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Money is pouring in — and deadlines are approaching fast.
There’s no quick fix for decarbonizing medium- and long-distance flights. Batteries are typically too heavy, and hydrogen fuel takes up too much space to offer a practical solution, leaving sustainable aviation fuels made from plants and other biomass, recycled carbon, or captured carbon as the primary options. Traditionally, this fuel is much more expensive — and the feedstocks for it much more scarce — than conventional petroleum-based jet fuel. But companies are now racing to overcome these barriers, as recent months have seen backers throw hundreds of millions behind a series of emergent, but promising solutions.
Today, most SAF is made of feedstocks such as used cooking oil and animal fats, from companies such as Neste and Montana Renewables. But this supply is limited by, well, the amount of cooking oil or fats restaurants and food processing facilities generate, and is thus projected to meet only about 10% of total SAF demand by 2050, according to a 2022 report by the Mission Possible Partnership. Beyond that, companies would have to start growing new crops just to make into fuel.
That creates an opportunity for developers of second-generation SAF technologies, which involve making jet fuel out of captured carbon or alternate biomass sources, such as forest waste. These methods are not yet mature enough to make a significant dent in 2030 targets, such as the EU's mandate to use 6% SAF and the U.S. government’s goal of producing 3 billion gallons of SAF per year domestically. But this tech will need to be a big part of the equation in order to meet the aviation sector’s overall goal of net zero emissions by 2050, as well as the EU’s sustainable fuels mandate, which increases to 20% by 2035 and 70% by 2050 for all flights originating in the bloc.
“That’s going to be a massive jump because currently, SAF uptake is about 0.2% of fuel,” Nicole Cerulli, a research associate for transportation and logistics at the market research firm Cleantech Group, told me. The head of the airline industry’s trade association, Willie Walsh, said in December at a media day event, "We’re not making as much progress as we’d hoped for, and we’re certainly not making as much progress as we need.” While global SAF production doubled to 1 million metric tons in 2024, that fell far below the trade group’s projection of 1.5 million metric tons, made at the end of 2023.
Producing SAF requires making hydrocarbons that mirror those used in traditional jet fuel. We know how to do that, but the processes required — electrolysis, gasification, and the series of chemical reactions known as Fischer-Tropsch synthesis — are energy intensive. So finding a way to power all of this sustainably while simultaneously scaling to meet demand is a challenging and expensive task.
Aamir Shams, a senior associate at the energy think tank RMI whose work focuses on driving demand for SAF, told me that while sustainable fuel is undeniably more expensive than traditional fuel, airlines and corporations have so far been willing to pay the premium. “We feel that the lag is happening because we just don’t have the fuel today,” Shams said. “Whatever fuel shows up, it just flies off the shelves.”
Twelve, a Washington-based SAF producer, thinks its e-fuels can help make a dent. The company is looking to produce jet fuel initially by recycling the CO2 emitted from the ethanol, pulp, and paper industries. In September, the company raised $645 million to complete the buildout of its inaugural SAF facility in Washington state, support the development of future plants, and pursue further R&D. The funding includes $400 million in project equity from the impact fund TPG Rise Climate, $200 million in Series C financing led by TPG, Capricorn Investment Group, and Pulse Fund, and $45 million in loans. The company has also previously partnered with the Air Force to explore producing fuel on demand in hard to reach areas.
Nicholas Flanders, Twelve’s CEO, told me that the company is starting with ethanol, pulp, and paper because the CO2 emissions from these facilities are relatively concentrated and thus cheaper to capture. And unlike, say, coal power plants, these industries aren’t going anywhere fast, making them a steady source of carbon. To turn the captured CO2 into sustainable fuel, the company needs just one more input — water. Renewable-powered electrolyzers then break apart the CO2 and H2O into their constituent parts, and the resulting carbon monoxide and hydrogen are combined to create a syngas. That then gets put through a chemical reaction known as “Fischer-Tropsch synthesis,” where the syngas reacts with catalysts to form hydrocarbons, which are then processed into sustainable jet fuel and ultimately blended with conventional fuel.
Twelve says its proprietary CO2 electrolyzer can break apart CO2 at much lower temperatures than would typically be required for this molecule, which simplifies the whole process, making it easier to ramp the electrolyzers up and down to match the output of intermittent renewables. (How does it do this? The company didn’t respond when I asked.) Twelve’s first plant, which sources carbon from a nearby ethanol facility, is set to come online next year, producing 50,000 gallons of SAF annually once it’s fully scaled, with electrolyzers that will run on hydropower.
