Corn growers looking for premiums must adopt cover crops, minimum-till and nitrogen efficiency practices to qualify.
June 12, 2024
Sustainable Aviation Fuel is the best hope for decarbonizing a sector of U.S. transport that accounts for 11% of all transportation-related GHG emissions. Farmers who grow crops for Sustainable Aviation Fuel tax credits may be eligible for premiums if they can lower their carbon intensity scores through climate-smart ag practices that include cover crops, minimum/no-till and nitrogen efficiency practices.
Ethanol plants – and the farmers who supply feedstocks – hope to cash in on new demand for SAF. But it won’t be a simple, straightforward process.
In theory, SAF begins with farmers who lower their CI scores so the feedstock they deliver to the ethanol plant can receive a lower CI score and substantial government tax credits. The ethanol must go through further refining to become SAF, and it’s not a simple or cheap process. The feedstock makes up about half of an ethanol plant’s CI score.
This spring the U.S. Department of Treasury and Internal Revenue Service released the U.S. Department of Energy’s Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model 40B, which regulates this process through the end of the year. The 45Z model and tax credit will apply starting January 2025.
Explainer: What is a carbon intensity score?
The regulations include a big red flag: To participate with corn, producers must implement all three of the climate-smart practices listed above. Soy does not have the nitrogen component.
“Early analysis says there’s not enough bushels out there to use corn as a feedstock,” says Mike Estadt Ohio State University Extension educator. “Corn would have to be raised with no-till, cover crops and some type of enhanced nitrogen fertilizer.
“I got news for you: That is a unicorn in Ohio. There are not enough acres doing both no-till and cover crops, especially because cover crops are sometimes hard to get seeded and established in the fall because of labor and weather.”
And, what if a producer implements all those practices only to see a yield drag, which then lowers their CI score? Higher yields spread emissions over more bushels, which lead to lower scores.
“With same production practices, one farmer could get adequate rain and high yields, but then another might be dry and produce low yields, which would inherently increase his CI score based on the bushels produced,” Estadt says. “There’s not enough money in this right now for producers to take the risk of no-till and cover crops in corn right now. You don’t turn the switch overnight and keep the same yields.”
5 considerations before you jump into a carbon project
For Ohio growers, using soy as an ethanol feedstock has the least amount of hurdles, Estadt notes.
‘Unreasonable requirements’
“The updated model creates unreasonable requirements for corn farmers that don’t account for the diversity of growing conditions farmers face across Michigan and the U.S.,” says Jim Zook, executive director of the Michigan Corn Growers and Corn Marketing Program of Michigan. “These new changes will block farmers from accessing the emerging sustainable aviation fuel market, which is a critical new market for ensuring the long-term sustainability of corn farming. It will ultimately limit the availability of cleaner aviation fuel, which is a key piece in our fight to reduce greenhouse gas emissions.”
“These new changes will block farmers from accessing the emerging sustainable aviation fuel market, a critical new market for ensuring the long-term sustainability of corn farming,” says Jim Zook, executive director of the Michigan Corn Growers Association. Photo: Corn Marketing Board of Michigan
In addition, the logistics of segregating grain grown based on prescribed practices make it unfeasible, he says, for most storage sites or transportation models.
“If the administration is serious about decarbonizing transportation fuels, they should not be limiting access to the fuel market by creating arbitrary standards for fuel sources,” Zook says. “When the government picks winners and losers instead of focusing on the science, the outcome will be limited availability of cleaner jet fuel – which amounts to a loss for farmers and consumers.”
Converting to all three of those climate-smart practices takes time, conversations and a learning curve. Even then certain farms are just not suited for no-till, or it’s difficult or impossible to get a cover crop in, Zook argues.
Zook also believes the new model “inaccurately shows an increase to the overall carbon intensity score of corn,” he adds.
Here are other headwinds that must be addressed:
Ethanol plants are not eligible for even a portion of the tax credits until they can cut their CI scores in half compared to petroleum-based jet fuel.
Ethanol plants are also required to capture and store carbon and implement renewable energy options.
The premium, if any, going to the producer for lower CI scores is not defined.
Third-party verifiers will be required for on-farm management practices.
A new SAF production plant is estimated to cost $1 billion and takes about two years to build.
The tax credit in 40B expires in 2024 and the credits under 45Z expire in 2027.
No one is certain how the presidential election will impact future tax credits.
Brazil is currently shipping sugarcane-produced ethanol to a SAF production plant in Georgia. Sugarcane is a perennial crop that does not require tillage or many inputs; the plant uses the byproduct of the sugarcane (bagasse) for fuel, thus achieving a score well below current U.S. ethanol.
The Department of Energy wants to ramp up to 3 billion gallons of SAF production a year by 2030, or 10% of U.S. aviation fuel consumption.
Some hope the ag industry will weigh in and sway changes before the 45Z model is released. In a statement, Geoff Cooper, CEO of the Renewable Fuels Association, said, "45Z is where the rubber really meets the road. We view the 40B announcement as the starting point – not the ending point – for additional modeling improvements, further integration of individual climate-smart agriculture practices and emerging biorefinery technologies.”
Read more about:
Jennifer Kiel
Editor, Michigan Farmer and Ohio Farmer
While Jennifer is not a farmer and did not grow up on a farm, "I think you'd be hard pressed to find someone with more appreciation for the people who grow our food and fiber, live the lifestyles and practice the morals that bind many farm families," she says.
Before taking over as editor of Michigan Farmer in 2003, she served three years as the manager of communications and development for the American Farmland Trust Central Great Lakes Regional Office in Michigan and as director of communications with Michigan Agri-Business Association. Previously, she was the communications manager at Michigan Farm Bureau's state headquarters. She also lists 10 years of experience at six different daily and weekly Michigan newspapers on her impressive resume.
Jennifer lives in St. Johns with her two daughters, Elizabeth, 19, and Emily 16.
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