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THE CASE FOR SUSTAINABLE AVIATION FUEL: As Senate Democrats iron out their “Build Back Better” agenda, analysts and big players in the airline industry are rallying support for a boost in funding for sustainable aviation fuel, without which they insist the industry will be unable to begin decarbonizing in pursuit of the Biden administration’s 2050 net-zero emissions target.

SAF, created using feedstocks like cooking and plant oils, municipal waste, and waste gasses, has demonstrated up to an 80% reduction in carbon dioxide emissions as compared to its conventional jet fuel counterpart.

The major advantage is it can be “dropped in,” meaning it can be used in current aircraft fleets, giving adopters the ability to maintain scale of operations while also denting their emissions footprints. But it remains expensive.

To cheapen it, the House-passed bill includes $1 billion for an alternative fuel and low-emission aviation technology program, which would fund grants and cost-sharing agreements with companies producing SAF and other technologies.

Still more important to the industry seems to be the blender’s tax credit. As currently written, it would provide a base tax credit worth $1.25 per gallon to producers of the fuel, provided that the product reduces lifecycle carbon emissions by at least 50% compared to fossil-derived jet fuel. The credit then increases by 1 cent for each percentage point of emissions reduction over 50% the product achieves, to be capped at $1.75.

United Airlines CEO Scott Kirby, whose company just operated the first commercial flight with 100% SAF and recently arranged purchase of 1.5 billion gallons of the fuel, is out promoting the credit as supporting “certainty of investment” within the industry.

“We're not going to be able to fly big airplanes long distances on batteries, or even hydrogen, anytime in the foreseeable future,” Kirby said yesterday during an energy forum hosted by Axios. “And because of that, we need to create sustainable aviation fuel, and today that industry is tiny.”

Today, only around four and a half million gallons of SAF are available for consumption each year. Meanwhile, the Biden administration envisions enough progress on the SAF front to make three billion gallons of the fuel available to the industry in 2030.

The tax credit would move the needle and help to “cover the gap” between SAF and jet fuel, said Alexander Laska, who is transportation policy advisor for the Climate and Energy Program at Third Way.

Laska added, though, that for any policies toward that end, the emphasis must remain on ensuring that SAF products make demonstrable emissions cuts from throughout the entire process of their production.

“We need to look at the entire lifecycle of the feedstock from how it's grown and harvested, how it’s transported, how it's refined, and blended,” he said. “So when we're talking about emissions, it's important that we're talking not only about the tailpipe emissions, so to speak, but the entire life cycle.”

Clean fuels compete: SAF is not the only fossil alternative on the transportation market. Biofuels have been helping power vehicles for years, and some groups with interests in biodiesel and renewable diesel are advocating against the blender’s credit, arguing that the spending bill lacks parity for production of those products (The bill does extend the existing $1 per gallon biodiesel tax credit).

Back to the lifecycle emissions point, opponents also argue that producing SAF requires more energy and therefore is responsible for the emission of more greenhouse gasses overall. But that depends on the feedstock composition used, Laska said.

Ultimately, he added, the blender’s credit adds policy support to SAF production where biofuel already has significant support. He mentioned biodiesel being eligible for use in the Renewable Identification Number credit system, which allows refiners who are unable to meet the EPA’s Renewable Fuel Standard requirements for ethanol-gasoline blending to comply.

“They're made in very similar ways, at the same facilities with similar feedstocks, and right now biodiesel currently has additional policy support that isn't available to SAF,” Laska said. “And so, you know, a lot of these producers don't currently have a reason to produce SAF if they can produce biodiesel and get more for it.”

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writer Jeremy Beaman (@jeremywbeaman). Email for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

NOTE FROM THE EDITOR: Apologies for the double-send of yesterday’s newsletter.

EPA DELIVERS MIXED BAG WITH ETHANOL MANDATE PROPOSAL: The EPA yesterday announced a proposal to reduce total volumes of biofuels that oil refiners are required to blend into their products this year and retroactively lowered last year’s mandate, a boon to refiners. Refiners had warned that raising the requirement would lead to an increase in gas prices — the last thing the Biden administration wants at the moment.

Corn-state Republicans were particularly critical of that aspect of the proposal. Sen. Deb Fischer of Nebraska called it a “betrayal.”

The 2022 proposal marks an increase, however, which elicited criticism from refiners’ groups.

