Delay in Clean Fuel Production Tax Credit Guidelines

The Biden administration will not finalize the guidelines for the new clean fuel production tax credits before the end of President Joe Biden's term. This delay impacts the airline and biofuel industries, which were anticipating the tax credit to boost sustainable aviation fuel (SAF) production. Without detailed guidance from the U.S. Treasury, the program, set to start on January 1, will remain inactive.

Significance of the Tax Credit

The tax credit is a core component of President Biden's initiative to produce 3 billion gallons of SAF by 2030. The aviation sector, responsible for approximately 2.5% of global greenhouse gas emissions, is a key focus in the fight against climate change.

Biofuel companies, along with their Congressional supporters, had hoped for a finalized program before President Biden's departure from office on January 20. A complete program was viewed as a safeguard against the potential repeal of the 2022 Inflation Reduction Act, which initiated the tax credit program. Ethanol producers, facing stagnant demand for gasoline additives, are particularly invested in SAF for market growth.

Urging for Extensions

With the future of the tax credit hanging in the balance, the biofuel industry is urging lawmakers to extend existing blender tax credits set to expire at the year's end. Interviews with industry executives reveal this as a strategy to navigate the existing uncertainty.

Reasons for Delay

The delay in releasing SAF guidelines is attributed to disagreements between agricultural lobbyists and environmentalists over ensuring the program achieves its climate objectives. While the Department of Agriculture is expected to offer some guidance on climate-smart farming techniques to access credits, essential components like life cycle analysis will remain incomplete, leaving the industry without a clear avenue for utilizing the credits.

In light of the delay, shares of Darling Ingredients (NYSE:DAR), which has a renewable diesel venture with Valero Energy (NYSE:VLO), saw a decline of up to 6.6%. The White House has yet to comment on this issue.

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