Treasury Department, IRS release guidance on sustainable fuel credits

On Tuesday, the U.S. Treasury Department and the Internal Revenue Service announced guidelines for Sustainable Aviation Fuel (SAF) Credit established by the Inflation Reduction Act (IRA).

The new guidance updates the current Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model to measure lifecycle emissions from SAF. Officials said the Treasury Department worked closely with the Environmental Protection Agency (EPA), and the U.S. Departments of Transportation (DOT), Agriculture (USDA), and Energy (DOE) on the guidelines.

“President Biden’s Inflation Reduction Act is driving American innovation to create good-paying jobs and help the U.S. clear hurdles in our clean energy transition,” U.S. Treasury Secretary Janet L. Yellen said. “Incentives in the law are helping to scale production of low-carbon fuels and cut emissions from the aviation sector, one of the most difficult-to-transition sectors of our economy. Today’s guidance provides additional clarity and certainty to companies and producers.”

The guidance provide clarity on SAF Credit eligibility, officials said, and incentivizes the production of SAF that achieves a lifecycle greenhouse gas emissions reduction of at least 50 percent when compared with petroleum-based jet fuel. SAF that achieves a GHG emission reduction of 50 percent is eligible for $1.25 credit per gallon, and SAF that achieves more than a 50 percent reduction of GHG emissions will be eligible for an additional penny per gallon for each percentage point in excess of 50 percent, up to 50 cents per gallon.

The guidance also includes the 40BSAF-GREET 2024 model which provides additional methodology for SAF producers to determine the lifecycle GHG emissions rates of their production for SAF credit purposes. The modified version incorporates new data, including updated modeling of key feedstocks and processes used in aviation fuel and indirect emissions, as well as GHG emission reduction strategies like carbon capture and storage, renewable natural gas and renewable electricity.

“The guidance released today reflects the latest data and science needed to help create new economic opportunities for America’s agricultural sector,” U.S. Secretary of Energy Jennifer M. Granholm said. “This interagency effort will help our climate goals take flight with cheaper, cleaner sustainable aviation fuel — ensuring America maintains an innovative edge on the global clean technology stage.”

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