While Europe may have stricter, actually enforceable SAF requirements than the U.S., Flanders told me there’s a lot of promise in domestic production. “I think the U.S. has an exciting combination of relatively low-cost green electricity, lots of biogenic CO2 sources, a lot of demand for the product we’re making, and then the inflation Reduction Act and state level incentives can further enhance the economics.” Currently, the IRA provides SAF producers with a baseline $1.25 tax credit per gallon produced, which gradually increases the greener the fuel gets. Of course, whether or not the next Congress will rescind this is anybody’s guess.
Down the line, incentives and mandates will end up mattering a whole lot. Making SAF simply costs a whole lot more than producing jet fuel the standard way, by refining crude oil. But in the meantime, Twelve is setting up cost-sharing partnerships between airlines that want to reduce their direct emissions (scope 1) and large corporations that want to reduce their indirect emissions (scope 3), which include employee business travel.
For example, Twelve has offtake agreements with Seattle-based Alaska Airlines and Microsoft for the fuel produced at its initial Washington plant. Microsoft, which aims to reduce emissions from its employees’ flights, will essentially cover the cost premium associated with Twelve’s more expensive SAF fuel, making it cost-effective for Alaska to use in its fleet. Twelve has a similar agreement with Boston Consulting Group and an unnamed airline
Eventually, Flanders told me, the company expects to source carbon via direct air capture, but doing so today would be prohibitively expensive. “If there were a customer who wanted to pay the additional amount to use DAC today, we'd be very happy to do that,” Flanders said. “But our perspective is it will maybe be another decade before that cost starts to converge.”
No sustainable fuel is even close to cost parity yet — Cerulli told me that it generally comes with a “roughly 250% to over 800%” cost premium over conventional jet fuel. So while voluntary uptake by companies such as Microsoft and BCG are helping drive the emergent market today, that won’t be near enough to decarbonize the industry. “At the simplest level, the cost of not using SAF has to be higher than using it,” Cerulli told me.
Pathway Energy thinks that by incorporating carbon sequestration into its process, it can help the world get there. The sustainable fuels company, which emerged from stealth just last month, is pursuing what CEO Steve Roberts told me is “probably the most cost-efficient long-term pathway from a decarbonization perspective.” The company is building a $2 billion SAF plant in Port Arthur, Texas designed to produce about 30 million gallons of jet fuel annually — enough to power about 5,000 carbon-neutral 10-hour flights — while also permanently sequestering more than 1.9 million tons of CO2.
Pathway, a subsidiary of the investment and advisory firm Nexus Holdings, has partnered with the UK-based renewable energy company Drax, which will supply the company with 1 million metric tons of wood pellets, to be turned into fuel using a series of well-established technologies. The first step is to gasify the biomass by heating the pellets to high temperatures in the absence of oxygen to produce a syngas. Then, just as Twelve does, it puts the syngas through the Fischer-Tropsch process to form the hydrocarbons that become SAF.
The competitive advantage here is capturing the emissions from the fuel production process itself and storing them permanently underground. Since Pathway is burying CO2 that’s already been captured by the trees from which the wood pellets come, that would make Pathway’s SAF carbon-negative, in theory, while the best Twelve and similar companies can hope for is carbon neutrality, assuming all of their captured carbon is used to produce fuel.
The choice of Drax as a feedstock partner is not without controversy, however, as the BBC revealed that the company sources much of its wood from rare old-growth forests. Though this is technically legal, it’s also ecologically disruptive. Roberts told me Drax’s sourcing methodologies have been verified by third parties, and Pathway isn’t concerned. “I don't think any of that controversy has yielded any actually significant changes to their sourcing program at all, because we believe that they're compliant,” Roberts told me. “We are 100% certain that they’re meeting all the standards and expectations.”
Pathway has big growth plans, which depend on the legitimacy of its sustainability cred. Beyond the Port Arthur facility, which Roberts told me will begin production by the end of 2029 or early 2030, the company has a pipeline of additional facilities along the Gulf Coast in the works. It also has global ambitions. “When you have a fuel that is this negative, it really opens up a global market, because you can transport fuel out of Texas, whether that be into the EU, Africa, Asia, wherever it may be,” Roberts said, explaining that even substantial transportation-related emissions would be offset by the carbon-negativity of the fuel.
But alternative feedstocks such as forestry biomass are finite resources, too. That’s why many experts think that within the SAF sector, e-fuels such as Twelve’s that could one day source carbon via direct air capture and then electrolyze it have the greatest potential for growth. “It’s extremely dependent on getting sustainable CO2 and cheap electricity prices so that you can make cheap green hydrogen,” Shams told me. “But theoretically, it is unlimited in terms of what your total cap on production would be.”
