The U.S. ethanol industry, some top U.S. airlines, and sustainable aviation fuel (SAF) producers are lobbying the Biden Administration to have ethanol-sourced SAF receive credits under the Inflation Reduction Act.
Currently, the IRA says that the SAF credit applies to certain fuel mixtures that contain SAF. To qualify for the credit of $1.25 for each gallon of SAF, the fuel must have a minimum reduction of 50% in lifecycle greenhouse gas emissions. There is also a supplemental credit of one cent for each percent that the reduction exceeds 50%.
The ethanol industry, which currently is focused on producing ethanol for blending in gasoline, is looking to persuade the U.S. Administration to use the Department of Energy's methodology of calculating the carbon emissions from ethanol production rather than the Inflation Reduction Act's proscribed methodology. Under the Department of Energy methodology, ethanol is assessed to be less emission-intensive, Reuters notes.
The Renewable Fuels Association and several other organizations of the U.S. ethanol industry are looking to venture into the SAF business, which is expected to grow in the coming years to help lower emissions from the aviation industry.
A growing number of airlines are betting on increased use of SAF to reduce their carbon footprint in a sector where emissions are hard to abate.
Earlier this year, United Airlines launched a $100-million investment vehicle to support start-ups that develop and explore the production of sustainable aviation fuel in an effort to accelerate the research, production, and technologies associated with SAF.
Despite numerous pledges from airlines and government support for SAF production, the alternative of the petroleum-based jet fuel faces challenges in supply, costs, and feedstock, analysts say.
According to the International Energy Agency (IEA), "increasing SAF use from less than 0.1% of all aviation fuels in 2021 to around 10% by 2030 in line with the Net Zero Scenario will require investment in production capacity and new policies such as fuel taxes, low-carbon fuel standards and mandatory blending."
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More