Fuel for thought, the role of SAF in achieving net-zero by 2050

SAF – What is it?

SAF is a renewable or waste-derived aviation fuel that meets established sustainability criteria[1]. European Union Directive (EU) 2018/2001 (RED II) defines SAF as being both synthetic aviation fuel[2], or biofuel produced from agricultural or forestry residues, algae, bio-waste, used cooking oil and certain animal fats[3] or any other feedstock with ‘high sustainability potential’[4].[5]

The sustainability criteria set out in schemes such as RED II or ICAO’s Environmental Protection Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)[6]  would consider both the type of feedstock used as well as the production pathway to determine whether SAF achieves a requisite life cycle reduction in CO2 e (carbon dioxide equivalent) emissions as compared to conventional jet fuel. There seems to be a preference that SAF must achieve a reduction of not less than 60% of life cycle CO2 e emission as compared to conventional jet fuel in order to be certified as ‘sustainable’.[7]

SAF – What is it good for?

Civil aviation accounts for around 2.5% of global anthropogenic carbon emissions and this figure is predicted to grow in line with the growth of air transport. It is a difficult industry to decarbonise because of its reliance on fossil fuel, but one promising near-term solution is for aircraft to use SAF.

SAF reduces the amount of new CO2 released into the atmosphere by recycling roughly the equivalent of the CO2 that the biomass absorbed from the atmosphere over its lifetime. It is estimated that SAF could reduce new CO2 e emissions by up to 80% over the life cycle of the fuel compared to conventional jet fuel, depending on the type of feedstock used and the production method.[8] Additionally, SAF also contains fewer pollutants such as sulphur dioxide and particulate matter. The International Air Transport Association (IATA) estimates that SAF could contribute around 65% of the reduction in emissions needed by aviation to reach net-zero by 2050.[9]

SAF is chemically similar to kerosene and could therefore be used as a direct replacement for conventional jet fuel or be blended with conventional jet fuel. It is called as a “drop-in” fuel, in other words compatible with many modern jet engines and current fuel delivery infrastructure. According to IATA, over 450,000 flights have already been made on existing aircraft using SAF; over 50 airlines have experience with SAF and over 60 airports are currently distributing SAF. The commercial sale of SAF at the moment is still subject to blending limits (currently 50%), but several flights using 100% SAF have been completed[10], including some with passengers on board.[11]

The World Economic Forum’s Clean Skies for Tomorrow Coalition aims for the industry to run on 10% SAF by 2030 compared with only 0.1% in 2021[12]; and there is certainly no lack of news announcing new SAF supply (or offtake) agreements. Many airlines, manufacturers and some aircraft leasing companies are partnering with suppliers to achieve their SAF goals. One example is the Air France-KLM and TotalEnergies memorandum of understanding for 800,000 tonnes of SAF over a 10-year period, scheduled to commence in 2023.[13]

The graphs below show the year-on-year increase in the number of SAF offtake agreements publicly announced, and the volumes of SAF procured, from 2013 to 2022.

Source: ICAO

Clearly, increasing the output required for SAF to achieve 10% of demand by 2030 will require a massive increase in production, but we are seeing an increase in the construction of refineries. As an example, Neste, a Finnish company and leading manufacturer of SAF, is scheduled to complete its new refinery in Singapore in the first quarter of 2023. Once commissioned, it will be the world's largest SAF production facility, producing up to 1 million tonnes of fuel a year.

SAF - What are the hurdles?

There are, however, a number of significant barriers to the world-wide use of SAF. The most significant of these are (i) the high cost of producing SAF and (ii) the lack of sufficient feedstock to produce the quantities of SAF needed to meet the ambitious goals.

SAF is more expensive to produce than conventional jet fuel. This is due partly to the lower quantities produced but also a result of the new infrastructure required. With fuel cost making up a significant percentage[14] of the operating cost of an airline, airlines are extremely sensitive to fuel price hikes; and if airlines are not going to buy more expensive SAF, producers would have no incentive to invest the necessary capital required to increase production.

The industry has therefore called for long-term policy commitments from governments and governmental organisations to encourage the use of SAF. Broadly this support could be in the form of subsidies applied to the production of SAF (resulting in a price comparable to conventional jet fuel) and/or incentives to produce and use SAF (in the form of tax or carbon credits). Some policies could also include a “stick” along with the “carrots” to force airlines to use SAF.

SAF – Current and future policies and incentives

A number of countries have already introduced policies focused on SAF. ICAO lists about 25 such policies in place or currently under development. This scattered approach is not ideal in a global industry such as aviation, but given that the capacity of countries to produce SAF varies greatly, a one-size-fits-all SAF policy may be difficult to achieve.