In the meantime, airlines are focused on making their planes and engines more aerodynamic and efficient so that they don’t consume as much fuel in the first place. They’re also exploring other technical pathways to decarbonization — because after all, SAF will only be a portion of the solution, as many short and medium-length flights could likely be powered by batteries or hydrogen fuel. RMI forecasts that by 2050, 45% of global emissions reduction in the aviation sector will come from improvements in fuel efficiency, 37% will be due to SAF deployment, 7% will come from hydrogen, and 3.5% will come from electrification.
If you did the mental math, you’ll notice these numbers add up to 92.5% — not 100%. “What we have done is, let's look at what we are actually doing today and for the past three, four, five years, and let's see if we get to net zero or not. And the answer is, no. We don't get to net zero by 2050,” Shams told me. And while getting to 92.5% is nothing to scoff at, that means that the aviation sector would still be emitting about 700 million metric tons of CO2 equivalent by that time.
So what’s to be done? “The financing sector needs to step up its game and take a little bit more of a risk than they are used to,” Shams told me, noting that one of RMI’s partners, the Mission Possible Partnership, estimates that getting the aviation sector to net zero will require an investment of around $170 billion per year, a total of about $4.5 trillion by 2050. These numbers take a variety of factors into account beyond strictly SAF production, such as airport infrastructure for new fuels, building out direct air capture plants, etc.
But any way you cut it, it’s a boatload of money that certainly puts Pathway’s $2 billion SAF facility and Twelve’s $645 million funding round in perspective. And it’s far from certain that we can get there. “Increasingly, that goal of the 2050 net-zero target looks really difficult to achieve,” Shams put it simply. “Commitments are always going up, but more can be done.”
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“We had enough assurance that the president was going to deal with them.”
A member of the House Freedom Caucus said Wednesday that he voted to advance President Trump’s “big, beautiful bill” after receiving assurances that Trump would “deal” with the Inflation Reduction Act’s clean energy tax credits – raising the specter that Trump could try to go further than the megabill to stop usage of the credits.
Representative Ralph Norman, a Republican of North Carolina, said that while IRA tax credits were once a sticking point for him, after meeting with Trump “we had enough assurance that the president was going to deal with them in his own way,” he told Eric Garcia, the Washington bureau chief of The Independent. Norman specifically cited tax credits for wind and solar energy projects, which the Senate version would phase out more slowly than House Republicans had wanted.
It’s not entirely clear what the president could do to unilaterally “deal with” tax credits already codified into law. Norman declined to answer direct questions from reporters about whether GOP holdouts like himself were seeking an executive order on the matter. But another Republican holdout on the bill, Representative Chip Roy of Texas, told reporters Wednesday that his vote was also conditional on blocking IRA “subsidies.”
“If the subsidies will flow, we’re not gonna be able to get there. If the subsidies are not gonna flow, then there might be a path," he said, according to Jake Sherman of Punchbowl News.
As of publication, Roy has still not voted on the rule that would allow the bill to proceed to the floor — one of only eight Republicans yet to formally weigh in. House Speaker Mike Johnson says he’ll, “keep the vote open for as long as it takes,” as President Trump aims to sign the giant tax package by the July 4th holiday. Norman voted to let the bill proceed to debate, and will reportedly now vote yes on it too.
Earlier Wednesday, Norman said he was “getting a handle on” whether his various misgivings could be handled by Trump via executive orders or through promises of future legislation. According to CNN, the congressman later said, “We got clarification on what’s going to be enforced. We got clarification on how the IRAs were going to be dealt with. We got clarification on the tax cuts — and still we’ll be meeting tomorrow on the specifics of it.”
Neither Norman nor Roy’s press offices responded to a request for comment.
The foreign entities of concern rules in the One Big Beautiful Bill would place gigantic new burdens on developers.
Trump campaigned on cutting red tape for energy development. At the start of his second term, he signed an executive order titled, “Unleashing Prosperity Through Deregulation,” promising to kill 10 regulations for each new one he enacted.
The order deems federal regulations an “ever-expanding morass” that “imposes massive costs on the lives of millions of Americans, creates a substantial restraint on our economic growth and ability to build and innovate, and hampers our global competitiveness.” It goes on to say that these regulations “are often difficult for the average person or business to understand,” that they are so complicated that they ultimately increase the cost of compliance, as well as the risks of non-compliance.
Reading this now, the passage echoes the comments I’ve heard from industry groups and tax law experts describing the incredibly complex foreign entities of concern rules that Congress — with the full-throated backing of the Trump administration — is about to impose on clean energy projects and manufacturers. Under the One Big Beautiful Bill Act, wind and solar, as well as utility-scale energy storage, geothermal, nuclear, and all kinds of manufacturing projects will have to abide by restrictions on their Chinese material inputs and contractual or financial ties with Chinese entities in order to qualify for tax credits.
