Airline execs see tax credit for sustainable fuel in inflation reduction act as good first step

The Inflation Reduction Act headed to U.S. President Joseph Biden’s desk gives the nascent sustainable aviation fuel industry a long-sought after boost with new tax incentives. A definite win for those pushing to green aviation, the legislation is only half of what many say is a needed two-pronged approach to meeting the airline industry’s ambitious net-zero emissions goals. The legislation provides several incentives for sustainable aviation fuel, also known as SAF. The first is an at least $1.25 per gallon tax credit for fuels that reduce carbon emissions by 50 percent that rises by one cent per percentage point of emissions reduction to as much as $1.75 per gallon. These credits go to the companies that blend sustainable fuels with traditional jet fuel, known as Jet A, and are only applicable in 2023 and 2024. The second, which kicks in in 2025, provides sustainable fuel producers tax credits that range from, for example, $0.35 per gallon for fuel that reduces emissions by 57%, to up to $1.75 per gallon for a 100% reduction for domestically-produced fuels. The bill also includes roughly $250m for competitive grants to develop sustainable aviation fuels. “Creating a new tax credit for sustainable aviation fuel and enhancing other crucial incentives for clean energy and carbon capture will slash greenhouse gas emissions,” United Airlines CEO Scott Kirby said in a statement following the US House of Representatives approval of the Inflation Reduction Act on August 12. “That’s an important step in the right direction.” Kirby has been one of the biggest proponents of federal support for sustainable aviation fuels. In December, he flew legislators and industry leaders on a sustainable fuel demonstration flight aboard one of United’s Boeing 737s from Chicago to Washington, DC, in a very public push for Congressional action.<br/>