European Union - ReFuelEU

In 2021 the European Commission presented its proposed legislation to promote the use of SAF, called ReFuelEU. The ReFuelEU Aviation Initiative is part of the EU’s ‘Fit for 55’ package which has the goal of reducing overall greenhouse gas emissions in the EU by at least 55% by 2030 compared to 1990 levels, and to achieve climate neutrality by 2050. ReFuelEU is a proposal for an EU level regulation to promote to the use of SAF on all flights leaving EU airports.

The regulation would include the following:

• The mandatory blending of SAF with conventional jet fuel supplied to EU airports. The requirement is expected to start in 2025 with a minimum volume of 2% SAF and increasing in five-year intervals to reach a minimum volume of 63% by 2050. There is also an obligation for aircraft operators to uplift blended SAF when departing from EU airports and for EU airports to be equipped with the required storage and blending infrastructure to allow fuel suppliers and aircraft operators to meet their obligations.
• Prioritizing feedstock for SAF production and ensuring that the list of eligible sustainable feedstock is as inclusive as possible to maximise the potential for scaling up. At matters stand, crop-based biofuel is not eligible due to the concerns around its sustainability.
• Establishing an obligation for aircraft operators to ensure that the yearly quantity of aviation fuel uplifted at a given EU airport is at least 90% of the yearly aviation fuel required. This is to prevent the practice of fuel “tankering” where aircraft operators upload more fuel than necessary at airports where fuel is less expensive.
• Incentivising the use of SAF through the EU ETS.[15]
• Setting out reporting requirements for both aircraft operators and fuel suppliers and applying financial penalties for failing to comply with the obligations.

Unfortunately the planned entry into force of ReFuelEU regulation (which was 1 January 2023) had to be pushed back when parties failed to reach an agreement during the third trilogue in December 2022. The European Parliament and Council differed on what feedstock should be designated as “sustainable” and what percentage of SAF should be mandated. The negotiations will continue in 2023.

Separately, the inclusion of aircraft in the EU’s “taxonomy for sustainable finance” - a framework designed to guide capital into environmentally friendly activities - is being assessed by the European Commission.[16] If included, it would mean that new jet fuel-powered aircraft could be classified as a green investment under EU sustainable finance rules.

UK - Sustainable Aviation Fuel Mandate

The UK’s ‘Sustainable Aviation Fuel Mandate’ is aimed at reducing the carbon footprint of the aviation sector. It requires that by 2030 at least 10% of jet fuel sold in the UK must be SAF. The mandate is part of the UK government's broader strategy to reduce emissions from the transport sector and achieve its goal of net-zero emissions by 2050. By requiring a minimum level of SAF to be blended into aviation jet fuel, the UK aims to incentivize investment in the production and distribution of SAF.

The blending mandate is expected to be enforced through a combination of incentives and penalties, such as tax credits for the use of SAF, and fines for non-compliance. The UK government has stated that it will work with the aviation industry to support the development of the SAF supply chain, and ensure that SAF is produced sustainably.

Heathrow Airport recently urged the UK government to help increase the commercial production of SAF and emphasized the importance of government support. Without such support, they say, favourable tax credit schemes such as those in the US, for instance, could divert investments in SAF production away from the UK.[17]

US - Sustainable Aviation Fuel Grand Challenge Roadmap

The US’s ‘Sustainable Aviation Fuel Grand Challenge Roadmap’ is aimed at accelerating the development and implementation of SAF. The goal of the roadmap is to achieve large-scale production and use of SAF by 2030. The roadmap outlines the various challenges that need to be addressed, including the development of scalable production technologies, the establishment of a regulatory framework, and the creation of a supply chain for SAF. The roadmap also identifies the key stakeholders who need to be involved in the development and deployment of SAF, such as governments, industry players, and research institutions. The ultimate goal is to reduce the aviation sector's carbon emissions to net-zero by 2050, in line with the Paris Agreement. It is to be noted that the roadmap sets out policy options, but does not suggest any preferences. Legislative action will be necessary to implement the goals of the roadmap.

The EU and the US have similar goals for sustainable aviation regulation, but their approach is different. While the EU's approach is more direct and aims to reduce emissions through mandatory use and reporting requirements, the US is more focused on improving the efficiency of the aviation industry by encouraging airlines through subsidies (e.g. a blending tax) under the Inflation Reduction Act.

The US, as a single market, can also act as a leading example to test SAF on a large scale. The goal is to produce 3 billion US gallons of SAF by 2030 and to enable the scale-up of the production to 35 billion gallons per year by 2050 to meet 100% of domestic aviation fuel demand.

