SECTION 3. LIFECYCLE

GREENHOUSE GAS EMISSIONS REDUCTION PERCENTAGE UNDER § 40B(e) (2) AND CERTIFICATION OF SUSTAINABILITY REQUIREMENTS UNDER § 40B(f) (2)(A)(ii); RENEWABLE FUEL STANDARD PROGRAM; SAFE HARBORS

.01 Calculating the lifecycle green- house gas emissions reduction percentage under § 40B(e)(2) .

(1) Renewable Fuel Standard program . Section 40B(e)(2) provides that the emissions reduction percentage may be calculated in accordance with any methodology

similar to the most recent CORSIA that satisfies the criteria under § 211(o)(1)(H) of the CAA (CAA § 211(o)(1)(H) criteria). Section 211(o)(1)(H) of the CAA defines the term “lifecycle greenhouse gas emissions” to mean “the aggregate quantity of greenhouse gas emissions (including direct emissions and significant indirect emissions such as significant emissions from land use changes), as determined by the [EPA] Administrator, related to the full fuel lifecycle, including all stages of fuel and feedstock production and distribution, from feedstock generation or extraction through the distribution and delivery and use of the finished fuel to the ultimate consumer, where the mass values for all greenhouse gases are adjusted to account for their relative global warming potential.” Section 211(o)(2)(A) of the CAA, as added by § 1501(a)(2) of the Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594, 1067 (2005) and amended by § 202(a)(1) of the Energy Independence and Security Act of 2007, Public Law 110-140, 121 Stat. 1492, 1521-22 (2007), requires the Administrator of the EPA to promulgate regulations implementing the statutory requirements of the RFS program, which include requirements related to greenhouse gas emissions reduction thresholds for renewable fuels. Regulations for the RFS program are codified under 40 CFR Part 80: Regulation of Fuels and Fuel Additives. Under the RFS program, the EPA evaluates a biofuel’s lifecycle greenhouse gas emissions to determine whether a particular fuel meets a 20-percent, a 50-percent, or a 60-percent emissions reduction from a gasoline or diesel fuel baseline, as applicable. ⁴ See 42 U.S.C. 7545(o)(1)(B) – (E); 40 CFR 80.2.

The EPA’s methodology for determining lifecycle greenhouse gas emissions under the RFS program was specifically designed to satisfy the statutory definition in § 211(o)(1)(H) of the CAA. The methodology employed by the RFS program, consistent with that definition, is similar to the CORSIA methodology as both are methodologies that evaluate the “full fuel lifecycle, including all stages of fuel and

4 Although § 40B(e) requires use of a petroleum-based jet fuel baseline, the Treasury Department and the IRS conclude that it is reasonable to use the RFS program’s diesel fuel baseline for purposes of the safe harbor in section 3.01(2) of this notice because the differences are small compared to the inherent lack of precision with respect to lifecycle greenhouse gas emissions calculations.

Bulletin No. 2024–2 349 January 8, 2024

feedstock production” through to the end use of the finished fuel. ⁵

(2) Safe harbor based on certain RFS program determinations . With respect to any SAF qualified mixture produced under ASTM International (ASTM) D7566, the IRS will accept an emissions reduction percentage of the SAF synthetic blending component for a jet fuel that qualifies as renewable fuel under the RFS program. Rows F, G, H, L, M, and P in Table 1 to 40 CFR 80.1426 list the generally applicable fuel pathways and the D-codes under the RFS program for jet fuel, which are available at https:// www.epa.gov/renewable-fuel-standard- program/approved-pathways-renewable- fuel#generally .

Specifically, a SAF synthetic blending component that has generated biomass-based diesel (D-code 4) or advanced biofuel (D-code 5) renewable identification numbers (RINs) under the RFS program that have been validated under a quality assurance plan (QAP) will be assigned a 50-percent emissions reduction percentage. See 40 CFR 80.2. A SAF synthetic blending component that has generated valid cellulosic biofuel (D-code 3) or cellulosic diesel (D-code 7) RINs under the RFS program that have been validated under a QAP will be assigned a 60-percent emissions reduction percentage. See 40 CFR 80.2 and 80.1425(g). The EPA has also made facility-specific determinations for renewable jet fuel pathways under the RFS program, which are available at https://www.epa. gov/renewable-fuel-standard-program/ approved-pathways-renewable-fuel# completed . The IRS will also accept the emissions reduction percentage for a SAF synthetic blending component for a jet fuel that has generated a D-code 3, 4, 5, or 7 RIN and that has been validated under a QAP pursuant to these approved facility-specific pathways.

