New guidelines for aviation fuel tax credits aim to reduce greenhouse gas emissions and stimulate cleaner energy.
The Biden administration released guidance for aviation fuel tax credits. These credits aim to lower emissions from fuels compared to those derived from crude oil. Environmentalists are concerned about the guidelines from the Treasury Department. They fear credits might be given for crop-based fuels, which require extensive resources to produce.
Midwest lawmakers and corn ethanol producers have praised these guidelines. Their support might be short-lived, however. Congress passed these credits in 2022's Inflation Reduction Act, promoting cleaner energy. The credits are designed to increase sustainable aviation fuel (SAF) supply and reduce its cost.
However, Treasury plans to update this model by March 1. This update adds uncertainty about the tax treatment of ethanol for aviation. The update will include new modeling for aviation fuel production and its crop impact.
The Environmental Defense Fund is reserving judgment until March. They worry the current guidelines might not align with international standards. Mark Brownstein, the group's senior VP, expressed concerns about fuels from sugar cane, soybean, and rapeseed.
Ethanol supporters argue that the Energy Department model accurately measures agricultural feedstocks' benefits. Iowa Senator Joni Ernst praised the Treasury's recognition of this model. Airlines for America, representing major U.S. carriers, also welcomed the guidelines. They believe the guidelines will speed up SAF production and encourage investment.
Aviation contributes 2% to 3% of global greenhouse gas emissions. This percentage could rise with increasing air travel. Electric-powered planes are seen as a distant future solution.
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