Conclusion

The aviation industry’s carbon emissions are hard to abate. Adopting the use of SAF is regarded as the most feasible mid-term solution to lower carbon emissions in aviation and it is therefore rapidly becoming an essential element in aviation companies’ carbon-cutting strategies.

However, several hurdles to increase the production and use of SAF still have to be overcome. Commercial adoption of SAF will require cooperative efforts from airlines and fuel producers, but governments and policymakers will need to do their share to construct the regulatory environment to incentivise the production and use of SAF while ensuring a level playing field between airlines.

Co-authored by Cea Mittler

[1] Annex 16 - Environmental Protection, Volume IV, Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

[2] Synthetic aviation fuel is unfortunately beyond the scope of this article, but is fascinating field in its own right. See for instance the efforts of Zero® Petroleum to synthesise fuel using air, water and renewable energy.

[3] As listed in Part A of Annex IX to RED II.

[4] As listed in Part B of Annex IX to RED II.

[5] As defined in Articles 29(2) to (7) RED II and certified as provided for in Article 30 RED II.

[6] Sustainability Criteria for CORSIA Eligible Fuels, ICAO document, November 2021. Available at https://www.icao.int/environmental-protection/CORSIA/Documents/ICAO%20document%2005%20-%20Sustainability%20Criteria%20-%20November%202021.pdf

[7] SAF Certificate Emissions Accounting and Reporting Guidelines, WEF, White Paper October 2022. Available at https://www3.weforum.org/docs/WEF_SAFc_Accounting_Guidelines_2022.pdf

[8] Developing Sustainable Aviation Fuel (SAF), IATA. Available at: https://www.iata.org/en/programs/environment/sustainable-aviation-fuels/.

[9] Incentives Needed to Increase SAF Production, IATA, 21 June 2022. Available at https://www.iata.org/en/pressroom/2022-releases/2022-06-21-02/#:~:text=To%20fulfil%20aviation's%20net%20zero,to%205%20billion%20by%202025.

[10] First flight in history with 100% sustainable aviation fuel on a regional commercial aircraft, Neste Corporation, 21 June 2022. Available at https://www.neste.com/releases-and-news/renewable-solutions/first-flight-history-100-sustainable-aviation-fuel-regional-commercial-aircraft ; Airbus A330MRTT completes first 100% SAF test flight on both engines, 18 November 2022. Available at https://www.airbus.com/en/newsroom/press-releases/2022-11-airbus-a330mrtt-completes-first-100-saf-test-flight-on-both-engines - :~:text=Brize Norton, 18 November 2022,carried out in UK airspace.

[11] Sky’s The Limit: First Passenger Flight Powered by 100% Sustainable Aviation Fuel Marks New Milestone, December 2021. Available at https://pmt.honeywell.com/us/en/about-pmt/newsroom/featured-stories/uop/first-passenger-powered-by-100-percent-saf-marks-new-milestone

[12] Clean Skies for Tomorrow Leaders: 10% Sustainable Aviation Fuel by 2030, 22 September 2021. Available at https://www.weforum.org/press/2021/09/clean-skies-for-tomorrow-leaders-commit-to-10-sustainable-aviation-fuel-by-2030/ ; IEA (2022), Aviation, IEA, Paris. Available at https://www.iea.org/reports/aviation

[13] Air France-KLM and TotalEnergies sign memorandum of understanding to supply sustainable aviation fuel for 10 years, 5 December 2022. Available at https://www.airfranceklm.com/en/newsroom/air-france-klm-and-totalenergies-sign-memorandum-understanding-supply-sustainable-aviation.

[14] Fuel costs constituted approximately 19,5 percent of total expenditure in 2022. Statista, 2023. Available at https://www.statista.com/statistics/591285/aviation-industry-fuel-cost/.

[15] In December 2022 the EU’s Council and Parliament reached a provisional agreement on revisions to the EU ETS ensuring that aviation contributes to the EU's emission reduction objectives under the Paris Agreement. Around 20 million free allowances have been reserved between 2024-2030 to incentivise the uptake of eligible SAF. 5 million allowances will be transferred to EU’s Innovation Fund for clean technology.

[16] Will the EU approve the biggest act of aviation greenwashing in decades?, Euractive, 20 February 2023. Available at https://www.euractiv.com/section/aviation/opinion/will-the-eu-approve-the-biggest-act-of-aviation-greenwashing-in-decades/

[17] Heathrow urges government to make SAF more viable, 23 February 2023. Available at https://biofuels-news.com/news/heathrow-urges-government-to-make-saf-more-viable/