SAF GREET update announced – Ohio Ag Net

Tune in to the audio player as Ohio Ag Net’s Dusty Sonnenberg talks with Ohio Corn & Wheat’s Tadd Nicholson about SAF tax credits and DOE’s Argonne GREET model.

After months of waiting, the U.S. Treasury Department released a highly anticipated update to the Department of Energy’s Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model on April 30.

The Inflation Reduction Act, passed in 2022, allocates tax credits for biofuels that can demonstrate that they cut greenhouse gas emissions by 50% or more. After the law was passed, Treasury and EPA were charged with choosing a model that would measure emissions throughout the life of biofuels. Late in 2023 the decision was made to settle on the GREET model, but it needed updates.

The April 30 update provided guidance on how feedstocks like corn ethanol could qualify for sustainable aviation fuel (SAF) under the 40B tax credit of the Inflation Reduction Act (IRA). Under 40B, SAF with lifecycle greenhouse gas (GHG) emissions at least 50% cleaner than conventional jet fuel qualifies for the tax credit if sold prior to Jan. 1, 2025. The value of this credit is determined on a sliding scale, equal to $1.25 plus an additional $0.01 for each percentage point by which the lifecycle GHG emissions reduction exceeds 50%.

The new 40B GREET model announced will recognize GHG reductions from carbon capture and sequestration (CCS), renewable natural gas, and renewable power used to produce ethanol and biodiesel for qualifying SAF and include a “safe harbor” pilot program for corn ethanol produced with bundled climate-smart agriculture (CSA) practices.

Ohio corn and soybean farmers have significant concerns and frustration regarding these measures, specifically with the changes made to the GREET model, which is used to measure greenhouse gas emissions and will be a crucial mechanism in determining who receives the tax credit. Particularly troubling is the updated model requirement for farmers to bundle the use of no-till practices, enhanced efficiency fertilizers and cover crops for their grain to meet the standards now required to qualify for the tax credit.

“Sustainable aviation fuel markets should be based on meeting a carbon intensity score, not federal regulators dictating how farmers get there,” said Tadd Nicholson, executive director at Ohio Corn & Wheat. “Ohio farmers are constantly innovating, but placing arbitrary restrictions around practices that can’t be universally adopted is killing the SAF industry before it ever gets off the ground.”

On average, as little as 3% of Ohio’s cropland acres are classified as consistently using cover crops. With GREET update, the number of corn bushels that could qualify for these tax credits would be negligible.

“Ohio farmers can’t afford to be left out of this market opportunity, especially in a season of tighter margins,” said Denny Vennekotter, Putnam County farmer and president of the Ohio Corn & Wheat Growers Association. “We can grow corn that has a low carbon intensity score and should have the freedom to figure out what works best for our own farms, our climate and conditions.”

 Nationwide, cover crops can be difficult, if not impossible, to grow in dryer climates, making the bundling requirement extremely unreasonable.

“As corn growers, we already understand the environmental practices that work best for our growing conditions and climate, so it is not necessary for the government to dictate specifically how we reach an emissions reduction goal,” said Harold Wolle, president of the National Corn Growers Association. “Farmers are going to have different methods depending on a variety of factors, including where their farms are located.”

 NCGA has been at the forefront of this issue, making a case about how ethanol can help the aviation sector meet the nation’s environmental goals. But recent developments have made growers question the Biden administration’s commitment to using ethanol as a climate solution.

 “President Biden has repeatedly said that biofuels will play an important role in the decarbonization of the transportation sector,” Wolle said. “Yet, this announcement and the recently finalized Multi-Pollutant Rule issued by the EPA have left corn growers across the country grasping for ideas on just how they will be able to contribute to this effort.”

Wolle said NCGA and corn growers across the country will increase their advocacy efforts to improve the changes Treasury made to the GREET model as the Biden administration focuses on the next phase of the Inflation Reduction Act for passenger vehicles, referred to as the 45Z tax credit. The 45Z tax credit will take effect at the beginning of 2025. As part of the law, the aviation tax credit will be folded into the 45Z tax credit beginning on Jan. 1, 2025. NCGA has been concerned about the delays with the release of the sustainable aviation fuel guidance because the regulatory uncertainty is beginning to impact fuel delivery contracts already being negotiated for January of next year.

In terms of soybeans, Soybean-based SAF already qualifies for the tax credit at the $1.25 per gallon rate. EPA determined existing methodology used for the Renewable Fuel Standard Program (RFS). For soybean oil to qualify through the new pathway through this update, production of soybeans will be required to employ both no-till and cover cropping. The Ohio Soybean Association (OSA) is concerned that the new pathway has missed an opportunity for the SAF industry to reach its full potential by imposing these strict requirements. While OSA acknowledges the importance of maintaining high standards for environmental stewardship, the standards must be attainable for farmers. Many farmers in Ohio already utilize no-till and cover crops on their operations, but conditions out of farmers’ control such as weather and soil type limit fields where such practices are feasible. Additionally, the increased costs associated with such practices could pose significant economic challenges for implementation on farms throughout Ohio.

“Soybean oil is a feedstock that already reduces greenhouse gas emissions over traditional petroleum jet fuel by 50% today, even before factoring in on-farm practices like no-till and cover crops,” said Rusty Goebel, OSA president who farms soybeans in Williams County. “Our nation’s transition to SAF has to start somewhere — let that start include all soybean oil regardless of farming practices.”

Moving forward, both corn and soybean organizations are urging policymakers and industry stakeholders to collaborate with farmers to develop tax credit pathways for SAF production that are both environmentally sustainable and practical for all farmers.