Preliminary Guidance on 45Z Tax Credit for Sustainable Aviation Fuels is Unclear on Environmental Integrity

The U.S. Department of the Treasury today issued preliminary guidance on the 45Z tax credit created by the 2022 Inflation Reduction Act, which aims to incentivize the production of clean transportation fuels, including sustainable aviation fuels (SAF).

“In creating the 45Z SAF tax credit, Congress understood that the future of the aviation industry depends on the rapid development and deployment of sustainable aviation fuels with high environmental integrity. Today’s announcement underscores just how challenging it is to deliver on this laudable objective and how imperative it is that we continue to do the hard work of getting this right. We look forward to working with relevant stakeholders – airlines, alternative fuel providers, farmers and others – to develop science-based regulatory criteria that fully and fairly rewards the production and use of high-integrity SAF in the United States."  

• Mark Brownstein, EDF’s Senior Vice President, Energy Transition 

Today’s announcement is a “notice of intent to propose regulations” for 45Z, meaning that some important details of interpreting the tax code will be left to the incoming Trump administration. The tax subsidies can be claimed beginning this year, and there are already efforts underway to extend the tax package beyond its 2027 sunset. However, in a December 19th, 2024 letter issued to the CEOs of America’s top airlines, executives from EDF, World Resources Institute and National Wildlife Federation warned that they would oppose the extension of 45Z if Treasury took a similar approach to its guidance on the 40B tax credit, which allowed pathways for low-integrity SAF to qualify for the tax subsidies that expired last year.

For more information, please visit https://www.edf.org/sustainable-aviation-fuels. 

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