By Jarrett Renshaw and Leah Douglas
November 1, 2023

US airlines back ethanol industry position on aviation fuel credit

WASHINGTON, Nov 1 (Reuters) - Major U.S. airlines and aviation companies joined ethanol companies to send a letter to the Biden administration on Wednesday backing a regulatory change that would make it easier for sustainable aviation fuel (SAF) made from corn-based ethanol to qualify for federal subsidies.

The Inflation Reduction Act, President Joe Biden's signature climate law, requires SAF producers to use an emissions model developed by the International Civil Aviation Organization (ICAO), or a "similar methodology", to show their fuel cuts emissions over gasoline by 50% to secure the subsidies.

Airlines including Delta (DAL.N), JetBlue (JBLU.O), and Southwest (LUV.N), and companies like GE Aerospace (GE.N) and Boeing (BA.N), said in the letter to Treasury Secretary Janet Yellen that the administration should allow the use of the Department of Energy's Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model in addition to the one developed by ICAO, echoing a request from the ethanol industry.

The ethanol industry believes the GREET model is more likely than the ICAO model to bear out the required climate benefits to secure IRA subsidies.

Environmental groups argue, however, that the GREET model underestimates ethanol's emissions, particularly those associated with clearing land to grow the crops required to make ethanol.

"With the right market signals, we can de-carbonize aviation and spur a new wave of U.S. innovation and clean energy jobs. However, modeling uncertainty today is a multiyear development problem," said the letter, which was also signed by ethanol companies including Poet and Archer-Daniels-Midland Co (ADM.N) .

The letter comes the same day Biden and his administration kick off a two-week focus on rural America, starting with a visit to Minnesota on Wednesday.

The final decision on the modeling question sits with Treasury, though the agriculture, environment and energy departments have also weighed in and the White House has stepped in to mediate, according to prior Reuters reporting.

The USDA said in September that it updating the GREET model to ensure that ethanol is eligible as an SAF feedstock.

A decision from Treasury is expected in December, according to prior Reuters reporting.