US lawmaker floats LCFS for aviation fuel
A US lawmaker is proposing the creation of a low-carbon fuel standard (LCFS) credit trading program to help cut greenhouse gas (GHG) emissions from the country's aviation sector.
US representative Julia Brownley (D-California) has proposed legislation to create the LCFS and authorize more than $1bn in federal support for sustainable aviation fuel (SAF) projects and related research. The Sustainable Aviation Fuel Act would also establish a national goal of reduction aviation sector GHGs by 35pc by 2035 and achieving net zero emissions by 2050.
"Aviation alone contributes 9pc to US greenhouse gas emissions from the transportation sector and is therefore a critical target toward achieving our climate goals. Sustainable aviation fuel will go a long way to reducing aviation sector greenhouse gas emissions but it needs a focused federal response to make it a reality," Brownley said.
Brownley is a member of the US House of Representatives' Transportation Committee, serving on the Aviation Subcommittee. She also is a member of the House Select Committee on the Climate Crisis.
Brownley's proposal comes at a time when Democrats are mulling over a series of national climate proposals in anticipation of president-elect Joe Biden taking office next year. Biden has called for achieve net-zero emissions across the economy by 2050 and has expressed support for proposals to expand the market for SAF.
Browley's bill would direct the US Environmental Protection Agency to establish the aviation sector LCFS, which would require a 20pc reduction in the carbon intensity of aviation fuel by 2030 and 50pc by 2050.
Browley's bill would also direct the US Department of Defense to transition 10pc of its aviation fuel procurements to SAF beginning in 2024, with the caveat that the secretary of defense could opt out if no available qualifying fuel could be sourced.
The bill also calls for creating an SAF blender's tax credit to range between $1.50/USG and $1.75USG, depending on the GHG reductions achieved by a fuel. SAF that reduces emissions by at least 50pc would be eligible, with fuels that achieve 100pc reduction eligible for the full amount.
SAF still comprises a small portion of the overall aviation fuel market, but demand is expected to increase in the future as the industry pursues environmental goals and programs like California's LCFS provide incentives. The state's program, which requires reductions in the carbon intensity of on-road fuels, allows SAF to generate compliance credits.
SAF has generated just over 20,200 metric tonnes of LCFS credits, with nearly 3.5mn USG consumed in the state, since it was added to the program in 2019. Over that period, the program has generated 21.7mn credits from all fuels.
SAF supporters are looking for greater policy support to help drive demand and production.
"The rate limiting factor for growth is the total monetary value that sustainable aviation producers receive compared to those for the on-road transportation market," San Francisco International Airport sustainability and environmental policy director Erin Cooke said last week during the Argus Biofuels Live virtual conference.
The airport is one of the major hubs for SAF, with deliveries enabled by Lufthansa, Alaska Airlines, Jet Blue, American Airlines, Amazon, Neste and World Energy and a goal to replace 5pc of all fuels at the airport with SAF by 2025.
Government support is especially needed given the aviation industry's thin margins and struggles during the Covid-19 pandemic, said Robert Boyd, who leads SAF deployment initiatives at the International Air Transport Association.
Boyd said that one issue that policymakers will need to address is how what portion of sustainable fuel feedstocks should be allocated to on-road transportation versus aviation.
Renewable diesel is often co-produced with SAF in the same refining process, which forces companies to choose between the fuels. To date, the economics have largely favored renewable diesel.
"As an extremely heavy industry that requires a high density liquid fuel, we do not have the same options around electric or even the discussion around hydrogen fuel is relatively premature," Boyd said. "We are going to need a liquid fuel for a long period of time, so I personally think there is a strong argument for policy to be directing that feedstock towards the aviation sector."
