Platts to begin using ICAO data to calculate SAF tax credit

Platts, part of S&P Global Commodity Insights, will incorporate the new federal tax credit for sustainable aviation fuel in its US West Coast SAF without credits prices, effective Jan. 3, 2023.

The new tax credit was passed under the Inflation Reduction Act and grants a federal tax credit of $1.25-$1.75/gal, depending on the greenhouse gas emissions reduction of the SAF. The new SAF tax credit replaces blenders' qualification for the existing $1/gal blender's tax credit for biodiesel and renewable diesel.

As per the announcement by The Treasury Department and Internal Revenue Service Dec. 19, Platts will use data from the International Civil Aviation Organization's publication of the CORSIA Default Life Cycle Emissions Values for CORSIA Eligible Fuels, not the data from the California Air Resources Board under the state's Low Carbon Fuel Standard as per the subscriber note published Nov. 9.

Taking into account the Platts methodology for SAF and the CORSIA default Lifecycle Emission Values for CORSIA eligible fuels, Platts will use a tallow fuel feedstock with a 22.5 gCO2e/MJ lifecycle emissions. SAF must reduce GHG emissions by at least 50% to qualify for the tax credit.

As per the calculation specified in Notice 2023-06 section 4.04 and 4.05, Platts will calculate the lifecycle greenhouse gas emissions reduction percentage by multiplying a fraction, the numerator of which is the baseline for the lifecycle greenhouse gas emissions of petroleum-based jet fuel (89 gCO2e/MJ) minus the lifecycle emissions value of tallow (22.5 gCO2e/MJ), and the denominator of which is jet baseline, by 100 percent.

[(89 – 22.5)/ 89] × 100% = 74% (The lifecycle greenhouse gas emissions reduction percentage is rounded down to the nearest whole percent)

Platts will then add $0.01/gal to $1.25/gal for every percentage point reduction above 50% up to a maximum of $1.75/gal, in line with the methodology in section 13202 of the Inflation Reduction Act.

(74-50) x 0.01 = $ 0.24 /gallon

Therefore the total SAF tax credit Platts will use in its US West Coast SAF without credits prices is $1.49/gal ($1.25/gal + $0.24/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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