Current obstacles to greater availability and use of sustainable aviation fuels (SAF) may soon be surmounted in light of new legislation to significantly bolster industry efforts to make SAF more accessible to business aviation operators.
Partly derived from a diverse array of renewable sources, SAF holds the potential to reduce life cycle carbon emissions from the aviation sector by as much as 80% with current technologies.
Effective Jan. 1, 2023, a new blenders tax credit (BTC) makes SAF producers eligible for a $1.25 per gallon credit for each gallon of SAF sold as part of a qualified fuel mixture with a demonstrated life cycle greenhouse gas (GHG) reduction of at least 50% compared to conventional jet fuel.
The stand-alone SAF tax credit increases by one cent for each percentage point by which the life cycle GHG emissions reduction of such fuel exceeds 50%, up to $1.75 per gallon for a 100% reduction.
“NBAA strongly supported this new blender's tax credit and the long-term effort to drive availability of SAF. We are optimistic the BTC will greatly incentivize SAF production, narrow the cost gap between SAF and conventional jet fuel and drive savings for end users.”
Stewart D'Leon CAM, NBAA Director for Environmental and Technical Operations
“NBAA strongly supported this new blender’s tax credit and the long-term effort to drive availability of SAF,” said Stewart D’Leon, CAM, NBAA director for environmental and technical operations. “We are optimistic the BTC will greatly incentivize SAF production, narrow the cost gap between SAF and conventional jet fuel and drive savings for end users.”
The SAF BTC will run through the end of 2024, after which time the Clean Fuel Production Credit (CFPC) will apply to all transportation fuels, based on the level of GHG reduction performance against a baseline emissions factor. However, SAF producers will be eligible for enhanced credits up to $1.75 per gallon – 25 cents higher than other fuels – when demonstrating a 100% GHG reduction.
Combined, these two programs offer producers the long-term incentive to invest in SAF production, noted Karen Huggard, vice-president of government affairs for the National Air Transportation Association.
“The BTC and CFPC will enable companies to secure necessary funding from investors to break ground on new SAF production facilities, as well as to expand existing sites,” she noted. “At least five emerging producers have announced new facilities slated to come online in the next two-three years, and current producers are also increasing production capacity. The new tax credits will solidify these efforts, dramatically increasing the supply of SAF.”
Huggard also expressed optimism that end users will benefit from these efforts. “We could see adjustments to the price per gallon of SAF once companies file their Q1 2023 tax reports, which will reflect the new credit,” she said.
General Aviation Manufacturers Association President and CEO Pete Bunce emphasized the importance of SAF as a key pillar to reducing the aviation industry’s carbon footprint and becoming net-zero for CO2 emissions by 2050, key pillars of the Business Aviation Commitment on Climate Change.
“The SAF Blender’s Tax Credit and the Department of Transportation SAF grant/tech development program being signed into law, along with additional administration efforts, are important steps forward,” he said. “We must continue to strengthen partnership efforts from the administration and U.S. Congress to help ensure that SAF production will increase significantly in the coming years.”