Last August, when Europe extended countervailing duties against China biodiesel and HVO imports, it specifically excluded SAF. Is it possible that SAF will be excluded from current existing countervailing duties against US biodiesel and HVO? Certainly, a precedent has been created. There are additional issues of RINs retirement that must be considered for US exports, but clearly, this is not insurmountable. On Jan 1, all airlines fueling in Europe will have to buy blended 2% SAF and will be required to buy at least 50% of the fuel in Europe for the return leg. This will precipitate a global race to implement SAF blending in conventional jet fuel, perhaps beyond the 2%, as the EU is planning to triple this mandate by 2030 and to reach 20% by 2035. Industry estimates that the impact of this 2% mandate in 2025 will be 1.3 million Metric Tons when you account for the ripple effects. There is no SAF mandate in the USA, but producers can earn more RINs producing SAF under the RFS, compensating for some of the much higher costs of production vs. renewable diesel. Currently, the situation on SAF under the IRA 45z provides up to $1.75/gallon production tax credit ($670/mt using SAF density) from UCO/YG/Tallow, as most airlines do not want crop-based feedstocks. Renewable diesel, depending on feedstock used to calculate carbon intensity, can reach up to $1.25/gallon producer credit or ($440/mt). Guidance on the 45z rules is still outstanding, so it is difficult to accurately assess economics, taking into account that every plant will have slightly different calculations and that foreign plants will be excluded. Despite lower renewable diesel subsidies, the costs of producing SAF vs. renewable diesel are not fully offset by the producer tax credit yet most plants could produce SAF at a negative margin of 20c/gal ($76.5/mt) without taking into account the blended production impact with RD that is more profitable especially when you include additional State incentives. Meanwhile, in Europe, the price of SAF is $2109 per metric ton or $1400/mt over the price of conventional jet fuel, but at the current mandated blend level of 2%, the price impact on airlines will still be minimal, raising blended jet fuel to $728/mt. This impact will be less than $2 cost increase per passenger on a 200-passenger flight of 6 hours. In conclusion, with most of the global HEFA production capacity now in the US, there is much scope for exports!
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