Senate Majority Leader Chuck Schumer, D-N.Y., and Sen Joe Manchin, D-W.V., on July 27 announced an agreement to add the Inflation Reduction Act of 2022 to the FY2022 Budget Reconciliation bill. The legislative package will benefit the U.S. ethanol industry, according to the Renewable Fuels Association and Growth Energy.

The legislation, in part, includes tax incentives to support biofuel production and infrastructure, as well as carbon capture and storage (CCS).

Once section of the bill aims to establish a new tax credit for sustainable aviation fuel (SAF) of between $1.25 and $1.75 per gallon, depending on the greenhouse gas (GHG) reduction of the fuel. The legislation also aims to extend several existing biofuel tax credits, including those for biodiesel, renewable diesel and second-generation biofuels. In addition, the bill aims to allocate $500 million to support biofuel infrastructure and agriculture project market expansion.

For CCS, the legislation extends the Section 45Q tax credit to any carbon capture, direct air capture or carbon utilization project that begins construction before Jan. 1, 2033. It also increases the value of the credit for industrial facilities and power plants that capture their carbon emissions to $85 per metric ton of CO2 stored in secure geologic formations, $60 per ton for the beneficial utilization of captured carbon emissions, and $60 per ton for CO2 stored in oil and gas fields. For direct air capture technologies, the credit is increased to $180 per metric ton for projects that store captured CO2 in secure geologic formations, $130 per ton for carbon utilization, and $130 per ton for CO2 stored in oil and gas fields.

The RFA said the Inflation Reduction Act will benefit the U.S. ethanol industry. “At long last, we are pleased to see the new Senate bill on climate change, which recognizes the important role renewable fuels like ethanol can play in a lower-carbon future for this nation,” said Geoff Cooper, president and CEO of the RFA. “Specifically for ethanol producers, the legislation includes provisions that provide funding for clean fuel production, higher biofuel blend infrastructure, enhanced opportunities for ethanol to play a greater role in sustainable aviation fuel, and carbon capture, utilization and storage.” 

Cooper noted that RFA members pledged last summer to reach net-zero carbon emissions by 2050 or sooner, and that remains a priority for the organization. 

“We’re committed to working with our Congressional champions on both sides of the aisle to ensure the final legislative package supports our members’ efforts to provide American families with lower-cost, lower-carbon fuels that are sourced in America’s heartland and bolster energy security,” Cooper continued. “Ethanol has a great story to tell as an important part of the rural economy, creating and supporting hundreds of thousands of jobs, while also reducing emissions and lowering costs to drivers.”

Growth Energy is also welcoming biofuel provisions included in the bill. “It’s very encouraging to see Senate negotiators continue to recognize key priorities we’ve pushed forward over the last year, including SAF, infrastructure, and other incentives aimed at maximizing the biofuel industry’s contributions to a low-carbon future,” said Emily Skor, CEO of Growth Energy. “For the U.S. to meet its climate goals, we must quickly expand the volume of low-carbon biofuels available across the entire transportation sector – on the ground, in the air, and at sea. These provisions can jump-start that climate progress, while delivering more savings at the pump, greater long-term energy security, and a welcome economic boon to rural communities.

“We know from experience that this process is far from done, and we continue to review other details of the proposal, but we look forward to continuing our work with champions in the House and Senate to ensure our priorities are reflected in any final package.”