Title: U.S. Treasury and IRS Announce Guidance on Sustainable Aviation Fuel Credit
The U.S. Department of the Treasury and Internal Revenue Service (IRS) have unveiled new guidance on the Sustainable Aviation Fuel (SAF) Credit, which forms a crucial part of President Biden’s ambitious Investing in America agenda. The SAF Credit aims to tackle climate pollution by encouraging innovation within the aviation industry.
In a joint effort, the Treasury Department collaborated with various partners under the Biden-Harris Administration, including the Environmental Protection Agency (EPA), Department of Transportation (DOT), Department of Agriculture (USDA), and Department of Energy (DOE), to develop comprehensive guidance on the SAF Credit.
The overarching aim of the Inflation Reduction Act, to which the SAF Credit belongs, is to provide incentives for the production of low-carbon fuels and to reduce emissions from the aviation sector. By promoting sustainable aviation fuel, the industry can make significant strides in decarbonizing hard-to-reach areas of the transportation sector and pave the way for a cleaner, greener future.
Under the SAF Credit, producers of sustainable aviation fuel that achieve a 50% or greater reduction in lifecycle greenhouse gas emissions compared to petroleum-based jet fuel are eligible for tax credits ranging from $1.25 to $1.75 per gallon. The new guidance provided by the Treasury Department offers clarity on eligibility requirements, creating certainty for producers in the industry.
Importantly, the SAF Credit extends its scope to include a variety of approved fuels. Biomass-based diesel, advanced biofuels, cellulosic biofuel, and cellulosic diesel, all approved by the EPA under the Renewable Fuel Standard, will qualify for the credit. Additionally, fuels that meet the 50% reduction threshold in lifecycle greenhouse gas emissions based on the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) standard are also eligible.
To further aid SAF producers, the EPA, DOT, USDA, and DOE will collaborate to release an updated version of the DOE’s GREET model by March 2024. This updated model will enable producers to accurately determine the lifecycle GHG emissions rates of their production, consequently helping them qualify for the SAF Credit. Further enhancements to the model include the integration of new data, scientific advancements, and the modeling of key feedstocks and processes used in aviation fuel. Moreover, it will also incorporate other categories of indirect emissions and greenhouse gas reduction strategies.
With the release of this guidance, the U.S. government shows its commitment to bolstering the production of sustainable aviation fuel and delivering on President Biden’s climate agenda. By incentivizing producers and streamlining the qualification process, the Treasury Department and IRS are driving innovation in the aviation industry while working towards a more sustainable future.
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