American Airlines Executive Calls for Extension of SAF Tax Incentives

American Airlines’ head of regulatory and international affairs, Molly Wilkinson, has emphasized the importance of extending tax incentives for sustainable aviation fuels (SAF) to drive their commercial viability. Speaking at the Paris Air Show on June 29, 2023, Wilkinson highlighted that the current incentives, set to expire in two years, fall short in encouraging long-term investments in the sector.

What Are SAF?
SAF, also known as biofuels, offer a promising solution to reduce the aviation industry’s carbon footprint. These fuels possess properties similar to conventional jet fuel but result in significantly lower greenhouse gas (GHG) emissions. Depending on the feedstock and production methods, SAF can reduce life cycle GHG emissions by up to 80% compared to traditional jet fuel.

SAF can be derived from various sources, including waste oils, non-food crops, municipal waste, and even atmospheric carbon capture. They are designed to seamlessly integrate with existing fuel infrastructure and are compatible with modern aircraft.

The Significance of SAF
The aviation industry currently accounts for approximately 9% to 12% of U.S. transportation GHG emissions, according to the U.S. Environmental Protection Agency. With the goal of achieving net-zero emissions by 2050, the industry needs to adopt a combination of strategies such as operational efficiency improvements, technological advancements, and the use of offsets and carbon capture. SAF is estimated to contribute around 65% of the emission reduction required to reach the industry’s net-zero target by 2050. However, their current consumption is less than 1% of global jet fuel due to limited production capacity and high costs.

Challenges in SAF Deployment
One of the primary obstacles facing SAF deployment is the lack of consistent and stable policy support from the government. Wilkinson expressed concern over the imminent expiration of tax incentives for SAF production, which currently provides a $1.50 per gallon credit for blending SAF with conventional jet fuel. This uncertainty hampers SAF producers’ ability to secure long-term financing, as the incentives only cover a short period.

To overcome this challenge, Wilkinson stressed the necessity of extending the tax incentives for a minimum of 10 years, preferably making them permanent. Such an extension would create a stable market for SAF, encouraging increased research and development investment.

Another hurdle lies in the availability and sustainability of feedstocks. While the United States has sufficient biomass to produce 50 to 60 billion gallons of low-carbon biofuels annually, not all feedstock sources are equally sustainable or suitable for SAF production. Some feedstocks may compete with food crops or water supplies, and others may contribute to forest degradation or biodiversity loss. Hence, it is crucial to ensure that SAF production employs feedstocks adhering to strict sustainability criteria and avoids negative environmental and social impacts.

Benefits of SAF
In addition to reducing GHG emissions, the use of SAF offers various economic and environmental advantages:

• SAF presents new revenue opportunities for farmers who can cultivate biomass crops or supply waste materials for biofuel production.
• SAF enhances air quality and public health by reducing particulate matter and other pollutants emitted by aircraft engines.
• SAF bolsters energy security and diversification by reducing dependence on fossil fuels.
• SAF improves aircraft performance by boosting engine efficiency and reducing fuel consumption.

SAF represents a vital solution for decarbonizing the aviation industry and achieving net-zero emissions by 2050. However, challenges surrounding production capacity, cost competitiveness, and policy support must be addressed. Wilkinson’s call to extend tax incentives for SAF beyond 2025 aims to provide certainty and stability to the sector. Furthermore, collaboration among stakeholders, including airlines, fuel producers, regulators, researchers, and consumers, is crucial to scaling up SAF deployment and realizing its full potential.

Sources: AirGuide Business airguide.info, aa.com, energy.gov, iata.org, easa.europa.eu