Sustainable aviation fuel tax credit fails the climate test

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OPINION — Aviation is one of the most difficult sectors to decarbonize. The world will need cleaner fuels, more efficient aircraft, operational improvements and eventually new technologies to reduce aviation’s climate impact.

Sustainable aviation fuel, or SAF, will likely play a role in that transition. But not every policy designed to promote SAF will deliver meaningful environmental benefits.

As California lawmakers consider a new tax credit worth up to $2 per gallon for SAF production, they should ask a simple question: Will this policy actually reduce emissions, or will it simply reward activity that would happen anyway?

Climate policy works best when incentives drive real change. When incentives primarily shift resources from one market to another without meaningfully reducing emissions, taxpayers can end up paying a high price for very little climate benefit.

That concern sits at the heart of California’s proposed SAF tax credit.

Supporters argue the credit will help accelerate aviation decarbonization by encouraging production of lower-carbon jet fuel. But independent analyses suggest the proposal may do little to expand the overall supply of low-carbon fuels.

Instead, it would largely redirect feedstocks already being used to produce renewable diesel into aviation fuel production.

In other words, California may not get more clean fuel. It may simply get different clean fuel. That distinction matters.

The state’s climate goals depend on reducing emissions across the entire transportation sector. If a subsidy merely shifts limited supplies of waste oils and other feedstocks from one fuel market to another, the environmental gains may be far smaller than advertised, or even non-existent.

Researchers at the University of California have concluded that the proposed credit would produce negligible or even non-existent emissions benefits because it would primarily reallocate existing feedstocks rather than generate substantial new supplies of low-carbon fuel.

At the same time, their analysis projects higher diesel and gasoline prices as fuel markets adjust to the new incentive structure.

Those findings should give policymakers pause.

California has no shortage of climate priorities competing for public resources. Every dollar dedicated to a tax incentive is a dollar that cannot be invested elsewhere. That makes it especially important to ensure incentives deliver measurable environmental returns.

The proposed SAF credit raises another important question: who benefits? According to public analyses of the proposal, only a very small number of companies would be positioned to claim the credit, and only one company has publicly indicated it is likely to qualify in the near term.

Yet the costs of the policy would be borne much more broadly through higher fuel prices and reduced public revenues.

That does not mean California should abandon efforts to decarbonize aviation. Quite the opposite. Aviation’s climate challenge is real, and SAF will almost certainly remain part of the solution for years to come.

But good climate policy requires more than good intentions. It requires evidence that public investments are producing meaningful emissions reductions that would not otherwise occur.

California has long been a leader in climate innovation because it has been willing to evaluate policies based on results rather than rhetoric. The same standard should apply here.

Before creating a new subsidy for sustainable aviation fuel, policymakers should demonstrate that it will significantly reduce emissions, expand the supply of truly low-carbon fuels, and provide benefits that justify its costs.

If it cannot meet that test, California should look for more effective ways to reduce aviation emissions. Climate policy should reward real progress, not simply reshuffle resources while delivering benefits to a select few.

Daniel A. Lashof, Ph.D. is a Senior Fellow at the World Resources Institute.