Ethanol industry gears up for new opportunities, if policies align

Refilling an car with fuel at the gas station. (Photo: iStock - Lightspruch)
Sara Wyant
Sara Wyant

Fresh from one of the best years in the industry’s history, ethanol leaders are looking to build even more momentum going into 2024. However, Renewable Fuels Association President and CEO Geoff Cooper said much of the outlook will depend on several details that the Biden administration is expected to announce in the coming months.

“Several policy decisions expected in next three to six months will shape the future course of the ethanol industry for years—and perhaps decades—to come,” Cooper said at his organization’s recent National Ethanol Conference in San Diego, California. In addition to the upcoming presidential election, he outlined several policy and regulatory questions ahead, including:

  • Will the Inflation Reduction Act’s clean energy tax credits be implemented in a way that properly recognizes the climate benefits of renewable fuels?
  • Will United States farmers and ethanol producers be allowed to fully participate in opportunities like sustainable aviation fuel?
  • Will more state and federal policymakers choose electric vehicle mandates and bans on internal combustion engines?
  • Will Congress take action to allow year-round E15 sales nationwide, or will that be left to individual states to initiate?
  • What happens with the Renewable Fuel Standard after 2025?
  • Will government officials and permitting authorities embrace the economic and environmental benefits of carbon capture, utilization and sequestration technologies?

New clues to the potential market for sustainable aviation fuel had been expected March 1 when the Biden administration was scheduled to finalize carbon intensity standards for SAF feedstocks and a new tax credit, known as Section 40B, that was created by the Inflation Reduction Act.

However, Secretary of Agriculture Tom Vilsack said March 1 the Biden administration would need several more weeks to finalize its carbon assessment of feedstocks for sustainable aviation fuel.

“We’re going to take a few more weeks, and I mean, weeks, not months, to make sure that the guidance is correct, that it acknowledges the work that’s being done in reducing greenhouse gas emissions relative to transportation fuels, and the good work that’s being done out in the field to embrace climate-smart practices,” Vilsack told attendees of Commodity Classic in Houston.

“I’m confident that at the end of the day, folks will understand and appreciate what President Biden has understood when he said in his view, 95% of sustainable aviation fuel will be connected and produced by farmers over the next 20 years.”

Cooper said investors in SAF plants are holding back funding until they see what is going to be required to qualify for the tax credits. One of the key issues to be addressed is what industry will be required to do to verify the carbon intensity of crops that would go into making SAF, said Cooper, one of several industry officials who met with Vilsack and EPA Administrator Michael Regan on the Classic trade show floor after Vilsack’s announcement.

Cooper said the industry doesn’t expect rules to require extensive tracking of commodities. “We think there are other systems that are more efficient and simpler that can be implemented and still provide that level of assurance and verification that the IRS is going to be looking for,” Cooper told reporters.

Tom Willis, who is on the board of the National Sorghum Producers and CEO of Kansas-based ethanol producer Conestoga Energy Partners, told Vilsack and Regan that the tax credits were too important to rush the final details. “If I could deliver one message to both of you, let’s get it right,” he said. “If it takes a little longer, let’s get it right.”

The Treasury Department, which is developing rules for IRA tax subsidies, announced in December that it would allow use of the Argonne National Laboratory’s GREET model for determining eligibility for the 40B credit, but with modifications that will likely take into account climate-smart farming practices. The GREET model was favored by the biofuel and airline industries.

“The modified GREET model will either help open the door for U.S. agriculture and ethanol producers to participate in the SAF market, or it will lock out the highest-volume, lowest-cost feedstocks and assure the failure of the administration’s ambitious SAF goals,” Cooper said.

Cooper said the “GREET model alone” won’t guarantee a bright future for corn ethanol in the SAF market because ethanol producers will need to shave 25-30 carbon intensity points before corn ethanol-to-jet qualifies for 40B. “But getting the model right would be a big first step” toward opening a “potentially enormous opportunity for America’s farmers and ethanol producers.”

Looking ahead, Cooper said “Lowering the carbon intensity of ethanol is the single most important thing renewable fuel producers can do to secure an even brighter future for the industry.”

Editor’s note: Sara Wyant is publisher of Agri-Pulse Communications, Inc.,