Saint Paul, MN — CoBank’s latest report, compiled by Lead Economist Jacqui Fatka, explores the potential of sustainable aviation fuel (SAF) as an emerging market for U.S. farmers and biofuel producers. While the SAF Grand Challenge’s target of 3 billion gallons by 2030 appears achievable, the report identifies crucial gaps in policy support, market incentives, and airline sector commitments that could hinder growth.
“In the absence of favorable policy incentives or commitments from airlines or consumers to pay higher prices for SAF, RD remains the more attractive option.”
The report emphasizes that without longer-term government incentives and additional airline offtake agreements, the shift to greater SAF production will face challenges. Currently, renewable diesel (RD) production is more profitable due to lower costs and fewer emissions requirements. “In the absence of favorable policy incentives or commitments from airlines or consumers to pay higher prices for SAF, RD remains the more attractive option,” the report notes.
According to CoBank, the anticipated release of guidance for the Inflation Reduction Act’s 45Z tax credit, also known as the Clean Fuel Production Credit, is expected to clarify potential revenue opportunities for farmers. The credit, designed to support clean transportation fuels, could encourage investment in SAF, though CoBank warns that proper auditing for climate-smart agriculture practices may limit farmer profits.
“The delay of the finalized GREET model ahead of the January 2025 start date adds further uncertainty for farmers in making input decisions,” says CoBank. Additionally, the 2024 election outcomes may affect the future of tax policy, potentially slowing implementation if federal administration changes.
“Ag retailers are positioned to serve as a trusted resource, helping farmers explore lower-carbon practices.”
CoBank also highlights the role of agricultural retailers in educating farmers on conservation practices. Retailers, backed by federal or non-governmental funding, could aid in the adoption of sustainable practices that benefit both environmental goals and profitability. “Ag retailers are positioned to serve as a trusted resource,” the report notes, “helping farmers explore lower-carbon practices and navigate emerging markets in carbon intensity.”
With potential for an estimated $427 million added to farm revenues if the SAF Grand Challenge goal is met, the report underscores the economic impact on rural communities. Still, without robust policy action and market stability, CoBank warns that adoption may lag.
