The Biden administration’s new pilot program for sustainable aviation fuel (SAF) subsidies will effectively exclude most ethanol from qualifying, presenting a significant challenge for the biofuel industry’s growth aspirations.
Under the program finalized on April 30, ethanol producers seeking the $1.25/gallon production tax credit must verify that their corn comes from farms using a combination of three climate-friendly practices: no-till farming, cover cropping, and using more efficient fertilizers. However, a review of USDA data by Reuters suggests that virtually no U.S. corn farmers employ all three of these practices simultaneously.
This stringent requirement means that little to no ethanol will be able to meet the 50% greenhouse gas reduction threshold needed to qualify for the SAF subsidies. Officials from five major farm and biofuel trade groups confirmed that few, if any, ethanol producers will be able to satisfy the standards.
The issue could significantly impact the biofuel industry, which had viewed SAF as a key growth opportunity for ethanol, especially as its market as a gasoline additive has contracted due to the rise of electric vehicles. It also jeopardizes the Biden administration’s goal of producing 30 billion gallons of SAF by 2030, a target that the president had once suggested would be met with 95% of the fuel coming from agricultural sources.
According to the report, the tougher climate requirements were added at the last minute, catching many in the industry by surprise. USDA officials acknowledged the rule as a “milestone” that recognizes farmers’ potential to combat climate change, but did not provide an estimate of how much ethanol would actually qualify.
The pilot program covers 2023 and 2024, after which a new, potentially less restrictive program will be implemented in 2025. Biofuel groups are hopeful that future iterations of the SAF subsidy will be more accommodating to ethanol producers.