Cal Cities calls on lawmakers to reject green jet fuel tax credit

By Damon Conklin, legislative advocate (transportation)

Cal Cities is pushing back against an aviation tax credit that would undermine local infrastructure projects by redirecting up to $300 million annually to a handful of companies. The Sustainable Aviation Fuel (SAF) tax credit — backed by Gov. Gavin Newsom — is one of the few outstanding budget items lawmakers will need to resolve in the last few weeks of session.

The proposal would provide tax credits of up to $2 per gallon for SAF produced or sold in California. Those funds would come from revenues otherwise dedicated to local projects, reducing resources that cities depend on to improve and preserve the transportation network that residents, businesses, and emergency responders rely on every day.

The proposal comes as cities are struggling with aging infrastructure, rising labor and construction costs, and significant maintenance backlogs.

Independent analyses also raise serious questions about whether the proposal would produce meaningful climate benefits. Research from the University of California concludes that the tax credit would largely shift raw materials from renewable diesel production into aviation fuel rather than increase the supply of cleaner fuels. This would result in negligible, if any, net emissions reductions. A similar analysis also projects higher diesel and gasoline prices as markets adjust to the tax credit.

The proposal asks every community in California to give up transportation funding and potentially pay higher fuel prices so that a handful of companies may receive a state tax credit with uncertain environmental benefits.  

Cal Cities supports thoughtful investments that advance California's climate goals, but those investments should demonstrate measurable public benefits and not come at the expense of maintaining the local transportation system that millions of Californians use every day.

What can my city do?

Although the tax credit was ultimately excluded from the 2026 state budget, the Governor has resubmitted his proposal as a budget trailer bill for the Legislature to reconsider and adopt before September. Cal Cities remains opposed to diverting precious funding for local streets and roads. City officials are being asked to urge their state representatives to reject any proposal that diverts local revenues to fund the tax credit.

To learn how to make your city’s voice heard, contact your regional public affairs manager or sign up for Cal Cities’ July 22 legislative briefing.