Sustainable aviation fuel (SAF) could drive significant growth in the U.S. biofuels sector, but the industry’s success will depend on favorable market and regulatory conditions. Agricultural feedstocks are expected to play a major role in SAF production, yet progress will rely heavily on policies that support farmers and biofuel manufacturers.
The new CoBank Knowledge Exchange report highlights the upcoming guidance for the 45Z tax credit, the Clean Fuel Production Credit, as a crucial factor for agriculture’s involvement in SAF. This credit, set to replace the 40B tax credit on January 1, 2025, is designed to promote clean fuel production. However, the previous 40B tax credit failed to incentivize farmers effectively, according to Jacqui Fatka, a farm supply and biofuels economist with CoBank. “Farmers are hoping the new guidance offers more flexibility to employ practices that are applicable to their individual operations,” Fatka explained. She added that the 40B credit used a “one-size-fits-all approach” that didn’t consider the diversity of farming practices nationwide.
The biofuels industry has seen growth through policies like the Energy Policy Act of 2005, which expanded ethanol production, but SAF presents a longer-term opportunity. While the Inflation Reduction Act authorizes the 45Z tax credit for only three years, stakeholders are pushing for more stable, long-term incentives and agreements with the airline industry. “The lack of longer-term incentives, as well as a lack of offtake agreements from the airline sector, will limit adoption and growth,” Fatka emphasized.
As the government finalizes new climate-smart models and tax credit guidelines, biofuel expansion remains uncertain, affecting farmers’ planning and investments.
Sabrina Halvorson
National Correspondent / AgNet Media, Inc.
Sabrina Halvorson is an award-winning journalist, broadcaster, and public speaker who specializes in agriculture. She primarily reports on legislative issues and hosts The AgNet News Hour and The AgNet Weekly podcast. Sabrina is a native of California’s agriculture-rich Central Valley.