Biden administration will not finalize clean fuel tax credit guidance

Biden administration officials will not finalize highly anticipated guidelines on new clean fuel production tax credits aimed at the airline and biofuel industries before they leave in January, three sources told Reuters, casting doubt on the future of a key piece of the U.S. president’s climate agenda.

The tax credit, the engine behind President Joe Biden’s ambitious plan to generate 3 billion gallons in production of sustainable aviation fuels by 2030, was due to become effective Jan. 1, but a lack of detailed guidance from the U.S. Treasury would render the program dormant. Air travel contributes around 2.5 per cent of global greenhouse gas emissions, making it a big target in the fight against climate change.

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The Treasury Department on Tuesday reiterated its previous commitments, saying the agency anticipates issuing guidance before Jan. 20 that will enable producers to access the credit in 2025.

Biofuel companies and their legislative backers were hoping to have a finalized program in place before Biden departs the White House on Jan. 20. They said they believed a complete program would provide some protection against President-elect Donald Trump’s vow to repeal Biden’s 2022 Inflation Reduction Act, which launched the program.

Ethanol producers in particular are hoping sustainable aviation fuels will provide market growth, amid stagnant demand for the corn-based fuel as a gasoline additive.

U.S. Senator Chuck Grassley said delaying the guidance would be disruptive to the biofuels industry and vowed a different approach to Farm Belt politics once Republicans take over next year.

“The Biden admin’s climate agenda has prioritized pet projects for coastal elites & left middle America behind at every turn That ends when Republicans take power next yr,” Grassley said on the X platform.

The biofuel industry is now pushing lawmakers to extend existing blender tax credits that were set to expire at the end of the year to deal with the uncertainty, according to multiple interviews with industry executives.

The White House, which is overseeing a broad effort to finalize a list of unfinished climate rules, did not respond to requests for comment.

The delay in establishing guidelines for sustainable aviation fuels is due to policy debates between agriculture lobbyists and environmentalists over how to ensure the program can achieve its climate targets, Reuters has previously reported.

The Department of Agriculture is expected to issue guidance on what farming techniques qualify for the credit, but other key items such as a life cycle analysis that are necessary to determine the value of the credit will remain unfinished, the sources said.