As airlines encourage us to pay additional fees towards sustainable aviation fuel, how successful is the initiative to wean air travel off fossil fuels?
In recent months many airlines have started to offer corporate customers the opportunity to partner with them in sourcing sustainable aviation fuel (SAF). For companies looking to lower their carbon emissions (20 per cent of Fortune 500 companies have set a climate commitment for 2030), it is a way of reducing the emissions caused by their employees travelling. For airlines it means they can reduce their Scope 1 emissions – meaning those stemming directly from its core business – while the corporate reduces their Scope 3 emissions caused by travel. But what effect will buying small amounts of SAF have on the overall emissions that aviation creates, and should you be pushing your company to do the same, or perhaps topping up those contributions by buying SAF as an offset for your own travel?
Aviation accounts for 2-3 per cent of global carbon emissions today, but there is a risk that this could rise to more than 20 per cent by 2050. At present, these emissions are small compared to transport as a whole (around 25 per cent in the European Union), but proportionally they will rise as those other industries reduce their emissions through electric vehicles and biofuels.
Sustainable aviation fuel is seen as the mid-term future for commercial aviation, until new technology – both electric and hydrogen – is brought into mainstream commercial use. At present, SAF makes up only 1 per cent of fuel used worldwide. As the International Air Transport Association (IATA) puts it: “Insufficient supply and high prices limited airline uptake to 120 million litres in 2021– a small fraction of the 350 billion litres that airlines would consume in a normal year.”
Airlines are targeting 10 per cent use by 2030, a huge ramp up, and are committing to buying SAF from producers. They are inviting corporates to help them in this process to encourage more production and help lower prices. It’s a win-win situation, though there is a long way to go. SAF needs to be the primary fuel source by 2050 to meet the industry’s net‑zero targets, which requires a 9,900 per cent increase in usage in less than three decades. The challenge is where feedstock – what SAF is made of – will come from, and whether it is sustainable (see box at end of feature).
Assuming there is enough feedstock, since existing aircraft can use SAF, the issue then becomes one of demand encouraging supply to drive down prices. There are several ways to incentivise the use of SAF, from government-enforced mandates (requiring that a percentage of all fuel is SAF), to airlines signing corporate deals with large customers or even appealing directly to travellers.
“There is a supply problem because there is a demand problem,” says Nora Lovell Marchant, vice-president of global sustainability at American Express Global Business Travel (Amex GBT). “There are not clear demand signals that are sending the right messages to producers to make more SAF. There needs to be an unlocking of investors that are sitting on the sidelines. Those investors could be corporations flying their employees around the world on these airlines. There’s a real opportunity here for corporations to help break this chicken-and-egg issue that is blocking SAF from scaling to its full potential.”
For its part, Amex GBT, along with Shell and Accenture, has launched a new platform called Avelia, which allows both airlines and corporates to source SAF for its flights. Using blockchain technology, SAF can be bought to cover a flight even where the SAF is not available at the airports being flown from and to. Instead SAF is sourced at another airport and put on a different flight, but the credit goes to the airline and corporate. It is hoped this will quickly scale up demand for and supply of SAF. David Reimer, executive vice-president global and multinational clients, and managing director for the Americas, Amex GBT, says there is a need for companies to get involved to drive decarbonisation of the industry and reach ambitious net-zero targets: “If it’s left to individual consumers, nothing is going to happen,” he says, adding that since 3 per cent of carbon emissions are from aviation and of that, 25 per cent is business travel, “to do nothing is really not acceptable”.
Low carbon fuels
On the supply side, facilities are being built. Worley, the project and asset services company for the energy, chemicals and resources industries, is providing design and procurement services to support the development of a low-carbon fuels facility at the Shell Energy and Chemicals Park Rotterdam in the Netherlands.
“A lot of the SAF projects are brownfield developments where we are converting an existing plant,” says Tony Frencham, Worley’s group senior vice-president, chemicals and fuels. “The Shell Netherlands plant will produce 820,000 tonnes of SAF per year. If we want to get to 10 per cent of all aviation fuel by 2030 we would need 46 of those plants.”
