Platts modifies IRA tax credit to calculate USWC SAF and RD cost of production

Platts, part of S&P Global Commodity Insights, has modified the federal tax credit for sustainable aviation fuel and renewable diesel in its US West Coast cost of production without credits, effective Jan. 2, 2025.

This change aligns with the transition under the Inflation Reduction Act. Effective Jan. 1, 2025, the blender's tax credit has been replaced by the Clean Fuel Production credit, also known as 45Z. Platts will continue to monitor further guidance on the transition of the IRA tax credit.

Renewable Diesel Tax modification

The new federal tax credit provides a maximum of $1/gal for non-SAF fuels for producers meeting prevailing wage and registered apprenticeship requirements, requiring a maximum carbon intensity of 50 kgCO2/MMBtu. The credit amount is proportional to the level of emissions reduction achieved, up to the full credit.

Platts considers CARB's Renewable Diesel Carbon Intensity of 37.01 gCO2e/MJ from Substitute Pathways for Reporting Fuels With Unknown CI for 2024.

Platts calculates the credit multiplying the lifecycle greenhouse gas emissions reduction percentage by the maximum credit price, $1/gal. Platts calculates lifecycle greenhouse gas emissions reduction percentage as a fraction, the numerator of which is the maximum carbon intensity (50 kgCO2/MMBtu) minus the RD CI of 37.01 gCO2e/MJ (or 39.05kgCO2/MMBtu) and the denominator of which is the maximum carbon intensity. The credit will be rounded to the nearest hundredth cent.

(50 – 39.05)/50 x 100 cents/gal = 21.90 cents/gal

Therefore , the total US West Coast tax RD tax credit is 21.90 cents/gal.

SAF tax credit modification

For SAF, the maximum tax credit is set at $1.75/gal for producers meeting prevailing wage and registered apprenticeship requirements, also requiring a maximum carbon intensity of 50 kgCO2/MMBtu. The credit amount will be proportional to the level of emissions reduction achieved, up to the full credit.

Taking into account Platts methodology for SAF and the CORSIA default Lifecycle Emission Values for CORSIA eligible fuels, Platts uses a beef tallow fuel feedstock with a 29.70 gCO2e/MJ lifecycle emission.

Platts calculates the credit multiplying the lifecycle greenhouse gas emissions reduction percentage by the maximum credit price, $1.75/gal. Platts calculates lifecycle greenhouse gas emissions reduction percentage as a fraction, the numerator of which is the maximum carbon intensity (50 kgCO2/MMBTU) minus the SAF CI of 29.7 gCO2e/MJ (or 31.34 kgCO2/MMBtu) and the denominator of which is the maximum carbon intensity. The credit is rounded to the nearest hundredth cent.

[(50 – 31.34)/ 50] × 175 cents/gal = 65.33 cents/gal

Therefore , the total US West Coast SAF tax credit is 65.33 cents/gal.

Platts will continue to monitor developments around the new Sustainable Aviation Fuel tax credit and acceptable models that may be used to determine the reduction in Lifecyle greenhouse gas emissions.

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