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UPDATE 2-U.S. lawmakers to propose tax credit for sustainable aviation fuel

(Adds quote from American Airlines executive)

NEW YORK, May 20 (Reuters) - U.S. lawmakers plan to introduce a bill on Thursday that would create a tax credit for lower-carbon sustainable aviation fuel, which they hope will slash emissions of greenhouse gases from the aviation industry.

The legislation, seen by Reuters, would impose a tax incentive of up to $2.00 for every gallon produced of sustainable aviation fuel, which can be made from feedstocks such as grease, animal fats and plant oils. That price would make it one of the most expensive subsidies for clean fuel.

The United States uses about 45 million gallons per day of jet fuel, or about 6% of total petroleum use, according to the U.S. Energy Information Administration.

U.S. Representatives Brad Schneider, a Democrat from Illinois; Dan Kildee, a Democrat from Michigan; and Julia Brownley, a Democrat from California, are expected to introduce the bill.

Lawmakers have been pushing for measures to fight climate change as President Joe Biden’s administration has called for the U.S. economy to have net zero greenhouse gas emissions by 2050, meaning removing as much carbon from the atmosphere as is emitted.

It was not immediately clear whether the sustainable aviation fuel bill would have Republican support. Schneider said on Thursday in a press conference that the representatives were working on building bipartisan support for the bill.

Republicans have opposed the administration’s climate policies, arguing they risk damaging the economy by hurting the drilling and mining industries.

Airlines and renewable fuel companies in recent months have been lobbying the federal government to support development of sustainable aviation fuel, saying this is necessary to reduce greenhouse gas emissions from aircraft.

Air travel contributes around 2% of global emissions, according to the Air Transport Action Group, a coalition of aviation experts focused on sustainability issues.

Climate groups such as the Environmental Defense Fund and the World Wildlife Fund, as well as industry groups like United Airlines and Airlines for America support the bill.

A coalition of more than 50 groups, including energy companies such as World Energy, Neste and LanzaJet, delivery companies FedEx and the United Parcel Service , and airlines such as Delta Air Lines, sent a letter on Thursday to the representatives, voicing their support for the bill.

“American has an ambitious goal to reach net-zero carbon emissions by 2050, and we see sustainable aviation fuel as the most promising way to make fuel-efficiency gains and reduce our emissions in the near term,” Jill Blickstein, American Airlines’ managing director of ESG, said in an email.

While U.S. sustainable aviation fuel use has risen in recent years, it remains a fraction of the larger traditional petroleum-based jet fuel market.

Producers of sustainable aviation fuel can earn the tax credit if the fuel achieves at least a 50% lifecycle greenhouse gas emissions reduction compared with petroleum-based jet fuel, according to the legislation.

The credit would expire at the end of 2031.

A coalition of trade groups representing pilots, flight attendants and other aviation industry personnel, sent a letter and documents on Tuesday to Congressional committee members that outlined ways to reduce carbon emissions. Solutions included the tax credit. (Reporting by David Shepardson in Washington and Stephanie Kelly in New York; Editing by David Gregorio, Richard Chang and Marguerita Choy)

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