Frencham adds: “Economies of scale work: that’s the lesson from the industries we come from. We’ve seen it working with solar, wind and batteries and the history of chemicals and fuels.” He is clear, however, that it will take government support to meet the targets airlines have set. So should governments encourage production and use of SAF through subsidies, mandates or tax breaks?
“In the US at the moment we are seeing that tax credits are working, but my sense is that governments would be better off with mandates of a percentage of SAF,” says Frencham. “The idea is that there would be a set of interim targets of 2.5 per cent, then 5 per cent and 7.5 per cent to get to 10 per cent by 2030 – 2.5 per cent of SAF is not a big addition [in price] on an airline ticket. Consumers will pay for it because consumers are already buying offsets. They need to travel but they need to feel good about travel and feel they are contributing. It’s hard to travel and feel you are contributing to climate change.” Frencham says that, contrary to perception, airlines “should be commended. They’ve done a great job of providing demand security through offtake agreements and that’s not normally the case.”
It’s these offtake agreements that are being supported by the deals and partnerships with corporate customers. When Delta, for instance, strikes a deal with Deloitte under which the global consulting firm buys SAF through Delta to help offset its business travel emissions, it will narrow the price premium of SAF over conventional jet fuel. Delta will begin taking delivery of more than 303 million litres of SAF in 2024, compared to 11 million litres a year at present.
“In the journey forward, sustainable aviation fuel is the most critical thing that we have to achieve our joint efforts between an airline and a corporation trying to reduce its business travel emissions,” says Amelia DeLuca, vice-president of sustainability for Delta Air Lines. But as with all those working in aviation, DeLuca is clear about the need for government support.
“But [SAF] is price-prohibitive not only for us as a company but for many customers who would like to purchase it. Government policy is critical at this point.” says DeLuca. DeLuca is keen that the message to the “business travel community is to understand that there’s a solution available now. There is no reason to stop flying. If you’re looking to hit your own internal emission-reductions targets, sustainable aviation fuel is there for you. Get in the game now because we also want our corporations to be with us to help figure out how we engage on this as we move forward,” adds DeLuca.
Airlines are increasingly forging these deals with corporate customers, including Air France KLM, Jetblue, Qatar Airways, Cathay Pacific, Delta and ANA. British Airways has signed up cargo customers and gives passengers the opportunity to purchase both nature-based offsets (supporting cookstoves in Nigeria, for instance) and buying an additional offset so that 10 per cent of their flight emissions are reduced by using SAF. This means that the airline “will source the SAF quantity necessary to make 10 per cent of your flight emissions carbon neutral.” The CO2 emissions associated with the SAF purchased will then be allocated “and audited for British Airways by an independent assurance company”.
For individuals, BA is encouraging passengers to pay for SAF by making it easy for them to do so. Those flying with British Airways, for instance, can do so at the time of booking, but only by following a link from ba.com. The aim is to incorporate it fully into the booking process.
“Part of the product development we’re doing is trying to bring in different channels and make it easier for customers as we know that every additional step is likely to reduce the level of participation,” says Carrie Harris, BA’s head of sustainability. “Since we introduced the SAF option, despite it being several times more expensive, perhaps five to six times more expensive, some 30 per cent of people are choosing it versus standard offsets. By giving options, we’re helping people make that choice if they want to contribute to in-sector emissions reductions and support the development of the nascent technology as well.”
BA has also added the ability to buy SAF from the onboard Speedbird café for European flights, and from the wifi portal onboard long-haul flights. If you find yourself on a flight thinking about climate change, you can use the portal to calculate your emissions and choose to offset and, possibly, also purchase SAF.
