Little to no ethanol will qualify for US aviation fuel credit
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[May 30, 2024] By
Leah Douglas and Jarrett Renshaw
(Reuters) - Little to no ethanol will qualify for U.S. sustainable
aviation fuel (SAF) subsidies under a new pilot program by President Joe
Biden's administration, which toughened climate requirements at the last
minute, according to a Reuters review of government data and people
familiar with the matter.
The issue could hurt the biofuel industry, which sees SAF as ethanol’s
best chance at growth since electric cars have cut into its market as a
gasoline additive. It could also hinder Biden's goal of producing 30
billion gallons of SAF by 2030. He once promised 95% of SAF - a biofuel
that can be made from oils, waste, or grains - would come from farmers.
Details about how little ethanol will qualify for the subsidies under
the pilot program, and how the requirements were raised at the final
hour, have not previously been reported.
At issue is a $1.25/gallon production tax credit embedded in the 2022
Inflation Reduction Act reserved for SAF that demonstrates a 50%
reduction in lifecycle greenhouse gas emissions compared to regular jet
fuel.
Under the pilot program finalized on April 30, ethanol producers seeking
to claim that credit must verify their corn comes from farms using three
climate-friendly farming practices in tandem: not tilling the soil,
planting cover crops, and using higher efficiency fertilizers.
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U.S. Agriculture Secretary Tom Vilsack touted the program as "a great
beginning as we develop new markets for sustainable aviation fuel that
use home grown agricultural crops."
But a Reuters review of data from the U.S. Department of Agriculture
(USDA) suggests almost no U.S. corn farmers use all three practices at
the same time. Officials at five farm and biofuel trade groups told
Reuters few, if any, ethanol-makers will be able to meet the standard.
"I have not had a single ethanol producer member contact me and say,
we're going to meet the climate-smart agriculture requirements," said
Brian Jennings, CEO of the lobby group American Coalition for Ethanol.
A USDA spokesperson said the rule was still a milestone because it
recognizes farmers' potential to fight climate change, and would
encourage adoption of climate-smart farm practices. The agency did not
provide an estimate of how much ethanol would qualify.
The pilot program covers ethanol produced in 2023 and 2024, and will be
replaced by a new program in 2025 that biofuel groups hope will be less
restrictive.
"I see this (pilot) as a marker, a signal and think it was a good first
step," said Patrick Gruber, CEO of biofuel producer Gevo.
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![](../images/053024PIX/busine92.jpg)
Logistics supervisor Travis Harrison walks among pipes and machinery
that convert corn into ethanol inside the Lincolnway Energy plant in
the town of Nevada, Iowa, December 6, 2007. REUTERS/Jason Reed
(UNITED STATES)/File Photo
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LAST-MINUTE CHANGE
The White House had been set to ditch the requirement that all three
farming methods be used at the same time, but reversed course after
Treasury Department officials said bundling the practices would
boost compliance and increase environmental benefits, according to
two sources familiar with the discussions.
Bundling the practices also helped balance rural and farm interests
with environmental concerns, the sources said.
Environmental groups have long worried that biofuels can cause
climate and environmental damage if more land is cleared to produce
them.
The USDA does not collect data on how many farmers use all three
required climate-friendly practices together, but data suggests the
overlap is slim.
Nationally, continuous no-till is used on about 33% of cropland
acres, efficient fertilizer application on about 26%, and cover
crops on about 6%, according to a 2022 USDA report.
There is no breakdown by crop or for corn destined for ethanol
production facilities.
"It’s a very small number of operations that would qualify," said
Matt Ziegler, policy director with the National Corn Growers
Association.
The climate-smart requirements also present hurdles for farmers who
grow soybeans, another potential SAF feedstock.
Josh Gackle, a North Dakota farmer and head of the U.S. Soybean
Association, said the cover crop requirement is particularly
problematic in his region, where long winters and short growing
seasons make it harder for him to grow the off-season crop than his
peers in Iowa or Nebraska.
"We just want to make sure that the rules across the growing regions
are right so all places can participate," Gackle said.
(Reporting by Leah Douglas and Jarrett Renshaw; Editing by Richard
Valdmanis and David Gregorio)
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