2025 Aviation Decarbonization Policy Deep Dive & Outlook
As the aviation industry moves toward sustainability, evolving policies are key to shaping its future. With rising emissions reporting regulations and global commitments, business aviation must actively engage in policy discussions. Staying ahead of these developments will allow the sector to navigate the regulatory landscape and strengthen its leadership in sustainability. This report outlines key 2024 policy updates, what 4AIR expects to see in 2025, and provides strategic actions for business aviation operators to remain compliant and drive progress toward a sustainable future.
US Federal Policy
2024 Recap
SAF Blenders Tax Credit (40B): In April 2024, the IRS issued guidance on the §40B SAF Blenders Tax Credit, offering producers up to $1.75 per gallon for fuels achieving lifecycle greenhouse gas (GHG) reductions under the Inflation Reduction Act (IRA). The guidance introduced the SAF40B-GREET emissions model and the climate-smart agriculture (CSA) reduction, marking the first integration of the USDA’s CSA Pilot Program into SAF policy. This development enabled Alcohol-to-Jet (ATJ) corn ethanol producers to qualify for the credit. The Blenders Tax Credit technically expired on December 31, 2024, but was replaced by the §45Z Clean Fuel Production Credit (also known as the Producer’s Tax Credit or PTC), which achieves a similar credit benefit through a slightly different mechanism.
FAA FAST Grant Awards: In August 2024, the FAA announced the allocation of $291 million in funding through the Fueling Aviation’s Sustainable Transition (FAST) discretionary grant program, funded by the 2022 Inflation Reduction Act. Spread across 36 projects, these investments aim to accelerate SAF production, adoption, and the development of low-emission aviation technologies in the US while supporting the domestic goal of achieving net zero greenhouse gas emissions by 2050 and SAF Grand Challenge goal of 3 billion SAF gallons by 2030.
2025 Outlook
Incoming Administration: With Republicans taking control of the White House in 2025, the future of the Inflation Reduction Act faces uncertainty. While former President Trump has pledged to repeal the legislation, clean energy advancements continue to offer benefits for all Americans, regardless of political affiliation. Over half of IRA funding has benefited red states, leading experts to predict targeted changes rather than a full repeal. Bipartisan support for SAF and hydrogen suggests these provisions may persist or reemerge in a different form.
Going forward, it will be crucial to emphasize the full range of SAF’s benefits, including manufacturing strength, energy independence, energy affordability, and spurring American competitiveness.
Clean Fuel Production Credit (45Z): Beginning in 2025, the §45Z Clean Fuel Production Credit (CFPC) will replace several expiring fuel-related tax credits, including the SAF Blenders Tax Credit (§40B). The transition to §45Z introduces new complexities, including the need for updated accounting guidance and an enhanced version of the Department of Energy’s GREET model to calculate GHG reductions. With the Biden Administration soon to be out of office, this guidance will fall to the incoming Trump administration, raising uncertainty about the program’s future. As currently written, the production credit is currently set to expire at the end of 2027.
Despite these uncertainties, §45Z could unlock significant benefits—supporting farmers, lowering consumer costs, enhancing energy security, and reducing emissions—if implemented effectively.
US State Policy
2024 Recap
Clean Fuel Standards (CFS): Also known as Low Carbon Fuel Standards (LCFS), these standards are market-based measures designed to reduce the carbon intensity of transportation fuels. These programs set increasingly stringent annual carbon intensity targets. Fuels that exceed the target generate deficits, while lower-carbon fuels like SAF generate credits, incentivizing the production of renewable fuels and allowing SAF to play a key role in compliance markets without penalizing conventional jet fuel.
New: In March 2024, New Mexico became the fourth U.S. state to adopt a Clean Transportation Fuel Program (CTFP). Program details are still being developed, with regulations expected by July 2026. SAF is anticipated to qualify for credits, potentially boosting local production and lowering costs.
Updates: California completed major rulemaking in November, setting new carbon intensity reduction targets and introducing caps on virgin vegetable oil-derived fuels starting in 2028. Washington and Oregon began updating their programs, with final rules expected in 2025. These updates reflect ongoing efforts to refine programs and align with the latest science, supporting the growth of SAF and other low-carbon fuels.
Nebraska SAF Tax Credit: In 2024, Nebraska introduced the SAF Tax Credit Act (SB937), which incentivizes SAF production by offering a credit against Nebraska income tax. Starting January 1, 2027, SAF producers can receive a 75-cent per gallon credit for SAF that reduces greenhouse gas emissions by at least 50%. An additional 1-cent credit per percentage point above 50% is available, capped at 50 cents per gallon. The credit is limited to $500,000 per fiscal year and will expire on January 1, 2035, with eligibility for five years. This initiative aims to support Nebraska’s ethanol and agriculture sectors. Other states with SAF tax credits include Washington, Illinois, and Minnesota.
2025 Outlook
New State Leadership: With federal incentives uncertain, states are increasingly likely to pass their own energy policies. Key developments to watch include:
Individual State Coalitions & Goals: For example, California’s new partnership with Airlines for America (A4A) and the California Air Resources Board (CARB) aims to increase SAF availability to 200 million gallons by 2035, meeting about 40% of intrastate travel demand—a tenfold increase from current levels.
State-Level CFS/LCFS Programs: Several states are exploring implementing or amending Low Carbon Fuel Standards (LCFS) to incentivize cleaner fuels like SAF. These states include Illinois (SB 1556), New York (A964/S1292), Hawaii (SB2768/HB2297), Massachusetts (S2286/H3859), Michigan (SB 275), New Jersey (S2425/A3645), and Minnesota (SF 2584/HF 2602).