Could more be done? There is no single solution to reducing the high cost of SAF. Producing it in volume will make the price drop, but for that to happen, governments will have to play a major role, both in encouraging production, and in forcing demand to go up through carbon pricing, either through emissions trading systems (ETS) or a carbon tax. This would mean that an airline would have to either pay for SAF, or pay a similar price for the carbon they would emit from their flights up to whatever the percentage mandate is. The price differential between SAF and jet fuel could also be lessened by a tax on jet fuel (kerosene). Campaigners point out that all other transport fuels – apart from kerosene – are taxed, and so removing this exemption would raise revenue while also helping lessen emissions through demand management (by raising the cost of flying and so reducing demand).
As part of the European Union ReFuelEU Aviation initiative, there are proposals to introduce a tax on kerosene in the 27 countries in the EU on a gradual scale over the next ten years – still, as you can imagine, airlines are not keen on this. “Making jet fuel more expensive through taxation scores an ‘own goal’ on competitiveness that does little to accelerate the commercialisation of SAF,” says IATA director general Willie Walsh. IATA argues that taxes “siphon money from the industry that could support emissions-reducing investments in fleet renewal and clean technologies”. In other words, by reducing the potential profits of the airline industry, it leaves less money to invest in technologies such as SAF.
It is a similar story worldwide. Worley’s Frencham says: “From a regulatory point of view, Europe with its green deal will be very helpful for the airlines and we are seeing good uptake in North America, but outside of that we are only seeing investments in Singapore.”
Qantas, for instance, is signing deals where it will source its SAF abroad, in the US and the UK, for instance, because there is no domestic supply, although it has pledged AU$50 million (£28 million) to support the development of a domestic SAF industry and promises to be its biggest customer.
Not a day goes by without a new announcement with regard to SAF. At the time of going to press Lufthansa and Shell had signed an exploratory Memorandum of Understanding to increase the supply of SAF up to 594 million gallons (1.8 million metric tonnes) in total in the years 2024 to 2030, and this SAF would be produced by Shell using up to four different approved technology pathways and a broad range of sustainable feedstocks.
Meanwhile, in July and August TAP Portugal, Cathay Pacific and Aer Lingus announced new initiatives. Will it be enough? We will have to see whether these offtake agreements are enough to convince producers, but without widespread – and expensive – government support, SAF will remain a future possibility when it should be a present imperative.
WHAT IS SAF?
Sustainable aviation fuel (SAF) is an aviation fuel made from sustainable and renewable sources which can act as a substitute for fossil jet fuel. SAF is perhaps best understood as a collective term for many different types of fuel. It is the feedstock – what goes into the mix to create the SAF – as well as the process by which it is made that determines just how “sustainable” the fuel is.
Ideally in the near future, SAF will be produced from waste, including used cooking oil, certified sustainable vegetable oils, waste animal fat and other industrial and agricultural residue. As demand increases, however, these sources will quickly become exhausted (and are expensive to source), so further feedstock will be needed, ideally, ultimately, synthetic kerosene which is made from water, captured carbon and renewable energy. To read more, see our feature ‘Sustainable aviation fuels: Ready for take-off?’
What effect will Russia’s invasion of Ukraine have on fossil fuel and biofuel prices?
- Fossil fuels
Not surprisingly, Russia’s invasion of Ukraine is likely to cause a spike in the price of fossil-based fuel. Other countries are now focused on fuel security, the necessity of finding alternatives, and the possibility of increasing investment in alternative sources, including renewables and even nuclear power. A significant obstacle to the adoption of SAF is its high price when compared to fossil fuels. From one point of view, if the price of fossil fuels goes up, the differential with SAF becomes less and SAF becomes more competitive. On the other hand, if the feedstock is from agriculture, then this is an industry which relies on fossil fuels and so the price of the SAF feedstock also goes up.
Biofuels are made with a number of different feedstocks, and there are growing calls, particularly among Europe’s biofuels lobby, for Russian oil to be replaced with biofuels made from crops , including wheat, corn, barley, sunflower, rapeseed and other vegetable oils. The problem is that it will be politically unacceptable at a time of rising food prices in the wake of Putin’s invasion of Ukraine.