Thirteen years ago, Congress decided a tax credit for companies that blend biodiesel shouldn’t go to refineries that put just a drop of the alternative fuel’s main ingredient — crops, animal fat and other organic material — into petroleum.
The idea, lawmakers said, was to use the tax credit to spur development of new biofuel plants, not to subsidize petroleum plants that were already running. Congress overruled guidance from the IRS to reach that conclusion in 2008.
Now, a similar debate is brewing as the Senate takes up the Democrats’ climate and social spending bill, the “Build Back Better Act,” which passed the House last month.
The biodiesel industry is asking the Senate to tweak the legislation to clarify that refineries that “co-process” petroleum with small amounts of biofuel feedstocks shouldn’t qualify for new renewable aviation fuel tax credits, for the same reason they can’t claim the biodiesel tax credit.
“We thought Congress agreed in 2008,” said Paul Winters, a spokesman for the National Biodiesel Board, an industry group.
At issue are incentives congressional Democrats are pushing to introduce more environmentally friendly fuel in the transportation system. Biofuel supporters say using token amounts of their industry’s products misses the point of encouraging alternative fuels.
But airline companies support sustainable aviation fuels (SAF) that contain small amounts of crop-based or similar feedstocks as a way to reduce greenhouse gas emissions.
The advantage of those fuels, the companies and other supporters say, is that they can be made within existing manufacturing and supply chains — a quick way to reduce greenhouse gas emissions while industry, researchers and policymakers work on more long-term solutions.
“We believe a SAF-specific blender’s tax credit would be the most impactful measure in the near term to improve cost-competitiveness, expand supply and help establish the long-term commercial viability of SAF,” said Carter Yang, a spokesman for Airlines for America, a lobbying organization for the airlines.
“A tax credit would help build the nascent market for SAF, providing a financial incentive for companies to integrate more SAF into the fuel supply and enabling them to offer it at a price that would allow airlines to use more of it,” he added.
Petroleum groups say excluding co-processing wouldn’t make sense, given the Biden administration’s goal to boost sustainable aviation fuel to 3 billion gallons annually by 2030. California also allows co-processed petroleum as part of its low-carbon fuel standard.