“Foreign entity of concern” is a U.S. government term referring to entities that are “owned by, controlled by, or subject to the jurisdiction or direction of” any of four countries — Russia, Iran, North Korea, and most importantly for clean energy technology, China.
Trump’s tax bill requires companies to meet increasingly strict limits on the amount of material from China they use in their projects and products. A battery factory starting production next year, for example, would have to ensure that 60% of the value of the materials that make up its products have no connection to China. By 2030, the threshold would rise to 85%. The bill lays out similar benchmarks and timelines for clean electricity projects, as well as other kinds of manufacturing.
But how companies should calculate these percentages is not self-evident. The bill also forbids companies from collecting the tax credits if they have business relationships with “specified foreign entities” or “foreign-influenced entities,” terms with complicated definitions that will likely require guidance from the Treasury for companies to be sure they pass the test.
Regulatory uncertainty could stifle development until further guidance is released, but how long that takes will depend on if and when the Trump administration prioritizes getting it done. The One Big Beautiful Bill Act contains a lot of other new tax-related provisions that were central to the Trump campaign, including a tax exemption for tips, which are likely much higher on the department’s to-do list.
Tax credit implementation was a top priority for the Biden administration, and even with much higher staffing levels than the department currently has, it took the Treasury 18 months to publish initial guidance on foreign entities of concern rules for the Inflation Reduction Act’s electric vehicle tax credit. “These things are so unbelievably complicated,” Rachel McCleery, a former senior advisor at the Treasury under Biden, told me.
McCleery questioned whether larger, publicly-owned companies would be able to proceed with major investments in things like battery manufacturing plants until that guidance is out. She gave the example of a company planning to pump out 100,000 batteries per year and claim the per-kilowatt-hour advanced manufacturing tax credit. “That’s going to look like a pretty big number in claims, so you have to be able to confidently and assuredly tell your shareholder, Yep, we’re good, we qualify, and that requires a certification” by a tax counsel, she said. To McCleery, there’s an open question as to whether any tax counsel “would even provide a tax opinion for publicly-traded companies to claim credits of this size without guidance.”
John Cornwell, the director of policy at the Good Energy Collective, which conducts research and advocacy for nuclear power, echoed McCleery’s concerns. “Without very clear guidelines from the Treasury and IRS, until those guidelines are in place, that is going to restrict financing and investment,” Cornwell told me.
Understanding what the law requires will be the first challenge. But following it will involve tracking down supply chain data that may not exist, finding alternative suppliers that may not be able to fill the demand, and establishing extensive documentation of the origins of components sourced through webs of suppliers, sub-suppliers, and materials processors.
The Good Energy Collective put out an issue brief this week describing the myriad hurdles nuclear developers will face in trying to adhere to the tax credit rules. Nuclear plants contain thousands of components, and documenting the origin of everything from “steam generators to smaller items like specialized fasteners, gaskets, and electronic components will introduce substantial and costly administrative burdens,” it says. Additionally the critical minerals used in nuclear projects “often pass through multiple processing stages across different countries before final assembly,” and there are no established industry standards for supply chain documentation.
Beyond the documentation headache, even just finding the materials could be an issue. China dominates the market for specialized nuclear-grade materials manufacturing and precision component fabrication, the report says, and alternative suppliers are likely to charge premiums. Establishing new supply chains will take years, but Trump’s bill will begin enforcing the sourcing rules in 2026. The rules will prove even more difficult for companies trying to build first-of-a-kind advanced nuclear projects, as those rely on more highly specialized supply chains dominated by China.
These challenges may be surmountable, but that will depend, again, on what the Treasury decides, and when. The Department’s guidance could limit the types of components companies have to account for and simplify the documentation process, or it could not. But while companies wait for certainty, they may also be racking up interest. “The longer there are delays, that can have a substantial risk of project success,” Cornwell said.
And companies don’t have forever. Each of the credits comes with a phase-out schedule. Wind manufacturers can only claim the credits until 2028. Other manufacturers have until 2030. Credits for clean power projects will start to phase down in 2034. “Given the fact that a lot of these credits start lapsing in the next few years, there’s a very good chance that, because guidance has not yet come out, you’re actually looking at a much smaller time frame than than what is listed in the bill,” Skip Estes, the government affairs director for Securing America’s Energy Future, or SAFE, told me.
