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Biofuel makers seeks changes to aviation fuel tax credit in Biden spending plan

[September 16, 2021] By Jarrett Renshaw

(Reuters) - Biofuel producers are seeking last-minute changes to a proposal to boost production of sustainable aviation fuel tucked in the Democrat's $3.5 trillion spending plan that they say will allow the nation's farmers to join the emerging multi-billion market.

The changes center on how the carbon-saving benefits of producing the fuel are measured, and could force the White House to choose between environmental groups who believe using land and food supply for fuel squanders earth's resources, and farm and agribusiness groups hoping to benefit from the push to stop climate change.

The White House said last week it wants to cut aircraft greenhouse-gas emissions by 20% by decade's end by significantly boosting the use of sustainable aviation fuel (SAF). Currently, less than 1% of the roughly 21.5 billion gallons of jet fuel burned each year in the United States is SAF, but the White House set a target of 3 billion gallons by 2030.

It has backed a $1.75 to $2 a gallon tax credit for sellers and users of sustainably produced fuel to offset the higher cost, which can be up to three times more than regular fuel.

SAF is currently produced from used cooking oil and animal fat, and even supporters of the increased targets consider the goal ambitious.

Biofuel groups say it's completely impossible without tapping into feedstocks like ethanol and soybean oil, and want the current model used to determine eligibility for the tax credit to be changed to allow them to participate.

They argue the plan relies on a "biased" European model that exaggerates the impact on land use of farm grown biofuel feedstocks and would deny farmers access to the lucrative credit. They are pushing for a different model developed by the U.S. Energy Department.

"If we use a modeling that is outdated and we don't utilize that blessing that we have, there could be a lost opportunity not just for farmers but for this whole project, this whole initiative," said Dustin Marquis, director of government relations at Marquis Energy.

The White House goals will be a "fantasy" if the current legislation is left untouched, said Brooke Coleman, Executive Director of the Advanced Biofuels Business Council.

"We need farm-based feedstocks to hit the target, and that won't happen if we let a European bias dictate advanced biofuel production in the U.S," Coleman said.

The White House did not respond to request for comment.

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Farmer Roger Hadley harvests corn from his fields in his John Deere combine in this aerial photograph taken over Woodburn, Indiana, U.S., October 16, 2020. REUTERS/Bing Guan

WHITE HOUSE TO CHOOSE

In order to be eligible for the tax credit, the current legislation says a producer would have to demonstrate a carbon score that is at least 50 percent better than the fossil fuel alternative.

The scoring system would be based on a European-based model developed by the International Civil Aviation Organization (ICAO) that has land-use penalties that are three times higher than the leading U.S. model known as GREET, which was developed by the U.S. Department of Energy.

Democratic Congressman Brad Schneider, of Illinois, is the lead sponsor of the tax credit legislation in the House. He is seeking an amendment to the bill that would reference both models, but leave it up to the White House make any final determination.

Pedro Piris-Cabezas, the director for Sustainable International Transport at the Environmental Defense Fund, says the ICAO model accurately accounts for direct and indirect land-use changes caused by increased demand for farm-based fuels like ethanol and soybeans.

Among other things, increased demand for crops causes land to be cleared in the United States and abroad, including rain forests. He also noted that the model allows farmers significant opportunity to lower their carbon scores by adopting new technology, like carbon sequestration or clean energy.

"The goal here is not to have taxpayers pay for something that will have a detrimental impact on the environment," Piris-Cabezas said.

He added that relaxing the model or injecting discretion in its implementation will "jeopardize the environmental integrity" of the plan and confuse an industry seeking to invest billions of dollars into its growth.

(Reporting By Jarrett Renshaw and Stephanie Kelly; editing by Heather Timmons and Richard Pullin)

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