Tax Credits on Sustainable Airline Fuel Part of Latest Bill Passage

The United States Senate passed the Inflation Reduction Act over the weekend. The $430 billion bill could be one of the most significant climate-centric bills ever proposed and it’s particularly advantageous for aviation.

The bill covers significant ground in attempting to address climate change, rising healthcare costs and reducing the national deficit.

The bill heavily incentivizes the research, development, and production of sustainable aviation fuel (SAF), including a tax credit of up to $1.75 per gallon for airlines that continue to switch over to SAF.

It’s part of an overall plan by the Biden administration to lower airline emissions by 20 percent over the next eight years.

Many airlines, including the largest domestic carriers such as American, United and Delta, have been proactive in finding ways to reduce their carbon footprint. The Washington Post called it a “less-noticed-but-significant provision that extends tax credits for biodiesel, and includes incentives for sustainable aviation fuel to reduce the airline industry’s emissions.”

Naturally, this being politics, nothing came easy. The vote was split along party lines and needed a tie-breaking vote by Vice President Kamala Harris to ensure its passage.

Moreover, it has left a bad taste in the mouths of traditional fuel retailers. According to Reuters, U.S. fuel retailers lobbied the administration hard prior to the bill being passed to remove the tax credit incentive being offered to green fuel alternative suppliers. Opponents of the bill said SAF is more carbon-intense and less efficient.

“SAF cannot compete with other renewable fuels on an environmental basis,” David Fialkov, executive vice president of government affairs at NATSO, told Reuters.