CoBank sees policy challenges slowing down SAF growth

In Colorado, CoBank says goal of producing 3 billion gallons of sustainable aviation fuel (SAF) by 2030 is within reach but needs additional government and market incentives to encourage expansion. The lack of longer-term incentives from governments as well as minimal offtake agreements from the airline sector will limit SAF adoption and growth.

Potential higher costs and emission requirements act as a profitability deterrent for renewable diesel (RD) producers to shift to SAF. In the absence of favorable policy incentives or commitments from airlines or consumers in paying higher prices for SAF, a refinery would make a higher profit producing RD than SAF.

The anticipated release of guidance for the Inflation Reduction Act’s 45Z tax credit will set the stage for whether farmers and the industries that serve them can find new revenue opportunities with the expansion of the sustainable aviation fuel market. Proper auditing and accounting requirements for climate-smart agricultural practices may also limit farmer profit prospects.

The delay of the finalized GREET (Greenhouse gases, Regulated Emissions and Energy use in Technologies) model ahead of the January 2025 potential start date brings more uncertainty for farmers to make farm input and conservation decisions for their 2025 crops. The 2024 election outcomes will also impact the future of tax policy, as well as slow implementation with a change in federal government administration personnel.

Ag retailers can play a key role in educating their customers about sustainable practices that provide both environmental and economic advantages. Non-governmental organizations and foundations can dedicate dollars to directly fund agronomists at the retail level to expand adoption of agricultural conservation practices, which can also help meet lower emission goals.