When the U.S. government launched the "Grand Challenge" in 2021, promising to help airlines use 3billion gallons of sustainable aviation fuel (SAF) by 2030, farmers saw a future beyond traditional ethanol. But those ambitions are now facing headwinds. The Biden-era program is gone, and a key SAF tax credit has been cut from $1.75 to $1 per gallon under President Donald Trump's "One Big Beautiful Bill", placing SAF on equal footing with renewable diesel-a cheaper and more established fuel.

This change to the 45Z clean fuels tax credit has rattled investors and producers. Without enhanced incentives, capital may flow to renewable diesel rather than SAF, which is more expensive to produce. Imported feedstocks, like used cooking oil, were also excluded from the credit, further tightening margins.

"These projects are not attracting private capital, and so the role of government in helping launch the industry is super important," said Bruce Fleming, CEO of Montana Renewables, one of the few facilities producing SAF at commercial scale. His company plans to ship fuel to Minneapolis-St. Paul for Delta Air Lines, but scaling up remains difficult.

"Currently, the SAF market is a mixed bag of policies and producers who are facing different challenges and realities," added Pat Gruber, CEO of Gevo, which intends to produce SAF from corn ethanol in North Dakota. "In the end, products must be economical to be adopted."

The financial strain is already showing. Phillips66 reported $185million in renewable fuels losses in Q1 and $133million in Q2, blaming restrictive credit rules and new limitations on foreign feedstocks. U.S. SAF production reached over 100million gallons in 2024, up from 5million in 2021, but still far below its 465million-gallon capacity. "With all the investment that has happened, we don't see capacity utilization fully yet, and that's not good news," said Andreea Moyes of Airbp.

Incentives remain a sticking point. Moyes noted that the original 75-cent SAF credit covered the cost gap between renewable diesel and SAF. With that now gone, U.S. producers struggle to compete with Europe and the U.K., where mandates guarantee demand. Industry leaders argue they need several additional dollars per gallon in incentives to make SAF viable long term.

Beyond economics, policy uncertainty is also clouding investment. Reema Bari of Shell Aviation warned that long project timelines-four to seven years-require bipartisan policy backing to secure financing. At Montana Renewables, logistical costs alone-like shipping fuel to Los Angeles-add 37 cents per gallon, further eroding margins.

Some producers are exploring "book and claim" credit systems, which allow corporations to buy SAF carbon credits without physically moving the fuel. Fleming argues this could lower costs, but the system faces scrutiny after investigations into fraud involving renewable energy certificates.

There are still bright spots. Gevo recently received a loan guarantee extension from the U.S. Department of Energy, shifting its first ethanol-to-jet (ETJ) facility to North Dakota, where carbon can be stored nearby. LanzaJet's Georgia project is also close to starting production, though tariffs on Brazilian sugarcane ethanol have caused delays.

For farmers and ethanol producers, SAF still represents a potential new demand driver at a time when electric vehicles and efficient engines are eroding ethanol's role in gasoline. But as Emily Skor, CEO of Growth Energy, warned at the SAF North America conference, the industry's messaging may need to shift away from climate rhetoric. "There's a lot in terms of the value proposition here," she said. "But carbon performance is not going to speak to this administration. We need to talk about what this means for farmers and rural America."

The promise of SAF remains-but without robust policy support, tax incentives, and stable regulation, the U.S. aviation biofuel market may stall before it truly takes off.