Sustainability Takes to the Skies

Sustainability Takes to the Skies

By Ainsley Peterson

Biofuels soar even higher, literally. The markets for these cleaner, more sustainable fuels are looking towards the sky following recent Sustainable Aviation Fuel (SAF) efforts in Springfield, Illinois.

SAF is a high-priority issue and Illinois Soybean Growers (ISG) has worked diligently with elected leaders, on both sides of the aisle, to pass this initiative in pursuit of continuous expansion of opportunities for soy producers in the state.

SAF provides a cleaner, more sustainable jet fuel alternative when compared to fossil fuels. It has similar properties to conventional jet fuel but is made with renewable feedstocks, including soybeans, corn, and used cooking oil. Studies on the use of SAF blended into fossil-based jet fuel have shown that particulate matter (PM) emissions behind the aircraft at cruising altitudes are reduced by 50-97 percent compared to petroleum-based jet fuel. This reduction in emissions serves as a positive externality to those who are on flight paths and near airports as it can help reduce asthma and cancer risks.

The Illinois General Assembly bipartisanly passed a novel SAF purchaser’s credit in January which was then signed into law by Governor Pritzker on Feb. 3, 2023. SAF sold to or used by an air carrier will earn a tax credit in the amount of $1.50 per gallon of SAF purchased for use in Illinois, thus, expanding markets for more environmentally-friendly agricultural feedstocks.

In order to qualify as SAF and be eligible for credit, the purchaser must achieve at least a 50 percent lifecycle greenhouse gas emissions reduction in comparison with petroleum-based jet fuel by either using the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) or International Civil Aviation Organization (ICAO) models. To earn tax credit the purchaser must retain a certification from the producer of the aviation fuel that includes sufficient detail for the Illinois Department of Transportation to determine if the fuel meets the requirements to be considered SAF and to calculate the number of gallons of SAF sold or used.

“The $1.50 tax credit will effectively lower the price airlines pay for SAF used at airports in the state, and it is exciting that multiple industries will get to see the benefits of this legislation,” says Eva-Dina Delgado, State Representative for Illinois’ Third District.

The legislation, which will sunset on Dec. 31, 2032, also outlines some key provisions that will continue to evolve the industry throughout the bill’s lifetime. The first being on June 1, 2028, in which SAF must be derived from domestic biomass resources. Additionally, there will be a limit on the tax credit eligibility for soybean oil derived SAF. Once air common carriers collectively purchase SAF containing more than 10,000,000 gallons of soybean oil feedstock for use in the state, then no tax credit may be earned on additional gallons purchased or used.

The limit on soybean oil was a concession that agriculture made to the oil industry to keep co-processed SAF from being eligible for the tax credit. This was granted to address the concern of the Illinois Fuel and Retail Association, which represents fuel retailers. The strongly felt concern was that this new incentive would divert soybean oil away from biodiesel production which is needed to be eligible for the B20 sales tax exemption. The limit will allow soybean oil feedstocks to remain the preferred biodiesel that is used in heavy machinery, rail, long haul trucking, and marine vessels.

“This credit will create a market dynamic that further helps drive value of soybean oil in biodiesel,” says David Kubik, ISA Public Policy Manager. “Yet, it will still allow for innovation in the soybean oil to jet pathway.”

The current aviation fuel market is roughly 1.1 billion gallons in Illinois which rank the state fifth nationally for jet fuel demand. The most recent regulations allow for up to a 50 percent blend of SAF with conventional jet fuel to be used in aircrafts which equates to, potentially, a 500-million-gallon market in the state. However, Illinois’ budget will not be impacted because no single airline can claim a higher value in credits, compared to the amount in which they pay in sales taxes on aviation fuel in any given year. Moreover, the credit will encourage SAF utilization in O’Hare Airport, among others, which is the most connected and fourth largest airport, creating a large market for SAF.

The heavily negotiated legislation, which went into effect on July 1, 2023, will have positive economic and environmental impacts in Illinois and throughout the U.S., and should continue to strengthen agricultural markets. It is definitely an exciting time as sustainability takes to the skies!