Towards a sustainable future

In my conversations with aviation leaders and policy makers, a recurring question emerges: Is the industry making sufficient progress toward a sustainable future, and what strategies are needed to advance? 

This question is not just a passing concern but a pressing challenge, as aviation contributes nearly 2% of global energy-related greenhouse gas emissions. Compared to other sectors, reducing carbon emissions in aviation is notably difficult. The urgency intensifies when considering that, without significant changes, aviation could consume nearly 10% of the remaining carbon budget needed to stay within the 1.5-degree celsius global warming threshold.

Fortunately, the industry is acutely aware of these sustainability imperatives, and significant steps have been taken towards addressing them. The 41st ICAO Assembly adopted a long-term global aspirational goal (LTAG) for international aviation of net-zero carbon emissions by 2050 in support of the UNFCCC Paris Agreement’s temperature goal.

A multipronged approach is required to be able to meet this goal. Industry’s aspirations of improving fuel efficiency by 2% per annum is crucial, but insufficient by itself to deliver the required reduction in emissions. Alternative fuels such as hydrogen or electric aircraft have a long way to go before being commercially available. The use of sustainable aviation fuel (SAF) holds the most promise when adopted at scale. SAF could contribute around 55-65% of the reduction in emissions needed by aviation to achieve net zero CO2 emissions by 2050.

Adoption of SAF

In 2023, SAF volumes reached over 600 million litres, double the 300 million litres produced in 2022. As per IATA estimates, production is expected to triple to 1.8 billion litres in 2024, accounting for 0.5% of aviation’s fuel need. While SAF is costlier than conventional fuel, airlines have picked up SAF to meet the regulatory mandates and their climate commitments. A number of offtake agreements have been signed by airlines, with some estimates indicating commitment of nearly 16 billion litres of SAF offtake in 2030. 

Airlines such as Air France KLM aim to incorporate at least 10% of SAF in all their flights, which goes beyond the mandates set by the European Union. Such offtake agreements mitigate risk for SAF manufacturers and enable higher allocation for SAF in the overall renewable fuel production capacity.

The supply, however, still lags significantly. The current production capacity of SAF is a fraction of its future requirement, highlighting the need to ramp up capacity. While planned production capacity for 2030 has seen significant growth, the rollout of this capacity has consistently encountered delays. Three key challenges are affecting the scaling up of capacity – evolving technology, feedstock availability, and cost of production.

Evolving Technology

There are multiple pathways to manufacture SAF, broadly classified into hydrotreated esters and fatty acids (HEFA), Alcohol to Jet (AtJ), and Power to Liquid (PtL) amongst others. These pathways utilise different feedstocks and have varied levels of technology maturity. 

Most of the current SAF production relies on the HEFA pathway (80-90%), driven by its lower capital costs and readily available feedstocks with energy densities comparable to fossil fuels. Key feedstocks for this process include waste fats, used cooking oil, and industrial greases, which can be processed in standard hydrocracker units after pre-treatment.

In contrast, synthetic SAF produced through the PtL process holds the greatest potential for large-scale production. PtL uses renewable energy to manufacture green hydrogen through electrolysis which along with carbon capture is utilised to eventually produce SAF. However, currently PtL is produced at a high cost and on a limited scale. This is expected to change as the technology evolves, renewable energy becomes cheaper and the green hydrogen ecosystem expands and achieves economies of scale.

Aviation industry has set a clear goal for a sustainable future, achieving it requires accelerated action and deep collaboration between government, SAF producers, airlines, investors and research institutions. While the journey is complex, aligning our strategies and resources will help the aviation industry meet its climate goals and move toward a cleaner, more sustainable future.

Feedstock availability

Feedstock availability is a critical bottleneck in scaling up SAF production. For HEFA, which primarily relies on waste fats, used cooking oil and industrial greases, effective mechanisms to collect feedstock at scale are limited. 

This limitation in feedstock availability will drive SAF production from other pathways such as AtJ, municipal solid waste, and biomass. For AtJ, the use of crops like sugarcane and corn poses a dilemma, as it can lead to the displacement of food crops, raising concerns about land use. This trade-off is particularly stark given the quantity of SAF required annually. Additionally, competing demand from sectors such as ground fuel and petrochemicals results in limited availability of feedstock for aviation. 

Cost of production

Due to these challenges, SAF production has not yet reached the desired scale. The limited scale also adds to the high cost of SAF which remains 2 to 5 times higher than conventional aviation fuel, depending on the production pathway. This cost disparity has limited SAF adoption, with most airlines using SAF to comply with regulatory mandates. Widespread adoption requires reduction in cost of SAF, especially for airlines in emerging countries which find it difficult to pass on the higher cost to passengers.

Risks

At the current rate, the aviation industry risks falling short of its net-zero emissions obligations. In the near term, SAF production may be insufficient to meet the increase in demand from airlines. Additionally, mandates from measures such as EU Emissions Trading System (EU ETS) and Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) on emission reduction would further increase the demand for SAF and other emission reduction mechanisms. Amongst these mandates, EU ETS has a greater impact on airlines and its scope is proposed to be extended to all airlines in and out of the EU. 

This would impact airlines finances as they price-in the higher cost of SAF and the use of carbon credits. While at the moment, the price in carbon markets for credits is comparably low, the prices are expected to move upwards with increasing demand as additional mandates become applicable. The rising price of carbon credits and expected SAF supply constraints pose increased risks for airlines, particularly those operating in heavily regulated markets.

Way ahead

To address the challenges of SAF adoption and secure a sustainable future for aviation, several critical actions are needed. Governments should develop strategies tailored to their specific contexts, considering both local and global feedstock availability. 

By crafting policies that integrate local conditions and available resources, they can create a supportive environment for SAF adoption without imposing undue costs on airlines and passengers. This is particularly crucial for emerging economies, where price sensitivity is high and many airlines may lack the financial resilience to absorb increased costs.

Expanding access to feedstocks is essential. Strengthening systems for collecting and processing waste fats, used cooking oil, industrial greases and other biomass will improve the reliability and efficiency of SAF production. While local feedstocks can be valuable, they may not always meet the demand. 

Therefore, tapping into global feedstock resources may be required for large SAF producers to ensure a reliable supply of feedstock. Improved infrastructure for collection and processing will support this effort, making it feasible to utilise a broader range of feedstocks.

Airlines play a pivotal role in the transition to SAF. Developing long-term SAF offtake agreements will provide stability for producers and help airlines meet regulatory requirements. Collaborative frameworks between governments, industry stakeholders, and airlines can facilitate these agreements and support the integration of SAF into airline operations.

Investments from traditional oil refining companies are crucial for scaling up SAF production. These companies have the infrastructure and financial resources to drive large-scale SAF manufacturing. Governments can encourage this investment by offering incentives and fostering partnerships between refineries, feedstock aggregators and airlines.

Conclusion

Advancing toward a sustainable future for aviation hinges upon large scale adoption of SAF. If the industry fails to scale SAF production effectively, the aviation sector may fall significantly short of its net-zero goals, risking environmental consequences and financial penalties from increasingly stringent regulations.

(Views are personal)

About the author

Jodhbir specialises in aviation consulting, advising clients across geographies on strategy and transformational initiatives.