Sustainable Jet Fuel Incentives Make Wish List for Spending Bill

Lawmakers and industry are pushing for incentives to make flying greener as part of a $3.5 trillion tax and spending bill.

Democrats, who are prioritizing environmental projects in budget negotiations, say they see support for provisions such as a sustainable aviation fuel tax credit among their caucus. American Airlines Group Inc. and Delta Air Lines Inc. are among the airlines lobbying for government help to buy greener fuel.

House committees aim to draft the massive money bill with much of President Joe Biden’s agenda by Sept. 15. Democrats plan to pass it using budget reconciliation to skirt Republican opposition.

“I am working hard to ensure sustainable aviation fuel investments are included in the budget reconciliation,” said Rep. Julia Brownley (D-Calif.). “I am optimistic that we are going to get key provisions over the finish line.”

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A ground crew worker directs a Delta Air Lines plane departing from New York’s LaGuardia Airport on Aug. 2, 2021. Delta is among airlines supporting incentives to use sustainable jet fuel.

Sustainable aviation fuels have a lower carbon footprint than jet fuel and are intended to reduce airplane emissions. Demand is likely to jump to 3.6 billion gallons annually by 2030, or 3% of global jet fuel, up from less than 0.1% in 2019, according to a June BloombergNEF report. But policy initiatives could push that statistic to 5.6% in a decade, the report said.

While the airline and sustainable fuel industries back tax credits, analysts question how effective some of the options are.

“It’s a really broad category,” Nikita Pavlenko, a senior researcher at the International Council on Clean Transportation, said. “Despite the name, not all of them are necessarily sustainable. Some of them can be near or zero carbon, some of them can actually be higher emitting than the petroleum that they displace to begin with.”

Tax Credits, Grants

Lawmakers have introduced legislation that would create a tax credit starting at $1.50 per gallon for blenders that supply sustainable aviation fuel with a 50% or greater reduction in greenhouse gas emissions compared with standard jet fuel.

Sustainable fuel producers include World Energy, which develops low carbon fuel, and Neste Oyj, which produces renewable diesel and sustainable aviation fuel refined from waste and residues. Gevo Inc. makes a renewable drop-in jet fuel from a range of non-petroleum biomass sources, and LanzaJet Inc. develops sustainable fuel by mixing a waste-based ethanol product with regular jet fuel.

Brownley wants the reconciliation bill to include a blender’s tax credit, similar to the one in H.R. 3440, which she co-sponsored with Democratic Reps. Brad Schneider (Ill.) and Dan Kildee (Mich.). Brownley is also urging the inclusion of infrastructure grants that are part of her Sustainable Aviation Fuel Act (H.R. 741) and money for Federal Aviation Administration research initiatives on alternative fuels.

Sherrod Brown (D-Ohio) got provisions from his Sustainable Skies Act (S. 2263) included in a clean energy package (S. 1298) the Finance Committee advanced in May. He will continue to work to ensure it stays part of the reconciliation legislation, according to his office.

On the House side, Transportation and Infrastructure Chair Peter DeFazio (D-Ore.) wrote Democratic lawmakers Aug. 23 that “passage of a budget resolution gives House Democrats the opportunity to make sure we are not just investing in infrastructure, but also reducing carbon emissions from surface transportation, aviation and ports.”

Industry Push

Carriers in the Airlines for America trade association promised in March to work with the government to expand the production and usage of “commercially viable sustainable aviation fuel.” Most major airlines have supported the tax credit bill, with Scott Kirby, CEO of United Airlines Holdings Inc., calling it “milestone legislation” in May.

“A long-term, refundable SAF-specific blender’s tax credit would be the most impactful measure in the near term, and we call on Congress and the Administration to include it in the budget reconciliation bill,” said Carter Yang, managing director of industry communications at Airlines for America. A $1.50 to $2 per gallon credit would help provide incentives for fuel producers, Yang said.

American Airlines, which is aiming to reach net zero emissions by 2050, supports legislation that would establish a blender’s tax credit to help make sustainable aviation fuel more available and affordable, according to a spokesperson.

Delta Air Lines spokesman Drake Castañeda said his airline is “laser focused on promoting policy incentives needed to help bridge the price gap between conventional jet fuel and SAF,” as part of its goal of replacing 10% of its jet fuel with sustainable fuel by 2030.

A Neste spokesperson said policy support, particularly a long-term tax credit, is necessary to accelerate the production and usage of sustainable airplane fuel.

Given the wide range of sustainable aviation fuels currently on the market and differences in prices, the cheapest aren’t necessarily the most effective at reducing greenhouse gas emissions, so legislation would need to be specific to be most beneficial, Pavlenko said.

“When it comes to giving away hard earned public money, it’s best to ensure that it’s going to things that actually make a difference and it’s driving those technologies that actually need the public support,” he said.

To contact the reporter on this story: Lillianna Byington in Washington at lbyington@bloombergindustry.com

To contact the editors responsible for this story: Sarah Babbage at sbabbage@bgov.com; Robin Meszoly at rmeszoly@bgov.com