Reuters, citing three sources, reported that Biden administration officials will not finalize highly anticipated guidelines on new clean fuel production tax credits aimed at the airline and biofuel industries before they leave Jan. 20. This casts doubt on the future of a key piece of the Biden administration’s climate agenda. However, Bloomberg News reported: The Biden administration anticipates guidance for clean fuel production tax credits that will enable eligible producers to claim the 45Z credit for 2025, according to a Treasury Department spokesperson.
The Biden administration’s inability to finalize guidelines has created significant uncertainty for the airline and biofuel industries. This development casts doubt on a key component of President Biden’s climate agenda, particularly his ambitious plan to generate 3 billion gallons of sustainable aviation fuels (SAF) by 2030.
Of note: In September 2024, USDA Secretary Tom Vilsack expressed confidence that the clean fuels tax credit program, including SAF, would be finalized by the end of the Biden administration on Jan. 20, 2025.He stated, “I’m confident that we’re going to get ‘er done,” during a summit hosted by the biofuels trade group Growth Energy.
The tax credit, which was set to become effective on Jan. 1, 2025, is now at risk of remaining dormant due to the lack of detailed guidance from the U.S. Treasury. This delay affects several key areas:
• Airline industry: With air travel contributing around 2.5% of global greenhouse gas emissions, the SAF initiative was seen as a crucial step in combating climate change.
• Biofuel sector: Ethanol producers were particularly hopeful that SAF would provide market growth, especially given the stagnant demand for corn-based fuel as a gasoline additive.
• Climate targets: The delay potentially hampers progress towards reducing emissions in the aviation sector, a significant focus in the fight against climate change.
The situation has created a complex political and economic landscape:
• Regulatory uncertainty: Biofuel companies and their legislative supporters had hoped for a finalized program before Biden’s departure from the White House on Jan. 20, 2025.
• Protection against policy reversal: A complete program was seen as potential protection against President-elect Donald Trump’s vow to repeal Biden’s 2022 Inflation Reduction Act, which launched the program.
• Industry response: Considering the uncertainty, the biofuel industry is now pushing lawmakers to extend existing blender tax credits that were set to expire at the end of 2024.
The delay in establishing SAF guidelines stems from several factors:
• Political disagreements: There are ongoing squabbles between agriculture lobbyists and environmentalists over ensuring the program can achieve its climate targets.
• Incomplete guidance: While USDA is expected to issue some guidance on climate-smart farming techniques eligible for the credit, other key elements, such as life cycle analysis, will remain unfinished, Reuters reported.
• Lack of clear blueprint: Without comprehensive guidelines, the industry lacks a clear path to access the credits.
This delay is part of a larger issue affecting clean fuel initiatives:
• Domestic feedstock requirements: There are concerns about the lack of requirements for domestically grown feedstocks, potentially allowing foreign producers to benefit from the clean fuel production credit.
• Climate-smart agriculture practices: The bundling of these practices and complex reporting requirements in the SAF guidance may exclude many farmers from benefiting from the SAF credit.
• Economic limitations: The implementation of practices like no-till farming, cover cropping, and enhanced efficiency fertilizers requires significant upfront investments, which may be prohibitive for many farmers.