Related news posts
Norwegian Cruise swings to 1Q profit
Norwegian Cruise swings to 1Q profit
New York, 1 May (Argus) — US-based cruise ship operator Norwegian Cruise Line's (NCL) swung to a profit in the first quarter on record bookings. The company posted a $69.5mn profit in the first quarter, compared with a $127.7mn loss during the same period of 2023. Revenue rose by 20pc to $2.19bn in the quarter from a year earlier as the cruise operator reported record quarterly bookings. Cruise operating expenses were up by 8pc at $1.39bn in the quarter from a year earlier. Norwegian rerouted some of its voyages that were previously expected to sail through the Red Sea. But demand from other regions offset the effect of the redeployed voyages. The company spent $197.7mn on marine fuel in the first quarter, 1pc up from $194.9mn in the first quarter of 2023. The company burned 269,000t of marine fuel and did not disclose its fuel consumption for the first quarter of 2023. It expects to burn about 245,000t in the second quarter and 995,000t for full 2024, split evenly between residual fuel oil and marine gasoil. Currently, it has hedged about 35pc of its fuel oil consumption at $395/t and 75pc of its marine gasoil consumption at $746/t for the entire 2024. Starting this year, Norwegian had been applying to the EU innovation fund with the goal of accelerating the transition of six of its vessels from being methanol ready to being fully methanol capable. Biomethanol was pegged at $2,223/t very low-sulphur fuel oil equivalent (VLSFOe) or 3.7 times the price of VLSFO average in April in the Amsterdam-Rotterdam-Antwerp bunkering hub, Argus assessments showed. Methanol was assessed at $699/t VLSFOe or 1.2 times the price of VLSFO. The company also has half of its fleet equipped with shoreside technology allowing it to use port electricity and minimize emissions during port stays. Norwegian has ordered eight new vessels for delivery from 2025-2036. Separately, its subsidiaries Oceania Cruises and Regent Seven Seas will take delivery of three new vessels from 2025-2029 and two new vessels from 2026-2029, respectively. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Derailment may interrupt SoCal renewable diesel
Derailment may interrupt SoCal renewable diesel
Houston, 1 May (Argus) — A Union Pacific train derailment in Colton, California, this week could curtail rail-delivered renewable diesel (RD) availability near Los Angeles. Up to three train cars derailed on the morning of 30 April in the Union Pacific West Colton rail yard, about 65 miles east of Los Angeles, Union Pacific said Wednesday. The cars remained upright during the incident, and cleanup was ongoing as of Wednesday morning. Renewable diesel market participants said the terminal — a hub for the product — was sold out pending the restart of deliveries, although there was no immediate price reaction in the R99 spot market. Spot differentials for rail delivered R99 in Los Angeles have ranged from 20-30¢/USG above Nymex ULSD this week. Renewable diesel deliveries by rail into PADD 5 were down in the first two months of 2024, according to Energy Information Administration data. Rail volumes totaled around 1.19mn bl in February, the lowest monthly total since May 2023 and a 10pc monthly decline after deliveries from the Midwest more than halved from January. By Jasmine Davis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
G7 coal exit goal puts focus on Germany, Japan and US
G7 coal exit goal puts focus on Germany, Japan and US
London, 1 May (Argus) — A G7 countries commitment to phase out "unabated coal power generation" by 2035 focuses attention on Germany, Japan and the US for charting a concrete coal-exit path, but provides some flexibility on timelines. The G7 commitment does not mark a departure from the previous course and provides a caveat by stating the unabated coal exit will take place by 2035 or "in a timeline consistent with keeping a limit of 1.5°C temperature rise within reach, in line with countries' net-zero pathways". The G7 countries are Italy — this year's host — Canada, France, Germany, Japan, the UK and the US. The EU is a non-enumerated member. The announcement calls for accelerating "efforts towards the phase-out of unabated coal power generation", but does not suggest policy action. It calls for reducing "as much as possible", providing room for manoeuvre to Germany, Japan and the US. Coal exports are not mentioned in the communique. Canada and the US are net coal exporters. France, which predominantly uses nuclear power in its generation mix is already scheduled to close its two remaining coal plants by the end of this year. The UK will shut its last coal-fired plant Ratcliffe in September . Italy has ended its emergency "coal maximisation plan" and has been less reliant on coal-fired generation, except in Sardinia . The country has 6GW of installed coal-fired power capacity, with state-controlled utility Enel operating 4.7GW of this. The operator said it wanted to shut all its coal-fired plants by 2027. Canada announced a coal exit by 2030 in 2016 and currently has 4.7GW of operational coal-fired capacity. In 2021-23, the country imported an average of 5.7mn t of coal each year, mainly from the US. Germany Germany has a legal obligation to shut down all its coal plants by 2038, but the country's nuclear fleet retirement in 2023, coupled with LNG shortages after Russia's invasion of Ukraine, led to an increase in coal use. Germany pushed for an informal target to phase out coal by 2030, but the grid regulator Bnetza's timeline still anticipates the last units going offline in 2038. The G7 agreement puts into questions how the country will treat its current reliance