Kentucky Launches $3‑per‑Gallon SAF Credit as Congress Targets Biodiesel Relief

Context The United States is intensifying policy support for low‑carbon fuels amid rising demand for greener transportation. State and federal legislators are crafting tax incentives to spur production and use of sustainable aviation fuel (SAF) and biodiesel, two sectors that could reduce emissions from air travel and trucking.

Key Facts - Governor Andy Beshear signed a law creating a tiered tax credit for SAF that allows taxpayers to claim up to $3 per gallon. The credit becomes effective on Jan. 1, 2029 and runs through the end of 2034. - Representative Mike Carey introduced the Strengthening Economic and Energy Development Act, which would reinstate the 40A biodiesel credit at $1 per gallon and keep it in force through 2029. Taxpayers could choose the 40A credit or the newer 45Z clean‑fuel production credit. - Ethanol Producer Magazine announced six companies selected to pitch at the International Fuel Ethanol Workshop & Expo in St. Louis, scheduled for June 2‑4. The event will connect these firms with angel investors and venture capitalists, highlighting the growing interest in ethanol‑based fuels.

What It Means Kentucky’s SAF credit positions the state as a potential hub for aviation fuel innovators, offering a financial edge that could attract refineries and feedstock suppliers. The $3 per gallon incentive is among the most generous sub‑national programs and aligns with the federal 45Z credit, which rewards low‑carbon fuel production. At the federal level, Carey’s bill aims to restore a modest but significant biodiesel incentive that expired in 2022. Restoring the $1 per gallon credit would lower costs for diesel distributors and fleet operators, encouraging broader biodiesel adoption in a sector that accounts for roughly 2% of U.S. fuel consumption. The upcoming ethanol expo underscores the private‑sector response to these policy signals. By showcasing startups to investors, the event could accelerate technology that meets both the SAF and biodiesel credit criteria, creating a pipeline of projects ready to benefit from the new incentives. Together, the state and federal measures illustrate a coordinated effort to expand low‑carbon fuel markets. Watch for the USDA’s partnership with the Export‑Import Bank, which could boost agricultural feedstock supplies, and for congressional debate on the biodiesel credit as the 2029 deadline approaches.