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White House seeks to boost sustainable aviation fuel production with tax credits

10 September 2021 Amena Saiyid

White House plans to boost sustainable aviation fuel (SAF) production to 3 billion gallons a year by 2030 with a production tax credit as part of a goal announced 9 September to reduce GHGs from the sector.

The tax credit, once approved by US Congress, would require the lifecycle GHGs of the SAFs be 50% lower than those of regular jet fuel.

The White House said the tax credit would help producers reach the 2030 goal, and make sure sufficient SAF is in place to meet 100% of US aviation fuel demand by 2050, which it added is currently projected to be around 35 billion gallons per year.

The 2030 goal, which the White House announced following a roundtable on sustainable aviation, aims to reduce aviation sector GHGs by 20% compared with current levels by increasing SAF use in aircraft and through improving aircraft engine efficiency. The White House said it would release a more comprehensive climate action plan for the aviation sector later.

The roundtable included federal agency officials, lawmakers, as well as airline industry and fuel producers, who all backed the 2030 goal.

Aviation (including all non-military flights within and departing from the US) represents 11% of the country's transportation-related emissions, which in 2019 the US Environmental Protection Agency estimated at roughly 178 million mt CO2 equivalent.

Shortly after the meeting, the US Department of Energy (DOE) said it would work closely with the transportation and agriculture departments to meet the SAF production targets and announced plans to spend nearly $65 million on projects focused on producing low-carbon biofuels that can be used to replace petroleum fuels in heavy-duty forms of transportation like airplane and ships.

The Biden administration promised to spend up to $4.3 billion to support SAF projects, including funding for R&D efforts to pursue technologies that can achieve at least 30% improvement in aircraft fuel efficiency.

Liz Jones, an attorney with the nonprofit Center for Biological Diversity Climate Law Institute, said the administration's push to improve engine efficiency was "promising," but was disappointed with the deal Biden struck with the airlines.

"Nothing in this deal holds the airlines to their promises, and even the best-case scenario doesn't cut climate pollution fast enough," Jones said in a 9 September statement. "The Biden EPA needs to set strong airplane emissions standards now, not get mired in the myth of sustainable airline fuels."

Aviation emissions likely to increase

As more goods and people fly as the impact of the COVID-19 pandemic decreases, the White House said, aviation emissions are likely to increase.

"In the future, electric and hydrogen-powered aviation may unlock affordable and convenient local and regional travel. But for today's long-distance travel, we need bold partnerships to spur the deployment of billions of gallons of sustainable aviation fuels quickly," the White House said, noting that this step is essential to unlocking the potential for a fully zero-carbon aviation sector by 2050.

The US Senate Finance Committee already approved the Clean Energy for America bill in late May that included a number of clean energy tax credits including a $2/gal tax production tax credit for SAF derived from woody biomass, waste streams, and renewable energy sources. Democrats are looking to fold this tax credit bill into a budget reconciliation measure they hope to push through the Senate.

Michael McAdams, president of the Advanced Biofuels Association (ABFA), who was present for the roundtable, said much of the discussion centered on the need to provide a federal tax credit for SAF producers of least $1.50/gal.

The White House said it is aware that its goal of producing 3 billion gallons a year of SAF in a decade, compared with the current US level of 4.5 million gallons a year, will require coordination, funding, research and development across the federal government, aircraft manufacturers, airlines, fuel producers, airports, and non-governmental organizations.

According to DOE, an estimated 1 billion dry tons of biomass can be collected sustainably each year in the US, enough to produce 50-60 billion gallons of low-carbon biofuels. This biomass includes fats, oils and greases, corn grain, oil seeds, and wood mill waste.

Need tax credits to meet goal

The Alternative Fuels and Chemicals Coalition (AFCC) said SAF producers will need the same level of financing and tax credits as producers of biodiesel and at least $20 billion in DOE loans to help scale up commercial production to meet projected demand for the fuel in the coming decades.

The billions of dollars in DOE loans would not only scale up production but also promote innovative technologies from producers and strengthen the domestic supply chain, AFCC said, adding that making more SAF from cheaper feedstocks, such as forest residue and biomass waste, would lower the cost of producing the fuel, making it more competitive with conventional A1 jet fuel.

According to the White House, commercial-scale SAF projects that utilize innovative technology and avoid, reduce, or sequester GHGs may be eligible for loan guarantees under the DOE Loan Program Office's Innovative Energy Loan Guarantee Program.

Fuel producers including World Energy and Gevo that were present at the White House roundtable agreed to work towards the 2030 goal.

World Energy said it would produce 150 million gallons of SAF each year by 2024 from waste fats, oils and greases, and oil major Chevron and Colorado-based Gevo inked a deal to invest in plants that will make SAF from corn oil. Gevo told the White House it would produce 150 million gallons of SAF each year by 2025.

Although financial terms and projected production capacities were not disclosed, the letter of intent signed between the two companies gave Chevron the right to take about 150 million gallons a year from the project.

Airlines back the goal

The US airline industry, through trade group Airlines for America (A4A) group, pledged to raise its 2 billion gallons a year SAF goal to align with the White House 2030 goal.

"We are proud of our record on climate change, but we know the climate change challenge has only continued to intensify. Accordingly, A4A member carriers have embraced the need to take even bolder, more significant steps to address the climate crisis," A4A CEO Nicholas Calio said at the White House roundtable.

In support of the 2030 goal, United Airlines announced plans to halve its carbon intensity compared with 2019 by 2035. United also announced a partnership with North Carolina-based Honeywell to invest in Alder Fuels, a clean tech company seeking to produce a low-carbon SAF from forest and crop waste.

Under this partnership, United said it will obtain 1.5 billion gallons of SAF from Alder Fuels over a 20-year period. The offtake volume is one-and-a-half times the size of the combined SAF commitments announced by other airlines worldwide, United said in a statement.

--Contributions from Aaron Alford, OPIS

Posted 10 September 2021 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

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