The U.S. Congress has introduced critical legislation aimed at extending the sustainable aviation fuel (SAF) tax credit for biofuels under the 45Z framework for an additional 10 years. Sponsored by Senator Sherrod Brown and Representative Marcy Kaptur, this bill is designed to prioritize U.S. feedstocks by preventing foreign producers from accessing the credits. The proposed legislation is set to safeguard domestic biofuel production, ensuring that U.S. tax dollars benefit American farmers and fuel producers while boosting sustainability in the aviation sector.
The tax credit, which is part of the 2022 Inflation Reduction Act, plays a crucial role in promoting biofuel production for SAF, biodiesel, and renewable diesel. The 45Z credit is tied to the carbon intensity of the fuel produced, with the aim of reducing greenhouse gas emissions from the aviation sector. Currently, the USDA estimates that 14 billion pounds of soybean oil will be utilized for biofuel production in 2024-2025, making this legislative change highly impactful for U.S. agriculture.
Boosting U.S. Agriculture and Biofuels Industry
By extending the 45Z credit, the bill will protect U.S. farmers from international competition, particularly concerning imported feedstocks like used cooking oil. Leaders in the soybean and corn industries have expressed support for the bill, underscoring its importance in securing the future of the U.S. biofuels market.
Rusty Goebel, president of the Ohio Soybean Association, applauded the bill’s sponsors for focusing on domestic feedstocks, noting that foreign materials, while useful, should not qualify for American taxpayer-funded credits. This sentiment was echoed by Harold Wolle, president of the National Corn Growers Association, who highlighted the essential role corn ethanol plays in helping airlines reduce greenhouse gas emissions.
A Win for U.S. Aviation and Climate Goals
This legislation is a timely and vital measure in supporting the aviation industry’s transition to SAF, a key component of global climate change efforts. The aviation sector remains a significant contributor to CO2 emissions, and the introduction of sustainable fuels like SAF is one of the most promising strategies for achieving substantial emission reductions. However, ensuring the carbon footprint of SAF remains low depends largely on sourcing domestic, sustainably produced feedstocks.
At VURDHAAN, we recognize the importance of legislative measures like this one in fostering sustainable practices within the aviation industry. We specialize in helping organizations navigate the complexities of SAF policies, including compliance with international standards like CORSIA and ReFuelEU, as well as understanding and leveraging tax incentives like the 45Z credit. Through our Support, Educate, and Implement methodology, we assist stakeholders across the aviation sector in developing strategies that align with sustainability goals and regulatory requirements.
Ensuring Long-Term Success for Biofuels and SAF
The passage of this bill would not only strengthen the U.S. biofuels industry but also bolster efforts to decarbonize aviation. With a 10-year extension of the tax credits, U.S. producers will have the financial stability to scale up SAF production, helping airlines meet stringent emission targets. Furthermore, by restricting the tax credit to domestic producers, the bill will safeguard the American farming sector, ensuring that U.S. farmers benefit from the growing demand for biofuels.
As we move closer to a net-zero aviation industry, collaboration between policymakers, fuel producers, and aviation stakeholders will be essential. This bill is a step in the right direction, providing a framework for sustainable growth in both the agricultural and aviation sectors.