Economic Incentives for Biomass-Based Sustainable Aviation Fuel
Madhu Khanna, C-FARE Board member and Professor at University of Illinois, Urbana-Champaign
Fahd Majeed, Postdoctoral Research Associate at the University of Illinois, Urbana-Champaign
Ruiqing Miao, Professor at Auburn University
As we consider scaling up Sustainable Aviation Fuel (SAF) to meet the SAF Grand Challenge of 35 billion gallons by 2050, it will be critical to go beyond using food crop-based feedstocks, such as corn and soybeans, to using non-food feedstocks such as crop residues and dedicated energy crops. Dedicated energy crops, such as miscanthus and switchgrass, are high-yielding perennials, have low input requirements, and can sequester large amounts of carbon in the soil, resulting in negative carbon intensity of SAF. These crops can also be produced on lower quality land and require less diversion of productive cropland from food crop production.
However, these energy crops have high costs of initial establishment, lags of 1-3 years between planting and obtaining harvestable yields, and require long-term (10-15 years) commitments of land to reap the returns over their life-span. The establishment lag implies that they would need to be planted years before the anticipated demand from a biorefinery.
This makes such energy crops more risky to produce than conventional crops, making them less attractive for farmers who are typically risk averse and more concerned about upfront costs than future returns, and may be constrained in obtaining loans to cover the upfront costs of establishment. Between switchgrass and miscanthus, we find that miscanthus is higher yielding and has greater potential for soil carbon sequestration, necessitating the conversion of fewer acres to produce the same volume of SAF. But it also has higher upfront costs and is therefore a riskier crop to produce. It is not surprising that farmers will prefer to grow switchgrass over miscanthus, resulting in lower SAF production from the same amount of land.
Policy incentives will be critical to induce farmers to produce energy crops instead of annual conventional crops. These incentives could take several forms, such as a carbon credit per unit carbon mitigated relative to (petroleum) jet fuel, a SAF tax credit that scales negatively with the carbon intensity of SAF, or a uniform payment per acre under an energy crop or per gallon of SAF. Policies that are related to the carbon intensity of SAF should account for both life-cycle emissions from producing SAF as well as the carbon sequestered in the soil. These policies will be more cost-effective than uniform payments per acre of energy crop planted, or per gallon of SAF produced.
Most importantly, however, we find that policies will need to address the upfront costs of establishing energy crops, such as miscanthus, to reduce the risks for farmers. This may require a policy that makes an upfront payment for the carbon emissions that will be sequestered or mitigated by an energy crop over its life-span.
High yielding perennial energy crops have substantial potential for producing low-carbon SAF. But the policies to induce their production must i ) be based on the carbon intensity of the specific crop and ii) address the uniquely risky nature of its production.
