President Biden recently signed the Inflation Reduction Act of 2022 to aid in creating more sustainable aviation practices. The new tax credit will encourage those in the aviation industry to switch to sustainable aviation fuel in order to fulfill the industry’s pledge to achieve net-zero CO2 emissions. Continue reading to learn more about what the program entails.
National Business Aviation Association (NBAA) President and CEO Ed Bolen today welcomed President Biden’s signing into law of the Inflation Reduction Act of 2022, which includes an NBAA-championed blenders tax credit (BTC) for producers of sustainable aviation fuel, or SAF.
Effective Jan. 1, 2023, a $1.25 per gallon credit will be available for each gallon of SAF sold as part of a qualified fuel mixture with a demonstrated lifecycle greenhouse gas (GHG) reduction of at least 50% compared to conventional jet fuel. The stand-alone SAF tax credit increases by one cent for each percentage point by which the lifecycle GHG emissions reduction of such fuel exceeds 50 percent, up to $1.75 per gallon.
“NBAA has long advocated for this blenders tax credit as a vital step in fulfilling our industry’s pledge to achieve net-zero CO2 emissions by 2050 under the Business Aviation Commitment on Climate Change,” said Bolen. “Implementation of this credit marks genuine progress toward increasing SAF production, promoting greater availability at general aviation airports and reducing costs to end users.”
The BTC will be in effect through Dec. 31, 2024. On Jan. 1, 2025, the Clean Fuel Production Credit (CFPC) will apply to all transportation fuels, based on the level of GHG reduction performance of a fuel versus a baseline emissions factor.
Under this system, SAF will be eligible for a credit of up to $1.75 per gallon for fuels with a 100% GHG reduction, with lower credits for fuels demonstrating lower levels of GHG reduction. The CFPC would expire on Dec. 31, 2027, unless extended by Congress.
The SAF BTC was first introduced in the U.S. House of Representatives by Reps. Brad Schneider (D-10-IL), Dan Kildee (D-5-MI) and Julia Brownley (D-26-CA) in May 2021 as part of the Sustainable Skies Act. Sens. Sherrod Brown (D-OH), Reverend Raphael Warnock (D-GA), Maria Cantwell (D-WA) and Patty Murray (D-WA) championed similar legislation in the U.S. Senate.
“In addition to the Biden/Harris administration, NBAA extends our thanks to all the lawmakers who have promoted this credit and who understood its significance and its necessity,” Bolen concluded. “This legislation puts us on the path toward a truly net-zero CO2 aviation sector.”