The expansive climate, healthcare and tax bill passed by Senate Democrats on Sunday includes tax credits for the sale or use of sustainable aviation fuel (SAF).
Under the $740 billon Inflation Reduction Act, airlines would receive credits of between $1.25 and $1.75 per gallon for SAF purchases, depending upon how much the fuel improves upon lifecycle greenhouse gas emissions compared to standard kerosene-based jet fuel.
To qualify for the credit, the SAF purchased would have to offer an emissions reduction of at least 50%.
The tax credit would be in place through 2024 and would be intended to spur domestic SAF production. SAF currently costs about 2.4 times as much as standard jet fuel, IATA director general Willie Walsh said during the trade group's general meeting in June.
The Biden administration has set a target of 3 billion gallons of domestic SAF production annually by 2030. But hitting that target will be a heavy lift. IATA estimates that SAF accounted for just 0.1% of global jet fuel production in 2021. In 2020, U.S. companies produced just 4.5 million gallons of SAF.
However, numerous SAF refinery projects in the U.S. and around the world are in the works.
IATA projects a 50-fold increase in global SAF production by 2025.
The Inflation Reduction Act isn't law yet, but the Democrat-controlled House is widely expected to approve the measure, perhaps as soon as late this week.