Sustainable aviation fuel (SAF) has emerged as the linchpin of aviation’s decarbonization strategy, offering one of the few viable near term pathways to reduce greenhouse gas emissions in medium  and long haul air travel. In Washington State, the Clean Fuel Standard (CFS) and complementary legislation have created one of the most advanced policy environments in the country for SAF development. By aligning aggressive carbon intensity targets with dedicated SAF pathways and tax incentives, Washington is positioning itself as a leading hub for SAF production and trading. This article examines the policy framework, market drivers and strategic considerations that fuel suppliers and project developers must navigate to succeed under Washington’s CFS and related incentives.

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Washington’s CFS and the Emergence of an SAF Pathway

Washington’s CFS, effective January 1, 2023, requires fuel suppliers to reduce the average carbon intensity of transportation fuels by 20 percent below 2017 levels by 2034. Although primarily designed to curb road transport emissions, the program’s flexible crediting system allows incorporation of new, low carbon pathways including SAF through a rulemaking process. Senate Bill 5447 (ESSB 5447), enacted in mid 2023, directed the Department of Ecology to establish one or more carbon intensity pathways for alternative jet fuels by December 31, 2023. This statutory mandate formalized SAF’s eligibility for CFS credits, ensuring that fuel suppliers blending or importing approved SAF can generate valuable compliance credits against their annual deficits.

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Tax Incentives and Streamlined Permitting for SAF

Beyond CFS credits, Washington has enacted targeted tax incentives to accelerate SAF production and use. ESSB 5447 created a flexible tax credit that may be claimed by producers, blenders or end users of SAF achieving at least a 50 percent reduction in lifecycle CO₂ equivalent emissions compared to conventional petroleum jet fuel. This credit, coupled with a preferential business and occupation tax rate for SAF activities, reduces capital and operational costs for projects locating in Washington. Complementing these fiscal measures, House Bill 1216 established a dedicated Clean Energy Project Permitting Council, set two year timelines on environmental reviews and designated qualifying SAF facilities as “Clean Energy Projects of Statewide Significance.” These streamlined processes minimize regulatory delays and improve project bankability.

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Lifecycle Carbon Intensity Pathways for SAF

Once Ecology adopts SAF pathways, applicants submit detailed lifecycle analysis (LCA) data based on the WA GREET model, Washington’s adaptation of Argonne National Laboratory’s GREET tool. LCA inputs cover feedstock production or collection, fuel conversion, distribution and combustion, measured in grams of CO₂ equivalent per megajoule (gCO₂e/MJ). To qualify for maximum credit generation, SAF pathways must demonstrate a CI score well below the CFS benchmark. Typical HEFA SAF (Hydroprocessed Esters and Fatty Acids) from used cooking oil can achieve CI values in the 50–60 gCO₂e/MJ range, while emerging ethanol to jet and Fischer Tropsch pathways from cellulosic biomass may reach scores below 40 gCO₂e/MJ when optimized. Lower CI scores translate directly into more CFS credits per gallon of SAF blended or imported.

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Aligning with Federal Incentives and the SAF Grand Challenge

Washington’s state level incentives dovetail with extensive federal support established by the Inflation Reduction Act (IRA) and the SAF Grand Challenge roadmap. The IRA’s Section 40B blended fuel credit (expiring in 2024), Section 45Z production credit (effective 2025), Section 45V clean hydrogen credit, Section 48(a)(15)(c) for hydrogen infrastructure, and Section 45Q sequestration credit together create an interlocking set of benefits across the SAF value chain. At the federal level, the SAF Grand Challenge aims to scale domestic SAF production from roughly 23 million gallons in 2023 to 3 billion gallons per year by 2030 and 35 billion gallons by 2050, with a minimum 50 percent lifecycle emissions reduction relative to fossil Jet A. Washington project developers can stack these federal credits with state CFS and tax incentives to enhance project economics and attract investment.

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Building Feedstock Supply Chains and Production Capacity

Securing reliable, low carbon feedstocks is foundational to any SAF venture. Washington benefits from agricultural residues, forestry byproducts and municipal waste streams that can serve as cellulosic biomass for ethanol to jet or Fischer Tropsch SAF. The Alternative Jet Fuels Work Group established in 2012 and reconstituted under ESSB 5447 has guided stakeholders in identifying priority feedstocks and conversion technologies, laying the groundwork for future commercial scale facilities. Collaboration among state agencies, universities and private investors is now coalescing around pilot plants and demonstration scale projects, with several developers announcing plans for SAF‐capable biorefineries in the Puget Sound corridor and eastern Washington.

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Market Outlook: Demand Drivers and Credit Pricing

Pilot CFS trading data suggest that new SAF pathways will command premium credit values relative to on road biofuels and RNG, reflecting SAF’s comparatively higher production costs and critical role in aviation decarbonization. As SAF pathways enter the CFS market, obligated parties—primarily jet fuel importers and refineries with jet blending obligations will compete for SAF credits to offset their deficits. This dynamic, combined with tightening CFS benchmarks (20 percent reduction by 2034, with potential elevation to 45 percent by 2038 under Senate Bill 1409), is expected to sustain robust credit demand and prices in the $100–$150 per credit range over the next decade. Concurrently, voluntary SAF offtakes by airlines under global net zero pledges will underpin additional demand, providing revenue certainty through long term purchase agreements.

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Financing Strategies and Offtake Agreements

Given the capital intensity of SAF facilities, project sponsors must structure layered revenue streams to satisfy equity investors and lenders. A typical finance stack combines long term offtake agreements with airlines or corporate offtakers at negotiated credit and SAF-of fuel prices, anchored by state CFS credits and federal production or blending incentives. Structuring collars or fixed price floors for CFS credits mitigates price volatility, while forward purchase agreements for feedstocks and SAF volumes secure input and offtake certainty. Washington’s SAF tax credit can be assigned to project partners—whether producers, blenders or end users providing flexibility in tailoring arrangements that optimize after tax returns.

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Strategic Considerations for Project Developers and Investors

Navigating Washington’s SAF landscape demands proactive engagement with regulatory processes, robust data management and strategic partnerships. Early coordination with the Department of Ecology during SAF pathway rulemakings accelerates pathway adoption and clarifies modeling assumptions. Developers should invest in comprehensive LCA studies to ensure CI scores maximize credit generation and withstand third party verification. Partnerships with feedstock suppliers, technology licensors and airline offtakers de risk supply chain and market uncertainties. Finally, staying abreast of pending legislation such as SB 1409’s proposed 45 percent CFS target and potential extensions of SAF tax credits enables timely adjustments to project designs and financing plans.

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Washington State’s integrated policy framework - combining the Clean Fuel Standard, dedicated SAF pathways under ESSB 5447, targeted tax incentives and streamlined permitting offers an unparalleled environment for scaling sustainable aviation fuel. By leveraging state and federal incentives, optimizing lifecycle carbon intensity pathways and structuring resilient finance and offtake models, developers and investors can seize early mover advantages in this critical sector. As airlines, governments and the broader aviation industry rally behind net zero goals, Washington’s SAF ecosystem is poised to deliver substantial emissions reductions, economic growth and leadership in the clean fuel transition.

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Contact AFS Commodities to explore how our end to end trading expertise, regulatory guidance and market intelligence can accelerate your SAF project from concept to flight.