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Info Released on CSA Pilot Program for Corn, Soybeans to Qualify for SAF Credits
Farmers can’t claim any carbon credits on crops sold to SAF producers | More modifications possible


The U.S. Treasury and IRS on April 30 updated SAF tax credit guidance and released a new 40BSAF-GREET model to enhance carbon reduction and support climate-smart agriculture. The Treasury (link) and IRS issued updated guidance (link) on the Sustainable Aviation Fuel (SAF) tax credit, aligning with the Inflation Reduction Act's goal to boost SAF production by providing incentives based on lifecycle greenhouse gas (GHG) reductions. This guidance includes the release of the now called 40BSAF-GREET 2024 model, designed to calculate these GHG reductions more accurately, incorporating new data and methodologies including climate-smart agricultural practices for soybeans and corn as a feedstock for SAF. GREET stands for Greenhouse gases, Regulated Emissions, and Energy use in Technologies.

     EPA's new model is designed to address previously identified shortcomings in the R&D GREET model, particularly in how it calculated lifecycle greenhouse gas emissions. The lifecycle approach accounts for all emissions from the initial production stages through to the final use of the fuel.

     Similarity to CORSIA methodology. The Treasury Department notes that the methodology used by the new 40BSAF-GREET 2024 model is like that of the CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) methodology. CORSIA also evaluates the full fuel lifecycle, which includes all stages from the production of feedstock to the end use of the finished fuel.

     Both these methodologies aim to provide a comprehensive assessment of the environmental impact of aviation fuels, focusing on reducing greenhouse gas emissions throughout the entire lifecycle of the fuel. This is crucial for developing effective strategies and regulations for mitigating the aviation industry's impact on climate change.

     The SAF tax credit provides a base of $1.25 per gallon for SAF that achieves at least a 50% reduction in GHG emissions compared to traditional jet fuels, with additional incentives for greater reductions, capped at $1.75 per gallon. This move is aimed at fostering the use of domestically produced, lower-carbon fuels and enhancing the role of U.S. agriculture in sustainable fuel production.

     Significantly, a pilot program was introduced to credit SAF production using feedstocks grown under specific climate-smart agriculture (CSA) practices, like no-till farming and cover cropping. This pilot, part of the broader strategy to decarbonize aviation fuels, represents a shift towards recognizing and rewarding agricultural practices that contribute to carbon reduction. The release from Treasury on the credit noted that the CSA practices incorporated into the USDA CSA Pilot Program "are not a part of either the 40BSAF-GREET 2024 model or any CARB program including the LCFS program. Therefore, the Treasury Department and USDA have developed additional unrelated party certification requirements for the USDA CSA Pilot Program."

     SAF production requirements:

     CSA corn production practices:

  1. No-till farming.
  2. Planting cover crops.
  3. Using enhanced efficiency nitrogen fertilizer.

     CSA soybean production practices:

  1. No-till farming.
  2. Planting cover crops.

               Added nitrogen is not required for soybean production.

     USDA CSA pilot program and emissions reduction:

     Emissions reduction example:

     Regulatory alignment and definitions:

     CSA pilot program practices:

     No-till farming defined:

     Cover crop practices:

     Enhanced Efficiency Nitrogen Fertilizer (EENF) practices for corn:

     Upshot: These practices and definitions are integral to the USDA CSA Pilot Program and aim to enhance sustainability in crop production by minimizing environmental impact and improving resource efficiency.

     Record keeping requirements for farmers in the CSA pilot program:

     General records:

     Crop-specific records:

     Cover crop and fertilizer management:

     Bottom line: These record-keeping practices are crucial for ensuring accountability and verifying compliance with the sustainable practices stipulated by the CSA Pilot Program.

     SAF producer requirements:

     Contractual obligations:

     Record keeping and compliance:

     Intermediary entities:

     Documentation and forms:

     Impacts and implementation:

     CSA pilot program requirements and participation:

     Land eligibility and coverage:

     SAF production and consumption:

     Periodic tillage and soil health:

     Record-keeping requirements:

     Regulatory and financial considerations:

     Future developments and clarity:

     Industry reactions have been largely positive, highlighting the progress towards integrating farming practices into carbon scoring for biofuels. However, some critiques focus on the need for less rigid frameworks to encourage broader adoption of innovative, carbon-reducing technologies and practices in agriculture and biofuel production. There is a desire for ongoing refinement of these models to ensure they are scientifically robust and economically beneficial, paving the way for significant reductions in GHG emissions from aviation fuels and strengthening the role of American agriculture in achieving these goals.
 

Summary of CSA and its interaction with the GREET model

Specifics of the Climate Smart Agriculture (CSA) Pilot Program and its interaction with the GREET model, used for evaluating the environmental impacts of various energy technologies, including biofuels, announced Tuesday. Important points:

  • Implementation of CSA practices: Farmers participating in the CSA Pilot Program are required to adopt specific agricultural practices such as no-till farming, cover cropping, and the use of enhanced efficiency nitrogen fertilizers. These practices are necessary to produce CSA corn and no-till farming and cover cropping for soybeans since they do not use fertilizer. These are expected to qualify as feedstocks for Sustainable Aviation Fuel (SAF) production.
  • Certification and verification: The program mandates that these practices be applied across entire fields and that producers must provide certification and maintain records that can be verified by third parties. This ensures that the environmental benefits of these practices are substantial and verifiable.
  • Direct sales to SAF producers: A notable requirement is that farmers must sell directly to SAF producers rather than through traditional ethanol plants. This linkage to SAF production suggests a strategic focus on boosting the supply of lower-carbon aviation fuels, which are a key part of reducing the carbon footprint of the aviation industry.
  • Qualification requirements: Farmers have to put in place no-till, planting cover crops and using enhanced efficiency nitrogen fertilizer for CSA corn. For HEFA production of what they refer to as CSA soybeans, they have to use no-till farming and cover crops. All practices have to be used on the entire field. Producers have to provide certification of the use on the entire field. They also have to maintain records that can be verified by a third party. This raises the bar for qualification under the program, potentially limiting the number of participants but ensuring more significant environmental benefits from those who do qualify.
  • Integration with the GREET model: USDA Secretary Tom Vilsack had previously described the CSA Pilot as a “placeholder” — this suggests that while the CSA practices are not currently integrated into the GREET model, they might be in the future. This would allow for a more comprehensive assessment of their impact on greenhouse gas emissions and could influence broader policy decisions and incentives for sustainable agricultural practices.

     Links: Treasury website | SAF guidance

     Work on 45Z continues. Vilsack says an interagency working group will continue working on another tax credit included in the Inflation Reduction Act called 45z, which supports the production of low-carbon biofuels and goes into effect January 2025. He says there are a few questions that need to be answered in the next few months.  “What other commodities besides corn and soybeans ought to qualify,” he says.  “And what other practices beyond no-till, cover crop, and energy-efficient fertilizer should qualify.”