(3) Emissions reduction percentages other than 50 percent or 60 percent de- scribed in the safe harbor will not be ac- cepted . For some fuel pathways, the EPA has published specific lifecycle analysis point estimates (or a range of estimates) to support its determinations under the RFS program. Those estimates are only used to determine whether a particular

fuel meets either the 50-percent threshold or the 60-percent threshold under the RFS program. Using those point estimates to calculate an emissions reduction percentage beyond 50 percent or 60 percent would extend those estimates beyond their intended uses. Therefore, the IRS will not accept those point estimates (or range of estimates) for the safe harbor provided in section 3.01(2) of this notice.

(4) Example for calculating the amount of the SAF credit using the RFS safe har- bor in section 3.01(2) of this notice . A blender used 100,000 gallons of a SAF synthetic blending component to produce a SAF qualified mixture. The SAF synthetic blending component has generated cellulosic diesel (D-code 7) RINs under a pathway that qualifies under the RFS program, and these RINs were validated under a QAP. The final rule that added the pathway to the list of approved renewable fuel production pathways in the RFS regulations states that the jet fuel’s emissions reduction percentage compared to the baseline is 64 percent. However, for purposes of calculating the applicable supplementary amount, the emissions reduction percentage will be deemed to be 60 percent under the safe harbor described in section 3.01(2) of this notice, which corresponds to the emissions reduction threshold the fuel was required to meet to qualify as cellulosic diesel and thus generate D-code 7 RINs.

The per-gallon amount of the SAF credit with respect to the SAF qualified mixture described above is calculated by adding $1.25 and the applicable supplementary amount, if any, with respect to the SAF synthetic blending component used to produce the SAF qualified mixture. Here, the SAF synthetic blending component qualifies for the applicable supplementary amount because the emissions reduction percentage is deemed to be 60 percent. The applicable supplementary amount is calculated by subtracting 50 from the emissions reduction percentage (60), and then multiplying by the applicable rate ($0.01): (60 – 50) × $0.01 = $0.10 per gallon.

The total amount of the SAF credit is calculated as follows: 100,000 gallons × ($1.25 + $0.10) = $135,000.00.

.02 Unrelated party certification of sus- tainability requirements under § 40B(f)(2) (A)(ii); RFS Q-RIN safe harbor . In the case of a methodology established under § 40B(e)(2) (relating to the CAA), § 40B(f)(2)(A)(ii) provides that no SAF credit is allowed with respect to any SAF unless the producer or importer of such fuel provides certification from an unrelated party demonstrating compliance with requirements similar to the requirements described in § 40B(f)(2)(A) (i) (relating to the CORSIA methodology). See also § 6426(k)(3). A Q-RIN is a RIN verified by a registered independent third-party auditor using a QAP that has been approved under 40 CFR 80.1469(c) following the audit process described in 40 CFR 80.1472. See generally 40 CFR Part 80: Subpart M. A Q-RIN signifies that the fuel has been produced pursuant to an EPA-approved pathway that the EPA has determined meets the specified lifecycle greenhouse gas emissions reduction threshold requirement.

With respect to any SAF qualified mixture produced under ASTM D7566, the IRS will consider a producer of a SAF synthetic blending component to meet the certification of sustainability requirements of § 40B(f)(2)(A)(ii) if the SAF synthetic blending component has generated a Q-RIN with an eligible D-code. For this purpose, an eligible D-Code means that a D-code 3, 4, 5, or 7 RIN was generated for the SAF synthetic blending component and the RIN has been verified under a QAP.

To demonstrate compliance with § 40B(f)(2)(A)(ii), the registered producer of the SAF synthetic blending component must record a valid Q-RIN or Q-RINs on the Certificate for SAF Synthetic Blending Component required under section 4 of this notice and sections 6.04(2) and 7.02 of Notice 2023-6 for the particular volume of fuel to which the certificate relates.