The federal government this week finally issued a modified framework for assessing whether fuel made from corn can qualify for tax breaks by producers of sustainable aviation fuel. That framework is being largely panned by farmers angered by what they see as the government telling them how to farm, while ethanol groups are generally reacting more favorably.
The new guidelines will require farmers to use no-till methods, cover-cropping and enhanced efficiency fertilizer in order for the fuel to meet the requirement to qualify as SAF. The underlying requirement is that a fuel must provide at least a 50% reduction in carbon emissions from conventional biofuels production.
Details about the guidelines, released by the Treasury Department this week, had been leaking out for weeks, and none of the requirements individually are a surprise. But lumping all three requirements together as a “bundle” is more than most expected, and there are some complaints about an overbearing federal government. The requirements are to some reminiscent of the onerous climate regulation being considered or imposed in Europe, which helped to spark widespread farmer protests this past winter.
“For growers like me here in North Dakota, short growing seasons and unpredictable fall weather make the cover crop requirement alone next to impossible,” said Josh Gackle, who is president of the American Soybean Association. “Growers in the Northern Plains do so when possible. However, employing both no till and cover cropping is contrary to what Mother Nature will allow no matter what the guidance specifies.”
U.S. Sen. Chuck Grassley, R-Iowa, as he likes to point out a farmer himself, criticized the decision on a number of fronts, calling it a “stupid approach.” He said the government failed to account for how grains are handled, and that corn made using the “bundle” of practices is not segregated from other corn. “No one can discern which methods were used to grow each individual grain that was delivered to the elevator, he said. Grassley also questioned how the government would enforce the requirements, saying that some growers will inevitably look to sidestep them. “It will be easy to violate,” he said.
But for ethanol producers, the Biden Administration’s decision is confirmation that corn-based ethanol remains part of the plan for Sustainable Aviation Fuel, which is expected to grow dramatically between now and 2030.
“Today’s guidance and modified GREET model help position ethanol-based SAF for takeoff, but more work is needed to fully clear the runway and get this opportunity off the ground,” said RFA President and CEO Geoff Cooper. “We are encouraged that, for the first time ever, this carbon scoring framework will recognize and credit certain climate-smart agricultural practices. We’re also pleased to see the integration of other carbon reduction strategies— like renewable process energy and carbon capture and sequestration — into the model. However, RFA believes less prescription on ag practices, more flexibility, and additional low-carbon technologies and practices should be added to the modeling framework to better reflect the innovation occurring throughout the supply chain.”
The tax credits tied to these practices initially only apply to fuel produced in 2023 and 2024 as part of a “pilot” plan. But the release of the plan is also seen as a commitment going forward. The strength of that commitment could depend on who wins the White House in November. A victory by former President Trump could mean a de-emphasis on sustainable aviation fuel and “climate-smart” farming practices generally. That said, as the past 15 years have shown, neither party is likely to enact policies that severely harm ethanol — at least not without making some other changes that offset the harm.
