WASHINGTON, D.C.—Today, Growth Energy, the nation’s largest biofuels trade association, submitted a letter to the U.S. Internal Revenue Service (IRS) outlining why the IRS should ensure that American producers of bioethanol can certify eligibility for the sustainable aviation fuel (SAF) tax credits enacted in sections 40B and 45Z of the Inflation Reduction Act (IRA) in a manner that is focused solely on the lifecycle greenhouse gas (GHG) emissions reductions of SAF.
In the letter, Growth Energy urges IRS to “interpret the 40B and 45Z certification process as calling for a workable alternative to CORSIA’s requirements for the certification of SAF that is based on criteria that reasonably relate to substantiating the lifecycle emissions of the fuel.” Growth stated further that “the IRS should clarify these certification criteria in conjunction with confirming that GREET are an acceptable ‘similar methodology’ for determining lifecycle greenhouse reductions” of SAF.
“Treasury has the power to ensure that American companies, American workers, and American communities benefit from growth in the still-nascent SAF market,” said Growth Energy CEO Emily Skor. “That’s why it’s critical that IRS shape its policies in a way that recognizes the importance of bioethanol as a potential feedstock for SAF and reflects Congress’ intent that IRA incentives be assessed on their lifecycle GHG emissions reduction potential, and nothing more. As we note in our letter, a number of our members have already made substantial investments in SAF production, and the IRA’s Section 40B and 45Z tax credits have the potential to greatly accelerate this trend.”
This is the fifth letter Growth Energy has sent to the U.S. Treasury Department in the last 12 months urging the agency to make bioethanol a centerpiece of its tax policy pertaining to SAF production. Read our other letters and learn more about SAF at growthenergy.org/saf.
Background
Section 40B(f) of the Inflation Reduction Act (IRA) gives taxpayers claiming SAF credits a choice of certification schemes to certify compliance with SAF credit eligibility requirements: (1) “general requirements, supply chain traceability requirements, and information transmission requirements” issued by the International Civil Aviation Organization (ICAO) under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) framework; or (2) “requirements similar” to those established under CORSIA for those taxpayers who use an “alternative methodology” to CORSIA to calculate lifecycle GHG emissions, as allowed under Section 40B(e).
The CORSIA eligibility requirements for the Section 40B and Section 45Z SAF tax incentives that are currently in place, and were in place at the enactment of the IRA, relate to ensuring the integrity of the lifecycle greenhouse gas (GHG) analysis of candidate feedstocks, including, for example, a requirement that feedstocks for sustainable aviation fuel (SAF) do not originate from forestland converted to agricultural production after 2007, and related supply chain traceability requirements. At their core, such requirements provide mechanisms to substantiate the lifecycle GHG reductions of the SAF. Beginning in 2024, however, the general requirements for certification under the CORSIA framework will include expansive new “sustainability criteria” that reach far beyond lifecycle GHG analysis into issues such as labor standards, community engagement, and other socioeconomic conditions of the region where the SAF is produced.
As explained in detail in Growth Energy’s letter, given the focus of the IRA on reducing lifecycle GHG emissions from aviation fuel, it would be unreasonable to interpret Congress’ intent in passing the IRA to require all of the far-reaching, new sustainability criteria under CORSIA to apply to the certification process under Sections 40B and 45Z. Moreover, requiring compliance with each of the newly-applicable sustainability criteria in 2024 would be burdensome or potentially infeasible for many SAF producers.