Another issue SAFE has raised is that the way these rules are set up, the foreign sourcing requirements will get more expensive and difficult to comply with as the value of the tax credits goes down. “Our concern is that that’s going to encourage companies to forego the credit altogether and just continue buying from the lowest common denominator, which is typically a Chinese state-owned or -influenced monopoly,” Estes said.
McCleery had another prediction — the regulations will be so burdensome that companies will simply set up shop elsewhere. “I think every industry will certainly be rethinking their future U.S. investments, right? They’ll go overseas, they’ll go to Canada, which dumped a ton of carrots and sticks into industry after we passed the IRA,” she said.
“The irony is that Republicans have historically been the party of deregulation, creating business friendly environments. This is completely opposite, right?”
On the budget debate, MethaneSAT’s untimely demise, and Nvidia
Current conditions: The northwestern U.S. faces “above average significant wildfire potential” for July • A month’s worth of rain fell over just 12 hours in China’s Hubei province, forcing evacuations • The top floor of the Eiffel Tower is closed today due to extreme heat.
The Senate finally passed its version of Trump’s One Big Beautiful Bill Act Tuesday morning, sending the tax package back to the House in hopes of delivering it to Trump by the July 4 holiday. The excise tax on renewables that had been stuffed into the bill over the weekend was removed after Senator Lisa Murkowski of Alaska struck a deal with the Senate leadership designed to secure her vote. In her piece examining exactly what’s in the bill, Heatmap’s Emily Pontecorvo explains that even without the excise tax, the bill would “gum up the works for clean energy projects across the spectrum due to new phase-out schedules for tax credits and fast-approaching deadlines to meet complex foreign sourcing rules.” Debate on the legislation begins on the House floor today. House Speaker Mike Johnson has said he doesn’t like the legislation, and a handful of other Republicans have already signaled they won’t vote for it.
The Environmental Protection Agency this week sent the White House a proposal that is expected to severely weaken the federal government’s ability to rein in planet-warming pollution. Details of the proposal, titled “Greenhouse Gas Endangerment Finding and Motor Vehicle Reconsideration,” aren’t clear yet, but EPA Administrator Lee Zeldin has reportedly been urging the Trump administration to repeal the 2009 “endangerment finding,” which explicitly identified greenhouse gases as a public health threat and gave the EPA the authority to regulate them. Striking down that finding would “free EPA from the legal obligation to regulate climate pollution from most sources, including power plants, cars and trucks, and virtually any other source,” wrote Alex Guillén at Politico. The title of the proposal suggests it aims to roll back EPA tailpipe emissions standards, as well.
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So long, MethaneSAT, we hardly knew ye. The Environmental Defense Fund said Tuesday that it had lost contact with its $88 million methane-detecting satellite, and that the spacecraft was “likely not recoverable.” The team is still trying to figure out exactly what happened. MethaneSAT launched into orbit last March and was collecting data about methane pollution from global fossil fuel infrastructure. “Thanks to MethaneSAT, we have gained critical insight about the distribution and volume of methane being released from oil and gas production areas,” EDF said. “We have also developed an unprecedented capability to interpret the measurements from space and translate them into volumes of methane released. This capacity will be valuable to other missions.“ The good news is that MethaneSAT was far from the only methane-tracking satellite in orbit.
Nvidia is backing a D.C.-based startup called Emerald AI that “enables AI data centers to flexibly adjust their power consumption from the electricity grid on demand.” Its goal is to make the grid more reliable while still meeting the growing energy demands of AI computing. The startup emerged from stealth this week with a $24.5 million seed round led by Radical Ventures and including funding from Nvidia. Emerald AI’s platform “acts as a smart mediator between the grid and a data center,” Nvidia explains. A field test of the software during a grid stress event in Phoenix, Arizona, demonstrated a 25% reduction in the energy consumption of AI workloads over three hours. “Renewable energy, which is intermittent and variable, is easier to add to a grid if that grid has lots of shock absorbers that can shift with changes in power supply,” said Ayse Coskun, Emerald AI’s chief scientist and a professor at Boston University. “Data centers can become some of those shock absorbers.”
In case you missed it: California Governor Gavin Newsom on Monday rolled back the state’s landmark Environmental Quality Act. The law, which had been in place since 1970, required environmental reviews for construction projects and had become a target for those looking to alleviate the state’s housing crisis. The change “means most urban developers will no longer have to study, predict, and mitigate the ways that new housing might affect local traffic, air pollution, flora and fauna, noise levels, groundwater quality, and objects of historic or archeological significance,” explained Cal Matters. On the other hand, it could also mean that much-needed housing projects get approved more quickly.
Tesla is expected to report its Q2 deliveries today, and analysts are projecting a year-over-year drop somewhere from 11% to 13%.