Business
SAF production boost hinges on incentives, subsidies and tax breaks
September 06, 2023 | 06:35 PM
Sustainable Aviation Fuel (SAF) is considered a critical component in reducing the aviation industry's carbon footprint and achieving sustainability goals. SAF has clearly emerged as a key feature within the industry as the world aims to achieve ambitious climate targets.The airline industry’s biggest focus now seems to be on sustainable aviation fuel, which will be the biggest contributor to its targeted net zero carbon emissions by 2050.SAF represents a broad category of fuels derived from non-fossil sources, including advanced biofuels and e-fuels, offering a sustainable alternative to conventional jet fuel.Global trade body of airlines - International Air Transport Association (IATA) estimates that SAF could contribute approximately 65% of the emissions abatement necessary for aviation to achieve its goal of reaching net zero CO2 emissions by 2050.Airlines have continued to announce their SAF offtake agreements, reaching 41 publicly announced SAF offtake agreements and 18 non-binding agreements since 2022, including both memoranda of understanding (MoUs) and letters of intent.Those agreements represent a total blended SAF volume of around 26mn metric tonnes. Considering the current blending ratio of 30-40% SAF and 60-70% conventional jet fuel, the total volume of neat SAF in these offtake agreements can be estimated to be around 8-10mn tonnes.Among the total of 59 SAF offtake agreements, some 51 agreements are based on Biofuel SAFs from four pathways, namely Hydro-processed Esters and Fatty Acids (HEFA), HEFA Co-Processing, Syngas Fischer-Tropsch (Syngas-FT), and Alcohol to Jet (AtJ). The remaining eight are associated with E-Fuel SAF, derived from various power-to-liquid projects.Based on IATA’s data sources, in excess of 130 renewable fuel projects have been announced publicly by more than 90 producers in some 30 countries across the world.Each of these projects has identified commitments to producing SAF in their product slate. Adding a few more projects in the second quarter of 2023, these projects represent an estimated overall renewable fuel capacity of 57mn tonnes by 2029.Given a three to six year lag between project announcement and commercialisation, IATA says further capacity announcements for 2026 and beyond can be expected, leading to additional facilities and in turn SAF production.Earlier, International Air Transport Association unveiled a series of roadmaps aimed at providing step-by-step detailing of critical actions and dependencies for aviation to achieve net zero carbon emissions by 2050.These roadmaps address aircraft technology, energy infrastructure, operations, finance, and policy considerations leading to net zero.At a media event during the IATA AGM in Istanbul in June, IATA Director General Willie Walsh said: "SAF production is less than 0.1% of what we need for net zero. But the trend is positive. In 2022, SAF production tripled to 300mn litres. And while critics of our industry dismiss that figure as irrelevant, it’s important to remember that airlines used every single drop costing almost $350mn."With the right supportive policies, reaching 30bn litres by 2030 is challenging but achievable. That would be about 6% of the 450bn litres annual production capacity we need in 2050. We think it will be the tipping point because achieving it will establish the trajectory needed to scale up for 2050.”On why the airline industry was not moving faster on the issue, he said, "The willingness of airlines to use SAF is definitely not the issue. As I have said, every drop of SAF ever produced has been purchased and used. The problem is insufficient production capacity to meet demand."That’s why we must increase the number of pathways for SAF production and diversify feedstocks — of course while maintaining their sustainability credentials. Doing so will open production opportunities best suited to particular geographical locations.”Undoubtedly, the aviation industry has the roadmaps to achieve energy transition. The industry leaders have reiterated time and again that their commitment to net zero by 2050 is fixed and firm.But to get the job done, SAF production has to be boosted. But stepping up SAF production is a complex and multifaceted endeavour that requires the concerted efforts of governments, industry stakeholders, and the research community.Governments and regulatory bodies need to provide incentives, subsidies, and tax breaks to encourage SAF production.This may include mandates requiring airlines to use a certain percentage of Sustainable Aviation Fuel in their fuel mix, which will then create a guaranteed market for SAF producers.By addressing these key areas, the airline industry can certainly work towards a more sustainable and environment-friendly future.
September 06, 2023 | 06:35 PM