emissions will ultimately be calculated for different SAFs,” he writes.
“A key outcome of the interagency working group process will be the determination of which emission factor will be used for feedstocks like corn and soy. Will it be a low estimate selected from the literature, an estimate consistent with the other regulatory assessments, or something in between?”
There also is uncertainty, Pavlenko says, about the credit the modified GREET model will give to climate-smart farming practices, given the ongoing debate about measuring the impact they have on soil carbon levels.
One ethanol industry official who spoke on condition of anonymity told Agri-Pulse that the measurement of land use emissions is critical to the outcome for ag feedstocks and that there is “some tension between USDA and DOE” on how to handle the issue, but that DOE also is sensitive to the politics of the issue. “We don’t really know how that’s going to shake out,” the official said.
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Agriculture Secretary Tom Vilsack has portrayed the 40B tax credit and the Treasury Department’s decision to use the GREET model as a “big, big deal” and a “tremendous opportunity” for American agriculture. But Monte Shaw, executive director for the Iowa Renewable Fuels Association, says he’s “cautiously optimistic” that the updated GREET model will work for ethanol-based SAF, citing Vilsack’s confidence that the outcome will be good for agriculture.
“Odds are very high that I will love or like the model they will come out with,” Shaw said.
What’s not in doubt with the Treasury guidance is that corn ethanol can’t qualify for the tax credit without sequestration of the carbon dioxide that ethanol plants produce, but the industry continues to struggle with getting approval from states and landowners to build CO2 pipelines.
Monte Shaw, Iowa Renewable Fuels Association
The Dec. 14 interagency statement notes that the emissions impact of carbon capture and sequestration as well as climate-smart farming practices will be integrated into the modified GREET model.
But without CO2 pipelines, ethanol-to-SAF producers are having to look at locating production near areas such as the Gulf Coast, where CO2 pipelines would face less opposition, or else import lower carbon sugarcane ethanol produced in Brazil, said Patrick Gruber, CEO of Gevo, a company that is developing SAF from corn ethanol.
At least two of the first ethanol-to-SAF plants, one located in Georgia and the other in Louisiana, are expected to use Brazilian ethanol, at least initially. Shipping corn to ethanol production sites on the Gulf Coast would cost about 50 cents per bushel, Gruber said.
“I don't want to import Brazilian ethanol. I think we should be using corn,” he said. But SAF production from corn ethanol “is going to be located in states that are open-minded” on CO2 pipelines, he said.
The updated GREET model is due to be ready by March 1.
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