Tax incentives for sustainable jet fuel could soon be coming to Washington

OLYMPIA – Lawmakers are hoping to incentivize the creation of cleaner fuels for airplanes.

A bill, sponsored by Spokane Democratic Sen. Andy Billig, would give tax incentives to manufacture and purchase alternative jet fuel, which are biofuels with a lower carbon intensity than conventional jet fuels. They are often made from sustainable feedstock, such as corn or agricultural residues, and can be blended with conventional jet fuels to create a cleaner fuel for the environment.

Currently, greenhouse gases from airplanes make up about 9% to 12% of the country’s transportation emissions, according to the U.S. Environmental Protection Agency, but the aviation sector remains one of the toughest to clean, in part because of a lack of sustainable aviation fuel.

“This bill will help make the promise of a green economy a reality here in Washington by addressing climate change and creating family-waged jobs,” Billig said.

The bill would incentivize fuel producers to build alternative fuel production facilities in Washington by creating a business and operations tax rate of 0.275% for the manufacture and sale of sustainable aviation fuels. The tax incentive would go into effect July 1, 2024, but only after a facility capable of producing at least 20 million gallons of alternative jet fuel is operating in Washington. It woud be in effect for 10 years, according to the bill.

Additionally, the bill creates a business and public utilities tax credit for some sales and purchases of alternative jet fuel, if the fuel has at least 50% less carbon dioxide emissions than conventional fuel.

The credits are equivalent to one dollar for every gallon of alternative jet fuel, increasing depending on the reduction in emissions. For example, alternative fuel that is 50% cleaner than conventional fuel would generate a $1 credit. Fuel that is 51% cleaner would receive a $1.02 credit, increasing by each percent up to $2 per gallon.

The bill would also require Washington State University to continue convening the Alternative Jet Fuels Work Group to further the development of these fuels in the state.

A Senate panel approved the amended bill on Tuesday. It will now head to the Senate Ways and Means Committee for further discussion. The House version of the bill received a public hearing on Tuesday but has not yet been scheduled for a vote.

The proposal has a number of Republican co-sponsors in both the state House and Senate.

Senate Minority Leader John Braun, R-Centralia, said the bill could put Washington in a very competitive position, and it could provide early investment in this industry.

Airlines, other businesses and fuel producers hoping to open alternative fuel production in Washington are in favor of the bill, saying it could make Washington a leader in the alternative jet fuel space, which has very little production in the United States right now. Some climate advocates, however, have concerns with the bill, saying it does not do enough to address climate change.

Fuel producers, including Neste, Twelve and BP, all testified in support of the bill. They said they are hoping to bring alternative fuel production to Washington, and this bill would help them do that.

Tom Wolf, of BP, said this bill is the next logical step in the state’s approach to achieve net zero carbon neutrality worldwide.

“This will make Washington a leader by setting up a welcoming and competitive environment for alternative jet fuel,” Wolf said.

Delta Airlines and Alaska Airlines also testified in support of the bill, saying they’ve set goals to use more sustainable fuels in the next decade.

“We cannot reach that goal without sustainable aviation fuel,” Diana Birkett Rakow, of Alaska Airlines, said, adding the bill will help reduce the barriers for production in Washington.

Larry Krauter, Spokane International Airport CEO, said the airport is “uniquely positioned” to use sustainable aviation fuels once they are created in Washington. The aviation industry can, and needs, to do better to scale up sustainable jet fuels, Krauter said.

There must be a sense of urgency, he added.

On the other hand, opponents of the bill say it does not do enough to address pollution in the aerospace industry.

Ursula Euler, a Thurston County resident, told the Senate committee that the bill does not do enough to incentivize the aviation industry to develop non-polluting solutions, such as by creating zero emissions aircrafts.

“The aviation industry should be made to take responsibility for its own pollution,” Euler said.

Some testifiers also had concerns with a portion of the bill that would amend the state’s new Clean Fuel Standard, which went into effect this year.

The Clean Fuel Standard incentivizes fuel producers to make cleaner transportation fuels by setting emissions standards each year. If producers don’t meet the standard, fuel producers would have to purchase credits.

Companies that produce clean fuels can earn free credits to offset any polluted work.

Although aviation fuels are exempt from the emissions standard under the program, fuel producers can still receive those free credits in the program for producing cleaner fuels, such as sustainable aviation fuels.

A previous version of this bill would have allowed fuel producers to receive more credits than they already do under the clean fuel standard for each ton of sustainable aviation fuels that they sell.

The bill would’ve limited the number of credits they can receive as opposed to following a ratio based on data that all other fuel types follow in the clean fuel standard, said Joel Creswell at the Department of Ecology.

Both Creswell and Leah Missik, of Climate Solutions, testified in a Senate committee against that provision.

“If the Legislature were to set in statute that ratio, it would undermine the basis of the program, which is all based on data,” Creswell said.

Missik said they support incentives for sustainable aviation fuels, but not at the expense of the state’s other climate proposals, such as the clean fuel standard.

That provision of the bill has since been taken out of the Senate version, though it remains in the House version. Now that the provision is removed from the Senate version, Creswell said Ecology fully supports that version.

“We’re big fans of this idea,” he said. “We really want to decarbonize aviation, and this is a significant step in doing that.”

The legislative session ends April 23.