Why green air travel will save US corn farmers from extinction

Some producers are betting on a nascent technology that promises to use ethanol to power planes.

For corn farmers in the United States, the rise of green jet fuel is their best hope of avoiding extinction.

With battery-powered cars expected to reduce gasoline demand by 2040, corn-ethanol producers must find new markets quickly. After all, roughly 40% of the country’s grain output is used to produce the biofuel that is blended into gasoline.

As a result, some manufacturers are betting on a new technology that promises to use ethanol to power planes.

“It’s a lifeline,” said Patrick Gruber, CEO of renewable fuels producer Gevo Inc., which is investing $850 million in a plant to produce green jet fuel from corn. “It creates an outlet for ethanol and it’s actually huge.”

The search for new uses for ethanol represents a watershed moment for an industry that has been propelled by the might of the United States government for nearly half a century. Even though its environmental credentials are questionable, the federal government has subsidized corn ethanol in order to reduce tailpipe emissions and promote energy security.

Now that President Joe Biden is backing electric vehicles, biofuel producers and crop traders like Archer-Daniels-Midland Co. are pursuing investments in sustainable aviation fuel, or SAF.

According to BloombergNEF, if everything goes as planned, the US market for converting ethanol and other alcohols to jet fuel could reach $105 billion by 2050. This is because major airlines such as United Airlines Holdings Inc. and others are under pressure to reduce greenhouse gas emissions.

However, ethanol has yet to be used commercially for aviation fuel, and it is unclear whether ethanol-derived SAF will be eligible for tax breaks.

Time is ticking

The timer is ticking. According to BNEF, ethanol consumption will drop 12% by the end of this decade and nearly 90% by 2050, mirroring a drop in gasoline demand as EVs become more popular and gasoline engines become more efficient.

Ethanol producers are facing a “make-or-break moment,” according to U.S. Agriculture Secretary Tom Vilsack, speaking this month at a Growth Energy forum. “The future of this industry is in fact linked to its capacity to take advantage of this new and amazing opportunity.”

Some farmers are dubious. Green aviation fuel, according to Nick Pingsterhaus, an Illinois corn farmer, is a promising development. But, in his opinion, it is far from certain.

“It is a good thing to have another player bidding on our grains by the river, but if the government has to pay for it, is this really a profitable long-term plan?” According to the second-generation farmer.

Failure to seize the opportunity would be another setback for American corn farmers, who lost the exporting crown to Brazil this year and may never regain it. Rising costs, the lingering effects of former President Donald Trump’s trade war with China, and a stronger dollar are all factors driving this shift.

Massive market

Nonetheless, many ethanol supporters reject the notion that the industry requires saving, arguing that liquid motor fuel will be required for the foreseeable future. Furthermore, producers are hoping for increased export sales, and lobbyists are pushing for U.S. policy that they believe will help expand year-round sales of the fuel across the country.

The market for ethanol-based sustainable aviation fuel has enormous potential. According to BNEF analyst Jade Patterson, if all of the surplus supply of biofuel in the United States were diverted into sustainable jet fuel, it would produce nearly 7 billion gallons of SAF, or 17% of the country’s projected jet fuel demand by 2050.

In a July speech, Biden expressed support for crop-based SAF, stating that farmers will provide 95% of all SAF over the next two decades. The White House wants sustainable jet fuel output in the United States to increase to 3 billion gallons per year by 2030, up from 15.8 million last year.

As they strive for net-zero carbon targets, airlines are setting aggressive goals for sustainable jet fuel. Delta hopes that SAF will account for 10% of its aviation fuel consumption by 2030, and 95% by 2050. United Airlines intends to convert entirely to SAF by 2046.

If ethanol demand for aviation fuel increases, the market has the potential to “more than make up” for the expected decline in motor fuel demand due to the transition to EVs, according to Scott Irwin, an agricultural economist at the University of Illinois.

There is still a long way to go. Sustainable jet fuel accounts for less than 0.1% of the fuel consumed by major US airlines.

“Right now, the biggest challenge we face is supply and scaling the infrastructure necessary to increase supply” of green jet fuel, whether derived from ethanol or other sources, said Rohini Sengupta, United Airlines’ head of decarbonization, in an interview.

SAF producers in the United States may be eligible for a $1.25 per gallon tax credit if their fuel reduces greenhouse gas emissions by half when compared to conventional aviation fuel. However, it is unclear whether corn-derived SAF can meet that standard. At the moment, it has a carbon intensity that is only 15% lower than regular jet fuel.

“This is a massive hurdle to overcome,” Patterson of BloombergNEF said in a report last month.

Fight in Washington

To achieve it, ethanol producers will need to use technologies such as renewable energy and carbon capture and storage to reduce their greenhouse gas emissions. However, the latter has yet to be proven economically viable on a large scale, and proposed carbon pipelines to capture emissions are being met with opposition, including from corn farmers.

The pending SAF policy has sparked a heated lobbying battle in Washington. Biofuel producers and farm-state lawmakers are pushing for the Energy Department’s carbon emissions tracking model, which they claim is the most current and transparent.

Concerned about biofuel ingredients shifting to SAF and away from renewable diesel used to power trucks, fuel retailers have joined environmentalists in calling for a more stringent approach from the United Nations. Biofuel manufacturers are concerned that this model will prevent some crop-based SAF production from qualifying for incentives under the White House’s signature climate law.

Possibility of Ethanol

There’s also the question of whether the industry can reduce its carbon footprint quickly enough to compete with rival SAF ingredients like used cooking oil, which command a premium due to their low carbon intensity.

Nonetheless, according to Barry Glickman, vice president and general manager of sustainable technology solutions at Honeywell International Inc., ethanol supplies are more plentiful than rival feedstocks. His company, which has dozens of SAF technology licensing agreements, signed its first ethanol deal earlier this year.

The message to industry observers is clear: sustainable aviation fuel represents a golden opportunity that corn farmers and ethanol producers cannot afford to pass up.

“You have to fight for it,” Vilsack said earlier this month in a speech to ethanol supporters. “I want you to have it because it’s critical to keeping small and mid-sized folks in business.”