Sustainable Aviation Fuel (SAF)
In a key development on business aviation’s path to a sustainable future, the U.S. House Ways and Means Committee’s budget reconciliation proposal for the Build Back Better Act contains a sustainable aviation fuel (SAF) blender’s tax credit, which will incentivize production of SAF and make it more affordable and accessible to general aviation.
SAF can reduce lifecycle greenhouse gas (GHG) emissions by up to 80% compared to conventional petroleum-based jet fuel and is widely considered to hold the greatest near-term potential for reducing aviation’s climate impact.
Importantly, SAF is a drop-in fuel that can be blended with current fuels and requires no redesign of engines or aircraft, providing an immediate solution to reduce GHG. However, as NBAA and other leading aviation advocates have noted, the production and availability of SAF will not meet demand without the incentive of a long-term blenders tax credit.
That tax policy took an important step forward on Capitol Hill. On Sept. 15, the House Ways and Means Committee formally advanced tax provisions to be considered as part of the Build Back Better Act, including a blenders tax credit that will be effective on Jan. 1, 2023.
Under the proposed provision, a $1.25 per gallon credit will be available for each gallon of SAF with a demonstrated lifecycle GHG reduction of at least 50% compared to conventional jet fuel if sold as part of a qualified fuel mixture. That blender’s tax credit also increases by one cent (up to $1.75 per gallon) for each percentage point by which the lifecycle emissions reduction of such fuel exceeds 50%.
Importantly, the Ways and Means Committee provision continues the blenders tax credit to the end of 2031. The certainty and long-term duration of the credit are critical to attracting additional investment in SAF production. Similar to other tax credits for renewable fuel, the committee has also made the SAF credit refundable.
Parnda Hedima is a Business, Aviation & Research Consultant who is a member of the National Business Aviation Association. Experimental Aircraft Association, & Aircraft Owners & Pilots Association.
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