(Reuters) - President Joe Biden's administration is poised to announce an adjustment to its scientific modeling for ethanol that will show the corn-based fuel to be less effective at reducing greenhouse gas emissions than previously estimated, three sources briefed on the plans told Reuters.
The adjustment, previously unreported, will make it more difficult for ethanol producers to take part in lucrative new U.S. tax credits for so-called sustainable aviation fuel, seen as crucial to the industry’s growth, the sources said. It will still leave them a pathway to the subsidies if they can partner with corn growers that use sustainable farming practices.
The adjustment is intended to more accurately account for the environmental damage caused when land is converted into farms to grow corn, while also rewarding climate smart farming techniques like no-till farming and covered crops, said the sources, who asked not to be named because they are not authorized to speak publicly.
Politically, the plan would be a middle ground for the White House, which faces pressure from environmentalists who want the world to rely less on farms for fuel, and an ethanol industry looking to the skies for financial survival as electric vehicles threaten to kick them off roads.
Ethanol is currently mainly used as an ingredient in gasoline, the consumption of which has plateaued.
A White House spokesman told Reuters that no final decision has been made on the climate model, and that "speculation about determinations are premature."
Biden’s signature climate bill – the Inflation Reduction Act – included a $1.25 a gallon tax credit for producers of sustainable aviation fuel, or SAF, to help it compete with petroleum-based jet fuel.
The administration has a goal to supply at least 3 billion gallons of SAF per year by 2030 as part of its broader effort to decarbonize the transport sector, from close to zero now.
To qualify for the credit, producers must demonstrate their SAF has a carbon score 50% better than straight petroleum jet fuel. The tax credit gets higher for every percentage point above 50%, creating more value for cleaner technologies.
The Biden administration backed a climate model favored by the ethanol industry in December, but they promised to revamp it and release the details in March.
That has fueled an intense lobbying push by industry and environmentalists over how to quantify things like environmental damage caused by land use changes and broad basket of climate-smart agriculture.