Clean Fuel Tax Credit Guidelines Delayed, Darling Ingredients Shares Decline

The Biden administration will not be able to finalize guidelines for new clean fuel production tax credits before President Joe Biden's term ends. This delay affects airlines and biofuel industries awaiting tax credits aimed at promoting sustainable aviation fuel (SAF) production. The lack of detailed guidance from the U.S. Treasury means that the program, which was set to begin on January 1, will not be active.

The tax credit is a central element of President Biden's plan to produce 3 billion gallons of SAF by 2030. The aviation sector, responsible for approximately 2.5% of global greenhouse gas emissions, is a significant focus in efforts to combat climate change.

Biofuel companies and their supporters in Congress hoped for the program's completion before President Biden's departure on January 20. A completed program was seen as a defense against a potential repeal of the 2022 Inflation Reduction Act, which initiated the tax credit program by a future administration. Ethanol producers, facing stagnant demand for ethanol as a gasoline additive, have a particular interest in SAF for market expansion.

Given the uncertain future of the tax credit, the biofuel industry is calling on lawmakers to extend the existing blender tax credits, which are set to expire at year-end. Interviews with industry executives reveal that this is a strategy to manage the current uncertainty.

Reports indicate that the delay in SAF guidelines stems from disagreements between agricultural lobbyists and environmentalists over ensuring the program meets climate goals. While the Department of Agriculture is expected to provide some guidance on climate-friendly agricultural techniques for accessing the credit, critical components such as life cycle analysis will remain incomplete. This situation leaves the industry without a clear path to utilize the credits.

Following the report of the delay, shares of Valero Energy and its renewable diesel initiative partner, Darling Ingredients, fell by as much as 6.6%. The White House has not yet responded to requests for comment on the matter.