Platts to modify IRA tax credit to calculate USWC SAF and RD cost of production

Platts, part of S&P Global Commodity Insights, will modify the federal tax credit for sustainable aviation fuel and renewable diesel in its US West Coast cost of production without credits, effective Jan. 2, 2025.

This change aligns with the transition under the Inflation Reduction Act. Effective Jan. 1, 2025, the blender's tax credit will be replaced by the Clean Fuel Production credit, also known as 45Z. Platts will continue to monitor further guidance on the transition of the IRA tax credit.

Renewable Diesel Tax modification

The new federal tax credit provides a maximum of $1.00/gal for non-SAF fuels for producers meeting prevailing wage and registered apprenticeship requirements, requiring a maximum carbon intensity of 50 kgCO2/MMBtu. The credit amount will be proportional to the level of emissions reduction achieved, up to the full credit.

Platts will still consider CARB's Renewable Diesel Carbon Intensity of 37.01 gCO2e/MJ from Substitute Pathways for Reporting Fuels With Unknown CI for 2024.

Platts will calculate the credit multiplying the lifecycle greenhouse gas emissions reduction percentage by the maximum credit price, $1/gal. Platts will calculate lifecycle greenhouse gas emissions reduction percentage as a fraction, the numerator of which is the maximum carbon intensity (50 kgCO2/MMBtu) minus the RD CI of 37.01 gCO2e/MJ (or 39.05kgCO2/MMBtu) and the denominator of which is the maximum carbon intensity. The credit will be rounded to the nearest hundredth cent.

(50 – 39.05)/50 x 100 cents/gal = 21.90 cents/gal

Therefore, the total RD tax credit Platts will use in its US West Coast SAF without credits prices is 21.90 cents/gal.

SAF tax credit modification

For SAF the maximum tax credit is set at $1.75/gal for producers meeting prevailing wage and registered apprenticeship requirements, also requiring a maximum carbon intensity of 50 kgCO2/MMBtu. The credit amount will be proportional to the level of emissions reduction achieved, up to the full credit.

Taking into account Platts methodology for SAF and the CORSIA default Lifecycle Emission Values for CORSIA eligible fuels, Platts will use a beef tallow fuel feedstock with a 29.70 gCO2e/MJ lifecycle emission.

Platts will calculate the credit multiplying the lifecycle greenhouse gas emissions reduction percentage by the maximum credit price, $1.75/gal. Platts will calculate lifecycle greenhouse gas emissions reduction percentage as a fraction, the numerator of which is the maximum carbon intensity (50 kgCO2/MMBTU) minus the SAF CI of 29.7 gCO2e/MJ (or 31.34 kgCO2/MMBtu) and the denominator of which is the maximum carbon intensity. The credit will be rounded to the nearest hundredth cent.

[(50 – 31.34)/ 50] × 175 cents/gal = 65.33 cents/gal

Therefore, the total SAF tax credit Platts will use in its US West Coast SAF without credits price is 65.33 cents/gal.

Platts will continue to monitor developments around the new Sustainable Aviation Fuel tax credit and acceptable models that may be used to determine the reduction in Lifecyle greenhouse gas emissions.

Please submit any feedback, comments or questions about this proposal to mrts_biofuelsandfeedstocks@spglobal.com and pricegroup@spglobal.com.

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