U.S. to release clean fuel tax credit model, limit credit access for ethanol producers, sources say

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Author: Jarrett Renshaw and Stephanie Kelly

NEW YORK, Jan 10 (Reuters) – The United States is expected to release a clean fuel tax credit climate model next week that would significantly reduce ethanol producers’ ability to receive subsidies for sustainable aviation fuel production, three people familiar with the matter told Reuters .

The exclusion of climate-smart agricultural practices, which the biofuel industry hopes to rely on, represents a reversal from the last update of climate models. The Treasury Department is expected to issue a notice of proposed rulemaking for the broader program, known as 45Z, later on Friday, leaving further decisions on the program to the administration of President-elect Donald Trump.

Updated climate models will also limit access to import credits for used cooking oil, two sources said. Both used cooking oil and ethanol can be used to produce SAF, which is made from non-petroleum feedstocks and has a smaller carbon footprint than traditional jet fuel.

President Joe Biden plans to produce 3 billion gallons of sustainable SAF by 2030. Air travel accounts for approximately 2.5% of global greenhouse gas emissions, making it an important target in the fight against climate change.

The Biden administration last year updated a climate model called the GREET model to provide stopgap tax credits under the Clean Fuels Plan, which expired on Jan. 1.

The new update may anger ethanol producers who want access to credit, as SAF production can be profitable for companies that receive subsidies, but without credit, production costs are high.

Climate-friendly farming practices include not tilling land, growing cover crops and using high-efficiency fertilizers.

Industry investment plans may also be delayed as the Biden administration leaves further decisions to the Trump administration.

CBOT soyoil futures rose more than 6% on Friday after Reuters reported updates on short-term tax credit guidance and climate models. “Whatever he (Biden) has in mind, I think we’re taking it into consideration today,” said Jack Scoville, vice president at Price Futures Group. (Reporting by Stephanie Kelly in New York and Jarrell Reporting by Ter Renshaw in Philadelphia Additional reporting by Julie Ingwerson in Chicago Editing by Matthew Lewis