SAF Tax Credits: Following Nebraska's lead with its SAF Tax Credit Act in 2024, several other states may introduce similar credits in 2025. States to watch include Kentucky, Pennsylvania, and Indiana.
European Union Policy
2024 Recap
ReFuelEU: Part of the EU’s Fit for 55 package, ReFuelEU mandates that fuel suppliers blend an increasing share of SAF at Union airports, starting with 2% SAF in 2025, rising to 6% by 2030, and 70% by 2050. It also includes synthetic fuels, with a 1.2% requirement in 2030 and 35% by 2050. Additionally, the regulation addresses fuel tankering by imposing penalties to ensure operators uplift at least 90% of their required fuel from Union airports.
Last year, key developments focused on preparation for the first 2024 reporting period due in Q1 2025. The European Commission published a list of 144 Union airports and released guidelines on exemptions and compliance. EASA created a Sustainability Portal to streamline reporting, including a voluntary SAF labelling scheme for flights. Member States began using the portal to review exemption requests, while tools like the Fuel Monitoring Tool and Reporting Template were introduced to simplify compliance.
EU ETS: In 2024, the European Commission revised and adopted the EU ETS Directive to include monitoring, reporting, and verification (MRV) of non-CO₂ aviation impacts starting in 2025. This revision involved a collaborative effort to develop the Non-CO₂ Aviation Effects Tracking System (NEATS) software, designed to collect and store the necessary data.
In 2024, the EC released a guide for airlines on MRV procedures, updated the EU ETS Monitoring Plan Template, and held webinars to assist operators. Additionally, 20 million EU Allowances (EUAs) were allocated to support operators using eligible SAF, potentially covering up to 100% of the SAF price premium until 2030.
2025 Outlook
ReFuelEU (Upcoming): Starting March 31, 2025, aircraft operators will begin reporting for the ReFuelEU program, covering data from the 2024 reporting year. Operators should check the EC’s list to ensure compliance. To optimize costs, operators should consider adjusting fuel uplift policies and explore exemptions under Article 5(3) of the Regulation. Operators exceeding 500 flights annually from Union airports will need to report and follow anti-tankering obligations. Tankering deficit penalties will be established and take effect in 2025 (not including the 2024 reporting year), so operators should prepare to assess their obligations.
EU ETS (Upcoming): From January 1, 2025, operators in the EU ETS scheme must add processes for monitoring and reporting non-CO₂ aviation effects to their EU ETS Monitoring Plans. The NEATS tool is scheduled to launch in February 2025, with a detailed guidance document. Although non-CO₂ emissions will not require compensation through emission allowances in 2025, operators will be eligible for free SAF allowances, with the EC set to issue a Delegated Act detailing the program in Q1 2025.
Other National Policy
2024 Recap
UK ETS: In November 2024, the UK government launched the Jet Zero Taskforce, a new initiative aimed at advancing sustainable aviation. Led by the UK Transport Secretary, the taskforce will work with stakeholders across the aviation sector to address environmental impacts beyond CO₂, such as contrails and other non-CO₂ effects. This may lead to future integration of non-CO₂ effects into the UK ETS. The taskforce also focuses on accelerating SAF production, supporting zero-emission flight development, enhancing aviation efficiency, and evaluating the need for greenhouse gas removal technologies.
2025 Outlook
UK SAF Mandate: Starting in 2025, the UK’s SAF Mandate requires aviation fuel suppliers to ensure that SAF makes up 2% of jet fuel supplied within the UK, increasing to 10% by 2030 and 22% by 2040. The mandate uses tradable SAF certificates awarded based on carbon reductions compared to conventional jet fuel, with a specific obligation for power-to-liquid (PtL) fuels starting in 2028. The mandate also includes buy-out prices to protect consumers from excessive costs. Unlike the EU’s ReFuelEU, the UK mandate does not impose reporting requirements on operators nor set airport size thresholds, so it applies to all UK airports.
UK Air Passenger Duty: In October 2024, the UK government introduced updated Air Passenger Duty (APD) rates for the 2026-2027 fiscal year, effective from April 1, 2026. APD rates vary by travel distance and class (see PolicyWatch for specifics). Notably, the rates for larger private jets will see a significant increase of 50%. A public consultation is open until January 2025 to potentially include more business aircraft in the Higher Rate category. These rate increases are expected to impact ticket pricing and travel patterns, with airlines and operators needing to assess the changes’ effects on their operations.
France Aviation Solidarity Tax: In 2025, France plans to significantly raise the Aviation Solidarity Tax, which applies to all passengers departing from French territory. The tax will vary by destination, class of travel, and aircraft engine type (check out PolicyWatch for specifics). These proposed adjustments are still under review but if implemented, these new rates could redefine France’s approach to aviation’s environmental and social impact, setting a precedent for the industry worldwide.
Numerous shifts and developments are expected in aviation decarbonization policy in 2025. Some policies will directly impact business aviation, with an increasing emphasis on transparency and verifiable climate claims. Operators should proactively enhance their environmental capabilities, align with their ESG teams, and embrace the reality that environmental compliance will be integral to future operations. And always stay informed through 4AIR's PolicyWatch tool and Newsletter, your go-to sources for the latest updates shaping the policy landscape for business aviation.
Sources
Biofuel groups advocate for ways to improve 45Z credit | SAF Magazine
KTIC 840 AM/98.3 FM/98.7 FM - Nebraska’s SAF Credit