Sustainable aviation fuel takes off

A green alternative to kerosene will allow airlines to decarbonise

10 August 2021 Andrew Lobbenberg, Aviation analyst

Airlines’ decarbonisation policies before the pandemic focused on offsetting measures such as re-forestation rather than directly reducing their own carbon emissions. Now, however, the aviation industry is looking to decarbonise flying directly. But while electric planes and hydrogen-powered aircraft may be feasible in the long term, sustainable aviation fuel – SAF – seems set to overtake them.

Sustainable aviation fuel is a non-fossil low-carbon alternative to kerosene that can be made from feedstocks such as vegetable oils, used cooking oil, forest and agricultural waste, municipal garbage or even algae. Non-food crops grown on low-grade land or salt marshes are suitable. These multiple feedstocks mean SAF is a broader concept than biofuel.

Electric aviation looks like it will be limited to small regional aircraft, and the first hydrogen-powered services are expected to be more than a decade away, so IATA, the airlines’ trade body, foresees sustainable aviation fuel accounting for 97 per cent of aviation decarbonisation, excluding offsetting, by 2030-35.

However, SAF made from used cooking oil currently costs two to three times the price of kerosene or 10 times as much if made using the cutting-edge ‘power to liquid’ technology that combines green hydrogen with industrial waste CO2.

But increased demand for sustainable aviation fuel will likely incentivise investment in the sector, and costs should fall as it is industrialised.

Policymakers can help boost that demand. The EU’s ‘Fit For 55’ programme, which aims to cut emissions by 55 per cent by 2030, proposes mandating the use of sustainable aviation fuel while closing the price gap by adding taxes to kerosene and setting higher carbon prices for airlines in the bloc’s Emissions Trading System.

European airlines are objecting to being disadvantaged relative to global competitors, and low-cost carriers don’t like kerosene pricing being applied only to intra-European passenger flying.

If the proposals do come into effect, airlines should expect to see fuel and carbon costs at least double over the coming decade, but that would be by no means atypical. The cost increases would likely require a 20 per cent-30 per cent jump in fares over the decade – 2 per cent to 3 per cent a year – but during the past 60 years, aviation has regularly absorbed a doubling of fuel prices each decade.

And, over time, sustainable aviation fuel pricing and supply should be significantly more stable than fossil-fuel kerosene. With multiple technologies and feedstocks, it can be produced across a wide range of countries, making aviation fuel potentially less exposed to geopolitical volatility in oil-producing nations.

Technological advances in aviation have lagged the sector’s growth rate. But emissions cannot keep growing. The sector is under pressure to define a credible pathway to decarbonisation by 2050. For aviation to defend its right to exist and expand, decarbonisation is imperative, and this is unlikely to happen without the successful industrialisation of sustainable aviation fuel.

First published 27th July 2021.

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