Imagine a future where aircraft no longer rely on traditional fossil fuels but soar through the skies powered by sustainable aviation fuel (SAF). This vision, once confined to science fiction, is now actively being pursued through U.S. energy policy. However, the path to this sustainable future faces significant hurdles as the newly enacted "One Beautiful and Big Bold Act" (OBBBA) reshapes the American biofuel landscape, presenting both opportunities and unprecedented challenges for SAF development.
Policy Shift: Domestic Focus and Agricultural Support
The OBBBA legislation continues federal support for sustainable aviation fuels but introduces notable changes in policy priorities, with increased emphasis on domestic biofuel production and agricultural support:
- Extended but Restricted 45Z Clean Fuel Production Credit: The two-year extension of the 45Z tax credit through 2029 provides crucial financial support for biofuel producers. However, new restrictions requiring feedstocks to originate solely from the U.S., Canada, or Mexico create significant challenges. Key SAF and renewable diesel (RD) feedstocks like used cooking oil often come from international sources, and these limitations may increase production costs and reduce industry competitiveness.
- Reduced SAF Tax Incentives: The legislation cuts the SAF credit from $1.75 to $1.00 per gallon, diminishing its competitive advantage against renewable diesel. This adjustment risks diverting investment toward RD production at the expense of SAF adoption, potentially slowing progress toward aviation decarbonization.
- Indirect Land Use Change (ILUC) Exemption: By removing ILUC considerations from lifecycle emissions calculations, the bill expands eligible feedstocks but raises sustainability concerns. This departure from internationally recognized standards, including those under CORSIA, could undermine long-term environmental benefits while creating tension between economic and ecological priorities.
Hydrogen Setback: Challenges for Power-to-Liquid SAF
The OBBBA presents obstacles for hydrogen development by accelerating the phase-out of the 45V clean hydrogen production credit, moving the project commencement deadline to 2027—five years earlier than under the Inflation Reduction Act. This compressed timeline particularly impacts Power-to-Liquid (PtL) SAF projects, which require extensive hydrogen infrastructure.
Given the technical complexity of PtL projects, this policy change may delay development and weaken U.S. leadership in scaling e-fuel technologies—a critical pathway for aviation decarbonization. The move warrants reconsideration to maintain momentum in this promising sector.
Carbon Capture Opportunities: Supporting PtL Production
On a positive note, the legislation enhances support for carbon capture through increased 45Q tax credits—raising the value to $85 per ton (from $60) for carbon used in enhanced oil recovery or utilization. While limited to new facilities operational after July 4, 2025, this incentive could significantly improve PtL SAF economics by reducing input costs for synthetic fuel production.
Navigating the OBBBA Landscape
The OBBBA presents a mixed outlook for U.S. biofuel development. While maintaining support for the sector and boosting carbon capture, its feedstock restrictions, SAF credit reductions, and hydrogen policy changes create substantial challenges. Strategic responses should include:
- Expanding international partnerships to diversify sustainable feedstock supplies
- Accelerating R&D to improve SAF production efficiency and reduce costs
- Refining policy frameworks to better support emerging technologies
- Strengthening sustainability assessments to balance economic and environmental priorities
As a pivotal moment in U.S. biofuel policy, the OBBBA's implementation will significantly influence whether sustainable aviation fuels can achieve the scale needed to transform the aviation industry. Addressing these challenges while capitalizing on emerging opportunities will be essential for realizing a cleaner aviation future.