Federal tax incentives for Sustainable Aviation Fuels (SAFs) have generated interest in the biofuel industry, but they fall short of covering the opportunity costs of diverting biofuels from on-road to aviation use.

Policy incentives for on-road biofuels are more substantial, and SAFs are more expensive to produce. Without significant emission reductions or expanded incentives, SAFs made from corn and soybean oil face major challenges.

In California, large carbon taxes on petroleum on-road fuels add value to biofuels, but petroleum jet fuel is exempt, potentially favoring on-road biofuels. Some propose taxing intra-California flights, but this may not boost SAF use, as fuel suppliers will seek the cheapest compliance methods, likely sticking to on-road biofuels.

Consequently, SAF adoption remains low outside California. Increased policy incentives might shift biofuel consumption to SAFs, but this would likely reduce on-road biofuel use.

The Renewable Fuel Standard (RFS) and its mandates are pivotal in national biofuel demand, and unless the EPA increases SAF mandates significantly, on-road biofuels might achieve similar emission reductions more cost-effectively due to lower processing costs.

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https://s.giannini.ucop.edu/uploads/pub/2024/06/27/v27n5_2.pdf