Guidelines around a new tax credit for sustainable aviation fuel is issued by Treasury Department

Long-awaited guidance around tax credits for aviation fuel that reduces emissions of greenhouse gases compared with conventional fuel was issued Friday by the Treasury Department.

Environmentalists said they were concerned that the guidelines could pave the way for credits for fuel made from corn, sugar cane and other crops, which they consider unsustainable sources.

Producers of sustainable aviation fuel will be eligible for tax credits ranging from $1.25 to $1.75 per gallon.

Congress approved the credits as part of President Joe Biden’s Inflation Reduction Act of 2022, which included provisions designed to boost cleaner energy. The credits are designed to increase the supply and reduce the cost of sustainable fuel, which is far higher than regular jet fuel.

On a key issue, the Treasury Department accepted a model for measuring the emissions-reduction of fuels that is being developed by the Energy Department and is supported by the ethanol industry.

However, Treasury said the Biden administration plans to update the Energy Department model for measuring emissions reductions by March 1, leaving the eventual outcome uncertain.

The Environmental Defense Fund said it would withhold final judgment on the guidelines until March, but said it worried that they could put the U.S. out of step with international standards.

“Our initial assessment is that this would be a blank check for fuels made from sugar cane, soybean and rapeseed—none of which are sustainable or consistent with Congress’ intent,” the group’s senior vice president, Mark Brownstein, said in a prepared statement.

Ethanol supporters counter that the Energy Department model provides a precise way to measure the carbon-reduction benefits of agricultural feedstocks used in sustainable aviation fuel.

Around 2% to 3% of global greenhouse gas emissions come from aviation, according to estimates, but that share is expected to grow as air travel continues to boom. Widespread use of electric-powered airplanes is generally considered decades away.

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