on coal as a backup fuel. The grid regulator requires "systematically relevant" coal plants to remain available as emergency power sources until the end of March 2031 . Germany generated 9.5TWh of electricity from hard-coal fired generation so far this year, according to European grid operator association Entso-E. Extending the current rate of generation, Germany's theoretical coal burn could reach about 8.8mn t. Japan Japan's operational coal capacity has increased since 2022, with over 3GW of new units connected to the grid, according to the latest analysis by Global Energy Monitor (GEM). Less than 5pc of Japan's operational coal fleet has a planned retirement year, and these comprise the oldest and least efficient plants. Coal capacity built in the last decade, following the Fukushima disaster, is unlikely to receive a retirement date without a country-wide policy that calls for a coal exit. Returning nuclear fleet capacity is curtailing any additional coal-fired generation in Japan , but it will have to build equivalent capacity to replace its 53GW of coal generation. And, according to IEA figures, Japan will only boost renewables up to 24pc until 2030. The US The US operates the third-largest coal-power generation fleet in the world, with 212GW operational capacity. Only 37pc of this capacity has a known retirement date before 2031. After 2031, the US will have to retire coal-fired capacity at a rate of 33GW/yr for four years to be able to meet the 2035 phase-out deadline. By Ashima Sharma Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US Treasury updates SAF tax credit guidelines
US Treasury updates SAF tax credit guidelines
Houston, 30 April (Argus) — The US Treasury Department released long-awaited guidance on tax credit eligibility for ethanol-derived sustainable aviation fuel (SAF) Tuesday, incorporating so-called climate-smart agricultural (CSA) practices. As part of the new guidance, the agencies comprising the SAF Interagency Working Group (IWG) are jointly releasing the 40B SAF-GREET 2024 model, which provides another methodology for SAF producers to determine lifecycle greenhouse gas (GHG) emissions rates of their production for the credit. It also incorporates a pilot program to encourage the usage of CSA practices for SAF feedstocks. In collaboration with the US Department of Agriculture (USDA), the major changes include further guidance on farming practices, including no-till farming, planting cover crops and enhanced efficiency fertilizer. The $1.25/USG 40B SAF credit applies to a qualified fuel mixture containing SAF for certain sales or uses after 31 December 2022, and before 1 January 2025. To qualify for the credit, the SAF must have a minimum lifecycle greenhouse gas emissions reduction of 50pc compared with petroleum-based jet fuel. Additionally, there is a supplemental credit of one cent for each percent that the reduction exceeds 50pc, for a maximum credit of $1.75/USG. The modified version of the Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) also incorporates new data, including updated modeling of key feedstocks and processes used in aviation fuel and indirect emissions. The modified GREET model also integrates key GHG emission reduction strategies, such as carbon capture and storage, renewable natural gas, and renewable electricity. The notice provides a safe harbor for use of the USDA Climate Smart Agriculture Pilot Program to further cut the emissions reduction percentage calculated for domestic soybean and domestic corn feedstocks and for certifying the related requirements. For corn ethanol-to-jet, the pilot provides a greenhouse gas reduction credit if a "bundle" of certain CSA practices — no-till farming, cover crop planting, and enhanced efficiency fertilizer — are used. It would also allow a greenhouse gas reduction credit for soybean-to-jet production if the soybean feedstock is produced using similar CSA practices. This is a pilot program specific to the 40B credit under the Inflation Reduction Act (IRA), which is in effect for 2023 and 2024. A new 45Z-GREET will be developed for use with the 45Z tax credit, which starts on 1 Jan 2025. Given the similar language between section 40B and section 45Z of the IRA regarding methods for determining lifecycle greenhouse gas emissions reduction percentages, it is expected that the positions taken by Treasury and the IRS related to the section 40B credit will be similar for the new clean fuel producer credit under section 45Z. Industry reaction mixed Renewable fuels groups welcome the updated pathway for ethanol-to-jet, but the groups expressed concern over the scope of the guidance. "We are encouraged that, for the first time ever, this carbon scoring framework will recognize and credit certain climate-smart agricultural practices," Renewable Fuels Association president and chief executive Geoff Cooper said. "However, RFA believes less prescription on ag practices, more flexibility, and additional low-carbon technologies and practices should be added to the modeling framework to better reflect the innovation occurring throughout the supply chain." Kailee Buller, chief executive of the National Oilseed Processors Association, also said the new guidance has shortcomings. "We are concerned the requirement to implement climate-smart ag practices simultaneously will limit this opportunity, particularly in parts of the country where it may not be possible to plant a cover crop or the cost to implement new practices is too steep," Buller said. Both groups said they would continue to work with the Biden administration to further opportunities for SAF development. By Matthew Cope and Payne Williams Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more