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US fuel retailers are claiming that the inclusion of a tax credit for sustainable aviation fuel (SAF) in the landmark Inflation Reduction bill will shift renewable diesel feedstocks to SAF, which they claim is more carbon intensive and less efficient, Reuters reported on 8 August.

The bill – the largest climate spending package in US history – was passed by the Senate on 8 August and is expected to be approved by the Democrat-controlled House of Representatives to become law.

The bill, which includes several major provisions to support crop-based biofuels – mainly corn and soyabean oil – includes a new dedicated tax credit for SAF and an extension of the existing credit for road-based biodiesels until 2024, transitioning to a Clean Fuel Production Credit (CFPC) from 2025-2027.

The SAF tax credit of US$1.25/gallon, which could rise to US$1.75/gallon depending on the fuel’s greenhouse gas reduction level, would remain in place until 2024 and also transition to CFPC payments from 2025, according to a 29 July AgriCensus report.

The bill would prohibit the use of palm oil derivatives but first-generation feedstocks such as corn-based ethanol, corn oil and soyabean oil would be eligible for use in SAF production – unlike in Europe, which has proposed to exclude food crops in its evolving SAF mandate, the AgriCensus report said.

However, fuel retailers feared the credit would shift vegetable oil and other renewable feedstocks to aviation, leaving less for renewable diesel producers, according to the Reuters report.

The National Association of Truckstop Operators (NATSO) and fuel marketers’ association SIGMA were urging lawmakers to oppose the legislation unless it provided tax equality between the biodiesel tax credit (BTC) and the proposed SAF tax credit, the report said.

The package of climate measures in the Inflation Reduction bill was drawn up by senior Democrats in consultation with Joe Manchin, the West Virginia senator who had effectively blocked President Biden’s ‘Build Back Better’ bill since the middle of last year, AgriCensus wrote.

The bill allocates US$369bn for climate provisions and aims to reduce greenhouse gas (GHG) emissions by electrifying things that currently run on fossil fuels and generating more electricity using renewable and clean energy sources.

The bill is much smaller in scope than the ‘Build Back Better’ package but analysis by independent research firm Rhodium Group, estimates that it will reduce US GHG emissions by 31-44% below 2005 levels by 2030.