Sustainable Aviation Fuels Accuracy Act of 2023

The Sustainable Aviation Fuels Accuracy Act of 2023, S.1958, provides a definitive pathway for the calculation of tax credits for Sustainable Aviation Fuel (SAF). This clarity is critical for the nascent SAF industry, as it removes ambiguity regarding eligibility for the SAF tax credit established by the Inflation Reduction Act (IRA). The bill mandates the use of the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) methodology for lifecycle greenhouse gas emissions, ensuring a standardized and internationally recognized approach. This standardization directly impacts the financial viability of SAF projects and accelerates their deployment. The money trail for this legislation is direct: SAF producers will receive tax credits, making their product more competitive against traditional jet fuel. The IRA established a tax credit of $1.25 per gallon for SAF that reduces lifecycle greenhouse gas emissions by at least 50%, with an additional $0.01 per percentage point reduction above 50%, up to $1.75 per gallon. This bill clarifies how those reductions are measured, ensuring producers can confidently claim these credits. Companies like Archer-Daniels-Midland ($ADM), Renewable Energy Group ($REGI), Gevo ($Gevo), and Aemetis ($AMTX) are direct beneficiaries as they are actively involved in SAF production or feedstock supply. Major oil companies like BP ($BP), Chevron ($CVX), and ExxonMobil ($XOM) with existing biofuel operations or plans to expand into SAF will also benefit from this clear incentive structure. Airlines such as Southwest Airlines ($LUV), United Airlines ($UAL), Delta Air Lines ($DAL), and American Airlines ($AAL) will see reduced fuel costs as SAF becomes more affordable and available, helping them meet their decarbonization goals. Historically, government incentives for renewable fuels have driven significant market shifts. For example, the Renewable Fuel Standard (RFS) program, established in 2005 and expanded in 2007, created a robust market for biofuels. While not directly comparable in scale or scope, the RFS led to substantial investment in ethanol and biodiesel production. Companies like Archer-Daniels-Midland ($ADM) and Renewable Energy Group ($REGI) saw consistent growth in their biofuel segments following RFS implementation. The clarity provided by S.1958 mirrors the regulatory certainty that propelled earlier biofuel markets, indicating a similar positive trajectory for SAF producers. The IRA's SAF tax credit, without this clarifying legislation, faced uncertainty regarding its implementation, which this bill resolves. Specific winners include SAF producers and feedstock suppliers: Archer-Daniels-Midland ($ADM), Renewable Energy Group ($REGI), Gevo ($Gevo), and Aemetis ($AMTX). Airlines stand to gain from lower SAF prices and increased availability, including Southwest Airlines ($LUV), United Airlines ($UAL), Delta Air Lines ($DAL), and American Airlines ($AAL). Major oil companies with SAF ventures, such as BP ($BP), Chevron ($CVX), and ExxonMobil ($XOM), will also benefit. There are no direct losers; however, companies solely focused on traditional jet fuel production without SAF diversification may see a gradual shift in demand. This bill has been read twice and referred to the Committee on Commerce, Science, and Transportation. The next step is committee consideration, including potential hearings and markups. If it passes committee, it will move to a floor vote in the Senate. Given the bipartisan support for climate initiatives and energy independence, and the economic benefits for the aviation sector, the bill has a reasonable chance of advancing. The timeline for passage is uncertain but could occur within the current legislative session, potentially by late 2023 or early 2024.