New 40B Tax Credit Guidelines Ready the Runway for SAF

Farm Practice Limitations Discourage Farmers, Must Be Addressed Moving Forward

Contact: Emma Koehler
515-252-6249

JOHNSTON, IA - Today, the United States Treasury Department announced a modified version of the Argonne National Laboratory's Greenhouse Gasses, Regulated Emissions and Energy Use in Technologies (GREET) model to verify eligibility for 40B sustainable aviation fuel (SAF) tax credits. While the Biden Administration previously announced that GREET could be used to determine the carbon intensity of SAF, today unveiled the modifications made to the standard model.

"We appreciate the Treasury Department for approving the use of the GREET model, and for USDA pushing to get farm practices included for the first time," said Iowa Renewable Fuels Association Executive Director Monte Shaw. "Those are landmark achievements that crack the door open for farmers to be rewarded for climate smart agriculture practices. Having said that, today's announcement also makes clear that a great deal of work remains to transition 40B to the new 45Z tax credit in 2025."

The Treasury Department also outlined that some on-farm practices would be recognized to reduce the carbon intensity of crop production for the first time. However, the new qualifications require "bundling" climate smart agriculture practices to become eligible for SAF credits. Three practices (cover crops, no-till farming, and enhanced efficiency fertilizer) would be required for corn and two (cover crops and no-till farming) would be required for soybeans.

"The approved bundle of farm practices won't work for many Iowa farmers, let alone farmers throughout the Midwest," stated Shaw. "Given the range of climates and soil types, farmers do not want one-size-fits-all bundles mandated from D.C. Moving forward, it is paramount that many additional farming practices be recognized on an individual basis. Further, the carbon reduction given for the bundled practices appears to be much smaller than we've seen in other voluntary carbon programs. We urge Treasury to continue to work to ensure farmers get full credit for carbon reduction practices. That is the only way to maximize farmer participation and, thereby, carbon benefits."

The Treasury Department also decreased the controversial indirect land use change (iLUC) penalty in the 40B GREET model by over 20 percent.

"While the so-called iLUC penalty was never justified in the first place, increasing yields per acre trends should be reducing the penalty each year," said Shaw. "We appreciate Treasury updating this number and hope that further reductions will be incorporated as we move forward. Every point of iLUC penalty just offsets any credit given for climate smart agriculture practices."

IRFA will continue to work with Secretary Vilsack and the interagency working group as they turn their focus to creating rules for the 45Z clean fuel production tax credit that is scheduled to go into effect on January 1, 2025.

"Once again, we thank Secretary Vilsack for his continued support in opening opportunities for farmers to become involved in the 35-billion-gallon SAF market," said Shaw. "Moving forward, we hope the transition to the 45Z tax credit in 2025 will remove the limitations of 40B and unleash the full potential of American farmers to be part of the carbon solution and the future of sustainable aviation fuel."

The Iowa Renewable Fuels Association represents the state's liquid renewable fuels industry and works to foster its growth. Iowa is the nation's leader in renewable fuels production with 42 ethanol refineries capable of producing 4.7 billion gallons annually - including 34 million gallons of annual cellulosic ethanol production capacity - and 10 biodiesel facilities with the capacity to produce 416 million gallons annually. For more information, visit the Iowa Renewable Fuels Association website at: www.IowaRFA.org.

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