The easiest way to win any game is to rig the rules.
That’s what Big Ag and its loyal boosters at the U.S. Department of Agriculture appear to be doing to make sure their new project, sustainable aviation fuel (SAF), flies despite market gravity and basic science.
Proponents hope the jet biofuel market will reach three billion gallons a year by 2030 and 35 billion gallons annually by 2050.
To clear the way for corn-based ethanol to become the dominant SAF feedstock, “qualifying producers can earn a minimum $1.25 tax credit per gallon” that can “increase to as much as $1.75 per gallon,” Andrew Swanson, a University of California (Davis) resource economist, said in a recent farmdocDAILY post.
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Those market-making tax credits, included in 2022’s Inflation Reduction Act (IRA), “are in addition to any fuel credits earned under the RFS,” today’s ethanol-enabling federal Renewable Fuel Standard and state sweeteners such as California’s carbon credits.
The “stacked” credits are not just “lucrative” to potential SAF producers interested in the “jet fuel conversion processes;” they’re the whole ballgame. Without them, SAF has little chance of ever taking off.
“However, there is a catch,” Swanson said in his lengthy, balanced report.
For any future SAF producer to “receive these tax credits, a fuel must have 50 percent less emissions than petroleum jet fuel.”
That’s Everest-tall for ethanol and more than double RFS’s comparatively meagre “20 percent less emissions than petroleum gas” standard for automotive fuel.
There’s more.
According to Swanson, SAF emissions must comply with “standards set by the International Civil Aviation Organization” that show “SAF from corn-starch ethanol has higher emissions than petroleum jet fuel.” That means “ethanol producers do not currently qualify for the IRA tax credits.”
But wait, this is ethanol, the federally mandated biofuel that over the last 40 years has had more lives than the hardiest barn cat. It’s survived decades of sketchy economics, questionable carbon emissions data, and most recently, the fast rise of electric vehicles.
To win the SAF fight, Swanson notes, U.S. president Joe Biden’s administration, which is under intense pressure from Big Ag’s ethanol lobby and the USDA’s advocacy, needed to rejigger the SAF emission rules just to get ethanol into the game.
So “the Biden administration formally stated in December that the Treasury Department will adopt a different model to calculate ethanol’s emissions for SAF. This model is called GREET,” or, in bureaucrat-speak, Greenhouse Gases, Regulated Emissions, and Energy use in Technologies.
Better yet, this new, customized model yielded a new, customized emission number.
“According to GREET, corn ethanol represents a 43 per cent reduction in emissions from petroleum gasoline.”
I know, a miracle, right?
While that number still doesn’t clear SAF’s steeper hurdle to unlock IRA’s tax-credit gold mine, says Swanson, “using GREET will certainly reduce the emission gap between ethanol SAF and the 50 per cent threshold, if not eliminate it completely.”
“Moreover,” adds Swanson, “exploring how GREET determines the emissions of ethanol will reveal how ethanol producers could surpass the 50 per cent threshold.”
The most obvious places to start are “the three largest sources of emissions for corn ethanol … corn production, biorefining and land use change.”
Of the three, biorefining offers an extraordinary example of how this novel Department of Treasury math magically makes ethanol “green” enough to enter SAF’s tax-credit heaven.
For example, under GREET, just “switching from natural gas to renewable natural gas” during ethanol’s refining process and then employing “carbon capture and sequestration … would reduce the carbon intensity of ethanol SAF” to meet the necessary IRA threshold.
In other words, potential SAF refiners can grab the biofuel’s tax credit billions by first grabbing carbon credits generated by other heavily subsidized, deeply controversial federal “green” programs such as methane-making manure digesters and carbon-capture pipelines.
Why all the bald-faced rule rigging — and a spectacular tax credit triple jump — to make SAF fly? More on that next week.
Alan Guebert is an agricultural commentator from Illinois.
