Page 61 - Inflation-Reduction-Act-Guidebook

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Incentivizing and Supporting Development and Use of

Cleaner Transportation Fuels

Our dynamic economy depends on moving people and goods around through a variety of
transportation modes. As noted previously, the transportation sector is the largest source of
greenhouse gas emissions in the United States, and a bulk of those emissions come from light-
duty vehicles and heavy-duty freight trucks. But experts predict that emissions from the aviation
and maritime sectors will steadily increase over the coming decades without policy intervention.
In addition to improving efficiency and electrifying transportation modes, one way to reduce
emissions from this sector—and make American households less vulnerable to the price
volatility of the oil market—is to make liquid fuels cleaner and diversify their sources. The
Inflation Reduction Act includes several tax incentives and programs to increase domestic
production of clean biofuels and sustainable aviation fuels.

Funding Overview

The Inflation Reduction Act incentivizes and invests in a range of non-petroleum-based fuels for
cars, trucks, and the aviation sector. Highlights include:

• $500 million for the Higher Blend Infrastructure Incentive Program at the U.S.
Department of Agriculture (USDA), the goal of which is to increase the sale and use of
higher blends of ethanol and biodiesel. The program will provide grants to improve
infrastructure for blending, storing, distributing, and supplying biofuels, including higher
ethanol and biodiesel blends. This investment builds on the Biden Administration’s
efforts, led by USDA, to expand biofuels infrastructure to open up new market
opportunities for sustainable fuel sources and lower energy costs for American families.

• Extension of existing tax incentives for alternative fuels and creation of a new Clean
Fuel Production Credit. The Inflation Reduction Act extends existing tax incentives for
a range of alternative fuels, including biodiesel, renewable diesel, and second-generation
biodiesel, through the end of 2024. Beginning in 2025, a new emissions-based Clean Fuel
Production Credit will take effect to incentivize production of fuels with low life-cycle
greenhouse gas emissions. Producers can earn bonus credits by meeting prevailing wage
and registered apprenticeship requirements. The law also extends and modifies the
Alternative Fuel Vehicle Refueling Property Credit, which supports fueling stations in
low-income and rural areas for alternative liquid fuels as well as electric charging
stations.

• Historic incentives and support for sustainable aviation fuels. The Inflation Reduction
Act includes a Sustainable Aviation Fuel Credit to incentivize the production of
sustainable aviation fuels that result in at least 50 percent less greenhouse gas emissions
than petroleum-based jet fuel. It also includes $297 million for the Alternative Fuel and
Low-Emission Aviation Technology Program at the Federal Aviation Administration
(FAA). FAA will award grants to projects that produce, transport, blend, or store
sustainable aviation fuel or projects that develop, demonstrate, or apply low-emission

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