By Holland Heins, Carbon Consultant, Asset Development

During a time when federal policy uncertainty is at an all-time high and the industry continues to wait for developments on the Inflation Reduction Act (IRA) Section 45Z Clean Fuel Production Tax Credit (PTC) to be finalized, several states are taking matters into their own hands and introducing tax credits to incentivize sustainable aviation fuel (SAF) adoption.

Minnesota, Washington, Illinois, and Nebraska have all signed SAF credit bills into law, while Wisconsin, Nevada, and New York have introduced bills to do the same. Each tax credit is unique in its eligibility criteria, including minimum greenhouse gas (GHG) reduction thresholds, feedstock requirements, and compliance obligations.

SAF is not currently a regulated fuel in the Low Carbon Fuel Standard (LCFS) programs in California, Washington, and Oregon, meaning SAF may generate credits, but there is no obligation for jet fuel producers to blend SAF, making these state credits vital to increase adoption. Also, the value of LCFS credits fluctuates based on program performance, whereas tax credits offer a dependable and fixed incentive for SAF producers and blenders.

EcoEngineers continues to monitor the evolving incentive landscape for SAF within the United States (U.S.) and globally. Our latest analysis breaks down how new state-level tax credit programs compare. (Table 1)

Table 1: U.S. State Level SAF Credit Comparison

(Source: EcoEngineers)

These state credits have distinct similarities along with key differences that SAF producers should be aware of. All credit programs have a GHG reduction requirement of at least 50%; however, Washington and Nebraska offer increasing credit amounts for additional GHG reductions. Minnesota recently introduced a new bill to award additional credit value for GHG reductions exceeding 50%. The credits in Illinois and Washington do not have a yearly volume cap, which gives them the potential to greatly increase SAF demand on a national scale.

Minnesota and Nebraska have a limit on the total amount of credits that may be awarded each year, which essentially caps the eligible SAF volume to 2.1 million gallons and 0.6 million gallons, respectively. Domestic SAF consumption totaled nearly 112 million gallons in 2024, making these tax credits a significant step in the right direction, but an immense gap remains compared to the total U.S. market supply of SAF.

Figure 1 below shows a comparison between domestic SAF consumption in 2024, as referenced from the U.S. Environmental Protection Agency’s (USEPA) D4 Renewable Identification Number (RIN) generation data, and the yearly volume limitations in Minnesota and Nebraska. Minnesota recently proposed a new bill to increase the yearly cap to $7.4 million, which equates to roughly 7.4 million gallons per year (gal/yr) of SAF.

Figure 1: Domestic SAF Consumption Compared to Volume Eligible for State-Level Credit

(Source: EcoEngineers, USEPA)

Many other states are working to develop SAF credit legislation, including Wisconsin, New York, and Nevada. In an effort to boost local jobs and economies, credits in Nevada and Wisconsin may only be available for in-state producers. New York’s bill is specifically geared toward increasing the adoption of domestically grown soybean oil and corn oil-derived SAF. The SAF credit market is rapidly evolving, shining a positive light on the future of SAF production within the U.S. EcoEngineers expects other states to follow suit as the aviation industry strives to achieve emissions reductions.

Contact EcoEngineers to determine if your SAF is eligible for current state credits or to learn how it aligns with current Canadian, European Union (EU), and United Kingdom (UK) regulations. EcoEngineers provides detailed analyses and scenario-based forecasts for all North American SAF credits and incentives, including SAF-use incentives and mandates in the UK and the EU.

About the Expert

Holland Heins is a Carbon Consultant on the Asset Development team at EcoEngineers, where she helps clients navigate low-carbon fuel policies and incentive programs and develop their renewable energy and carbon dioxide removal projects. With a focus on renewable diesel and SAF, she provides in-depth regulatory analysis and strategic guidance to support decarbonization goals across North America and the rest of the world.

For more information about how EcoEngineers can help you navigate the SAF and RD markets, contact: Holland Heins, Carbon Consultant, Asset Development | hheins@ecoengineers.us

About EcoEngineers

EcoEngineers, an LRQA company, is a consulting, auditing, and advisory firm exclusively focused on the energy transition and decarbonization. From innovation to impact, EcoEngineers helps its clients navigate the disruption caused by carbon emissions and climate change. Its team of engineers, scientists, auditors, consultants, and researchers live and work at the intersection of low-carbon fuel policy, innovative technologies, and the carbon marketplace. For more information, visit www.ecoengineers.us.