US sustainable aviation fuel (SAF) production rose to a record this year, but mounting delays for policy clarity may send volumes abroad or force producers to dial back output in 2026.
SAF output rose to an all-time high of 196mn USG through November of this year compared to 39mn USG in all of 2024, according to US Environmental Protection Agency (EPA) data. But growth next year is uncertain as the industry awaits final rules on a new biofuel tax credit, nearly a year after the US issued preliminary guidance.
The Inflation Reduction Act's 40B SAF tax credit expired after 2024, ending a minimum $1.25/USG subsidy for producers and blenders of a fuel that produces half as many emissions as petroleum jet fuel. The move this year to the 45Z tax credit for all types of domestic clean fuel production was always expected to be rocky — in part because stricter carbon intensity rules left most types of SAF with less of a tax break than in 2024 — but the market also has been hurt by delayed final rules.
The US government now expects to issue final regulations in the second quarter of 2026, though interim guidance could come sooner. Nonetheless, producers have begun selling 45Z credits at a discount to the book value of the credit. With producers looking for the market to rebound after a year of depressed margins and a drop in SAF values, this revenue stream is expected to become more common in future years but will still hinge on policy certainty.
In a similar fashion, EPA expects to finalize new biofuel blend mandates in the first quarter next year, another delayed regulatory program affecting SAF margins. While jet fuel is not obligated under the program like conventional gasoline and diesel, SAF generates a D4 RIN that is used by refiners to show compliance with the EPA's standards.
These RINs over the last five trading days were valued at about $1.08/RIN for credits with 2026 vintage. One USG of SAF generates 1.6 RIN credits, a substantial source of revenue for SAF producers and importers alike.
EPA in a June proposal signaled a significant increase in the blending mandate in the category satisfied by D4 RINs. If EPA finalizes similarly ambitious quotas, it would support D4 prices and give SAF producers a boost in offering their product at a more competitive price.
At the state level, multiple jurisdictions offer tax credits geared toward rewarding producers and airlines that increase SAF usage. The one that has made the most difference in boosting SAF demand is Illinois' $1.50/USG airline tax credit for SAF use. Minnesota has a similar policy.
Washington, Nebraska and, most recently, Arkansas have enacted incentives available to SAF producers within their states. But those states have not produced any SAF that is not co-processed with petroleum fuel and they have no facilities being commissioned, according to Argus estimates.
Uncertainty over federal policy continues to act as a roadblock for SAF producers looking to develop, finance, and bring their products to market in a timely and efficient way. The oldest tenured US producer of SAF, World Energy's facility in Torrance, California, was idled in Julyfollowing a reorganization of refining assets. Industry newcomer XCF Global's plant in Reno, Nevada, is producing only renewable diesel, not SAF as originally planned, at least through 2025, spurred by difficult market conditions and lower demand.
Given the absence of European-style SAF mandates in the US, domestic airlines are focused on meeting their minimum SAF usage goals at the lowest possible cost. Meanwhile, President Donald Trump's attacks on climate change policy has eroded industry-wide SAF demand. SAF prices reached all time lows in December, valued as low as $3.52/USG in the US west coast. But that's still a considerable premium to petroleum jet fuel, meaning uptake will be limited in the US absent new policies.
If final incentives are delayed further, and new state policies do not make up the difference, US SAF producers could have reason to send their fuel abroad. And if arbitrage opportunities fail to materialize, producers may dial back production or pivot to production of other renewable fuels.
