The Biden administration is set to unveil a preliminary climate model for its sustainable aviation fuel (SAF) subsidy program in the coming weeks, presenting stricter criteria than anticipated by the corn-based ethanol industry, as reported by two sources familiar with the matter to Reuters.
According to the preliminary model expected to be released by May 15, ethanol will not automatically qualify as a feedstock in the SAF subsidy program unless the corn utilized is sourced from farmers employing one of three specific sustainable agriculture techniques. These techniques encompass efficient tilling, use of cover crops, and optimal fertilizer application.
While White House officials had initially contemplated mandating all three techniques as a prerequisite in a binary approach, they have since retreated from this stance. The ethanol industry had anticipated a broader array of agricultural practices to be eligible for fuel qualification.
The sources suggest that the model may be expanded to encompass a wider range of options when the administration deliberates on establishing the Clean Fuel Production Credit, or 45Z, later in the year. However, immediate expansion of options has been delayed due to concerns surrounding verification of farm practices and their actual carbon reduction efficacy.
The intricacies surrounding ethanol and biofuels have entangled the White House in complex political dynamics during an election year. While subsidies for these products resonate strongly in key Midwestern swing states, the conversion of farmland for fuel production instead of food has drawn criticism from environmentalists.
To access SAF subsidies, producers must demonstrate a 50% lower emissions level compared to jet fuel. Ethanol faces challenges meeting this threshold due to environmental penalties associated with land conversion for fuel production, necessitating reliance on sustainable agriculture practices to meet credit requirements.
Environmental advocates remain cautious about the carbon reduction benefits of smart agriculture practices and have urged the White House to limit their influence within the model.
The Biden administration views SAF as pivotal in decarbonizing the transportation sector and has incorporated a $1.25 per gallon tax credit for SAF production in the 2022 Inflation Reduction Act. The administration aims to stimulate 3 billion gallons of sustainable aviation fuel production by 2030 through this tax credit.
For ethanol producers, the emerging SAF industry and associated subsidies offer a prime opportunity for market expansion amidst subdued gasoline demand.