US regulatory clarity vital to sustain biofuels growth

Clarity from both US state and federal regulators regarding the rules and incentives for biofuels production is essential to ensure continued growth to achieve underlying carbon-reduction targets, industry stakeholders said today.

A lack of guidance for incentive programs and qualifications for 2025 and beyond is already hindering trade and investment in key US biofuels markets, panelists said today at the Argus North American Biofuels, LCFS and Carbon Summit in Monterey, California. The current biodiesel tax credit (BTC) is scheduled to give way to the Inflation Reduction Act's Clean Fuels Production Credit (CFPC) in January, while narrowed proposed targets and credit qualifications in state Low Carbon Fuel Standard (LCFS) programs has effectively left key portions of the biofuels market in a holding pattern.

Alignment and certainty between regulatory bodies on what will be incentivized and credited in the future will be an essential component of business and investment decisions in the industry, necessary to reach ambitious carbon-reduction targets within the next decade.

"The fact that we don't have clarity mid-September for a tax credit going into effect on 1 January, is really hard to believe," said Kurt Kovarik, vice president of federal affairs for Clean Fuels Alliance America. "No one knows the rules of the road with respect to 45Z."

Panelists echoed opposition to proposed California caps on crop-based renewable feedstocks that discussed on Monday at the conference during sustainable aviation fuel (SAF) discussions.

"If the goal is to remove carbon, the extent to which we can base it on science and not pick winners and losers is in everyone's interests," Kovarik said. "All you're going to end up doing is limiting the driving out of carbon."

But speakers today further warned of the potential for a duplication of efforts by parties trying to satisfy both state LCFS programs and the federal Renewable Fuel Standard program. Proposed requirements may also require an unprecedented level of collaboration between segments of the US renewables supply chain.

Those requirements could be more disruptive than the feedstock cap itself and potentially have the greatest limiting effect on fuel supply into California, said Don Gilstrap, Chevron's manager of fuels regulations.

With that goal in mind, declining carbon intensity targets are already providing the necessary incentive for producers to pivot away from crop-based renewable feedstocks, Gilstrap said.

But panelists were optimistic about rising interest in replicating LCFS-style focuses on carbon intensity — an approach they theorized would "unleash innovation" across both the finished fuels and feedstocks segments of the industry.

By Jasmine Davis