NATSO, the national association representing truckstops, travel plazas, and SIGMA: America’s Leading Fuel Marketers, and representatives of the trucking and convenience store industries, urged lawmakers to extend the $1 per gallon biodiesel tax credit in the upcoming budget reconciliation package and ensure tax parity for any new credits awarded for transportation fuels that compete for the same feedstocks. The organizations specifically warned that more favorable tax treatment to other transportation fuels, such as sustainable aviation fuel (SAF), would increase diesel prices as well as carbon emissions, since SAF production is a less efficient process than renewable diesel and biodiesel production.
Any differential between the tax incentive for SAF and biodiesel or renewable diesel fuel would result in taxpayers paying more to realize less environmental benefits, the organizations said in a letter to House and Senate Leadership. The letter also was sent to the Chairmen and Ranking Members of the House Committee on Ways and Means and the Senate Finance Committee.
“We urge you to oppose policies that would result in higher costs for fewer environmental benefits,” the letter states. “This has real consequences for air quality in the communities in which many of our member-companies operate and in which many of your constituents live and work.”
“If Congress provides special tax treatment for sustainable aviation fuel, it would disrupt and eventually eliminate the market for biodiesel and renewable diesel. Diesel prices would increase, as would the cost of all goods that are moved by truck and emissions would increase.”
Renewable diesel and renewable jet fuel are key tools in decarbonizing the diesel and aviation sectors and reaching climate goals. However, both technologies utilize the same feedstocks to produce renewable fuel. If renewable jet fuel receives a higher tax benefit than renewable diesel or biodiesel, “the outcome would not be lower aggregate greenhouse gas emissions, but rather a migration of renewable fuel feedstocks away from their existing, efficient use in over-the-road trucks to a less efficient use in airplanes,” the letter states.
Recent commitments from U.S. airlines to incorporate three billion gallons of sustainable aviation fuel by 2030 and their corresponding push for a $1.50 per gallon tax credit for renewable jet fuel threaten the longstanding success of the renewable diesel market, without improving the overall emissions footprint from transportation fuel.
The associations cited a recent study that corroborates the various agricultural and economic arguments that they make. “Comparative Economic Analysis of Renewable Jet Fuel and Renewable Diesel,” conducted by LMC International on behalf of NATSO, confirms that sustainable aviation fuel offers far fewer carbon savings per gallon than renewable diesel. Renewable diesel consumption reduces greenhouse gas emissions by up to 75 percent compared with petroleum-based diesel.
The biodiesel tax credit incentivizes fuel retailers to buy and blend biofuels and has worked successfully to build a robust renewable diesel industry in the U.S. while decreasing carbon emissions associated with transportation fuel. The U.S. biodiesel and renewable diesel market has grown to approximately three billion gallons in 2020 from roughly 100 million gallons in 2005. This number will continue to grow as new renewable diesel plants are built and continue to come online.
LMC reports that producing sustainable aviation fuel is fundamentally less efficient as more feedstock and more energy input is required per gallon of fuel produced. This results in fewer carbon savings despite using the same technology and feedstocks. If Congress grants a higher tax credit for sustainable aviation fuel, ultimately a lower volume of renewable fuel would be available to displace existing fossil fuels, LMC concludes.
It is critical that limited resources are used as effectively and efficiently as possible to ensure the greatest possible gain in carbon emission reductions, the associations said in a statement. The associations urged Congress to ensure that environmental policies for fuels are grounded in a scientific assessment of the environmental benefits associated with those fuels.
“Extending the biodiesel blenders’ tax credit at a dollar amount that is at parity with the dollar level for other alternative fuels will allow the fuel retail and trucking industries to continue to provide economic and environmental benefits, while incentivizing SAF producers to continue innovating to bring their costs and processes in line with renewable diesel markets,” the statement said.