The American Fuel & Petrochemical Manufacturers said it would raise gas and diesel prices. “This proposal will make things worse for refiners and consumers alike,” the group’s president, Chet Thompson, told the Wall Street Journal.

At the same time, the increase for 2022 did not mollify farm-state Republicans, who noted that the retroactive cut for 2020 means the same could be done in the future. “What’s to stop the administration from slashing 2022 obligations down the line?” said Sen. Chuck Grassley of Iowa.

MANCHIN STILL OUTSTANDING: Sen. Joe Manchin is signaling that Democrats’ Build Back Better Act is unlikely to pass the Senate before Christmas as he withholds a commitment to vote for the spending bill, despite Majority Leader Chuck Schumer’s Dec. 25 deadline for finishing the task, the Washington Examiner’s Susan Ferrechio reports.

“There’s an awful lot there and a lot of changes to be done at a time when it’s very vulnerable in our economy,” Manchin told reporters this week.

Manchin keeps returning to his apprehension about inflation, raising doubt that the bill would improve inflation as the administration claims.

“I don't know how you control inflation when the first year of spending is going to be quite large,” he said. “And that's an awful lot more of federal dollars going into a time when we have uncertainty and inflation now at 6.2%, maybe going higher.”

What his fellow Democrats are saying: Negotiations on the bill remain ongoing, but several Democrats are indicating they’re ready to put something on the record. Sen. Mazie Hirono’s preference is, “Put it to a vote and let people know where people stand.”

It’s about the same for Majority Whip Dick Durbin: “All this speculation notwithstanding, people have to face the reality of yes or no.”

CARBON TAX ‘STILL BEING DISCUSSED’: Little that has been publicly revealed by Senate negotiators in recent weeks would indicate that a carbon tax is still viable for inclusion in the reconciliation bill. Nevertheless, Sen. John Hickenlooper isn’t writing it off yet,

“I think that if we get a price on carbon, that goes well beyond what a fee on methane would do, and that's still being discussed,” he said during the same Axios event.

OIL EXECUTIVES SAY BIDEN HASN’T ASKED FOR MORE PRODUCTION: Executives at the World Petroleum Congress in Houston yesterday rejected the Biden administration’s criticism that they have not boosted supply.

“Their first response was to call Opec and ask them to pump more oil. They have not called me,” Scott Sheffield, chief executive of Pioneer Natural Resources, told the Financial Times. 

Facing voter dissatisfaction over high gas prices, President Joe Biden has accused the industry of gouging and asked for an FTC investigation into it. And he has pressured OPEC to produce more to lower prices, while the administration maintains that doing so is consistent with a gradual transition away from fossil fuels.

RON DESANTIS RELEASES FLOODING RESPONSE PLAN: The Republican Florida governor yesterday announced $270 million in funding to support a flooding resilience plan at a press conference, during which his secretary of environmental protection Shawn Hamilton called the state “ground zero for the impacts of sea-level rise.”

Based on an outline released by the governor’s office, the plan funds modification of drainage systems, replacement of sea walls, and roadway elevation on various parts of the coast.

DeSantis resolved that the project funds wouldn’t go towards “any left-wing stuff,” a clear effort by the national GOP heavyweight to distance himself from the Democrats’ ambitious environmental priorities.

OLAF SCHOLZ SWORN IN ON PROMISE TO BOOST RENEWABLES: Olaf Scholz, sworn in as Germany's new chancellor this morning, has pledged an ambitious shift toward renewable power.

“The new government will get going on this in its first year,” Scholz told a trade union in October.

The new government has called for phasing out coal by 2030 and having at least 15 million electric cars on the road by then.

It’s a tall task, as the country already faces a power supply gap from the planned phase-out of coal and nuclear power.

The fate of Nord Stream 2 is also a major early test for Scholz. The Biden administration has indicated that the pipeline would be a target if Russia invades Ukraine. That would put Scholz in a tricky position early in his tenure. Last night, he said he felt bound by his predecessor Angela Merkel’s commitments on the pipeline but added those included the possibility of sanctions if Russia used gas “as a geopolitical weapon” against Ukraine, according to The Telegraph.

The Rundown

Bloomberg Europe’s energy crunch set to linger as power prices hit records

Reuters Australians to create 'black box' to hold world accountable for climate crisis

E&E News Hawaii endures record cold, blizzard conditions



1:30 p.m. 210 Cannon The House Select Committee on the Climate Crisis will hold a hearing entitled “Cleaner, cheaper energy: Climate investments to help families and businesses.”