Here’s how sustainable aviation fuel can take off
in Europe
21 Oct 2020
Kevin
Soubly
Project
Lead, Clean Skies for Tomorrow, World Economic Forum LLC
Lloyd
Pinnell
Associate,
Energy Transitions Commission
Aviation,
Travel and Tourism
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15 major
companies from across the European aviation sector have codeveloped policy
recommendations for delivery to the European Commission and UK government on
how Europe can chart the course for an ambitious transition to sustainable
aviation fuels.
This
proposal is the first time such a diverse group of companies from across the
aviation value-chain – including airplane manufacturers, airlines, airports,
and fuel providers – have collectively backed such policies.
COVID-19
has resulted in arguably the worst economic crisis the aviation industry has
ever faced. Revenues and passenger volumes are at historical lows, causing
ripple effects throughout the travel and tourism industries.
Yet the
pandemic will end, borders will reopen, and air travel will pick up again. As
of 2019, aviation contributed to nearly 3% of global greenhouse gas emissions.
Albeit tempered by expected lasting impacts from the pandemic, aviation’s
greenhouse gas emissions are still projected to increase three-fold by the
middle of this century, carrying with it a substantial impact on the Earth’s
climate.
The
European Commission’s RefuelEU Initiative aims to reduce aviation’s climate
impact. Currently in an initial research and analysis phase, this legislative
effort is intended to establish a policy foundation for increasing the
production volumes and use of sustainable aviation fuels (SAF) in European
aviation to help the EU meet its overall climate goals. The UK government has
also launched the Jet Zero Council to drive its aviation sectors’
decarbonization.
Through the
Forum’s Clean Skies for Tomorrow coalition, stakeholders across the European
aviation value-chain have aligned on key policy proposals to inform the
RefuelEU initiative and UK government policy. Taken together, this
industry-backed policy package provides a clearly defined strategy to scale SAF
in Europe – focused on measures that collectively increase both SAF supply and
demand signals to create a balanced market.
Says John
Holland-Kaye, CEO of Heathrow Airport, “This is the key step that needs to be
taken for aviation to reach its net zero goals.”
Aviation
and decarbonisation
Sustainable
aviation fuels – produced from feedstock ranging from agricultural residue to
carbon removed directly from the air – are an essential pillar of aviation’s
decarbonisation journey. When responsibly sourced, they offer massive gains in
lifecycle carbon reductions vs traditional fossil jet fuel and are fully
compatible with existing airplane and airport infrastructure.
As
hydrogen-based fuel systems and electric aviation are still years away and
offsets are only a transitional solution, SAF is aviation’s best option in the
near term to reduce its lifecycle carbon emissions. But due to limited production
capacity and cost premiums over traditional fossil-fuels, SAF currently
comprises only 0.05% of all jet fuel used.
“This is the key step that needs to be taken for
aviation to reach its net zero goals.”
—John Holland-Kaye, CEO of Heathrow Airport
Sustainable
Aviation Fuel offers a rapid solution that benefits both the environment and
the aviation sector, says Paul Griffiths, CEO Dubai Airports. SAF “does not
rely on new technology and, if implemented quickly, could prevent aviation
being regarded by its potential customers as an environmental pariah.”
Deutsche
Post DHL Group Chief Financial Officer Melanie Kreis agrees: “SAF are essential
for the sector to overcome its environmental challenges by enabling carbon
neutral aviation logistics for a functioning global economy,” she says.
4 key
policy recommendations
Clean Skies
for Tomorrow’s recently released Community Paper, accessible on the Forum’s
digital library, outlines four key policy measures:
Public
policy must support innovation to advance biofuel and power-to-liquid
technologies, emphasizing those with the most significant emissions and cost
reduction potential.
Scaling-up
SAF production and use in Europe to meaningful levels won’t be possible by
relying exclusively on technology pathways available today. Many of the
technologies that are based on the most sustainable types of feedstock, like
power-to-liquid or ‘e-fuels,’ are still in early stages of development and need
policy support to mature and scale at the speeds required to achieve climate
goals.
Government-backed
price floors should be provided through the early stages of SAF production to
enable investment confidence.
As with any
commodity, SAF is reliant upon the laws of supply and demand; production at
scale is dependent on significant demand. The challenge is that SAF faces a
“chicken and egg” conundrum as a result of the significant price premium
between fossil-based jet fuel and SAF: costs will reduce if production scales
up. But fuel providers are lacking a strong demand signal to increase
production and demand is low due to the high price premium.
Policy
mechanisms to secure a price floor for SAF output will be crucial for making
new SAF plants economically viable and to secure necessary investments. This is
especially important in the early stages of deployment before regulations
incentivising SAF demand (such as blending mandates) are in place.
Support
development of SAF production facilities by directly de-risking investments.
Even in a
favourable policy context, investment in first-of-a-kind production facilities
will entail a level of technology and commercial risks that lead to high
financing costs and long timelines to raise capital. This will likely remain
true for the first decade of SAF deployment. Different forms of support from
public investment funds, national government, regional development banks, and
international financial institutions should be used to facilitate these
projects and secure capital.
SAF
blending mandate for European aviation should be announced in 2021, go into
effect by 2025, and increase through 2050.
Key to this
important recommendation is a clear timeline that will enable market confidence
to support major investments in new SAF production infrastructure, make
possible responsible scaling to ensure that only sustainably-sourced feedstocks
are used, and improve emissions reduction capacity over time.
The mandate
is recommended to initially apply only to intra-EEA flights (ideally including
the UK as well). Although the effect will be a powerful incentive to boost
production and investment in SAF, public financial support will be required to
compensate for the effect of competitive distortions, especially on intra-EEA
feeder flights. And additional measures will be needed by 2030 to speed the
decarbonization of long-haul aviation.
CLIMATE
CHANGE
What is the
World Economic Forum doing to help aviation meet net zero goals?
The paper’s
policy recommendations are an important sign of progress, though more
collaboration is ahead.
Further
effort will be required to determine the specific design of blending mandates,
for example, as well as appropriate levels of blending through time given the
feasible ramping up of SAF production.
“We encourage industry and governments to work
together to introduce ambitious, global blending mandates to promote the use of
sustainable aviation fuel.”
—Anna Mascolo, President of Shell, Aviation
Quickly
scaling SAF production and use is possible, however, and to ensure it’s done
effectively, sustainably, and affordably, the policy basket detailed by the
coalition should be implemented in a strategic and sequenced manner. Public
financial backing will be key to unlock cost reductions, and the proposed
policies should be carefully tied to the technically feasible pace of
production ramp up to avoid supply bottlenecks and price volatility.
Says Anna
Mascolo, President of Shell, Aviation: “Shell, Aviation supports the policies
recommended by the CST paper. We encourage industry and governments to work
together to introduce ambitious, global blending mandates to promote the use of
sustainable aviation fuel. Coupled with fiscal incentives, such collaborations
could drive new technologies and help establish SAF production plants and ease
supply chains.”
“Recent
announcements by ourselves and others demonstrate real progress, but there’s
much more work to do,” she says.
Christina
Foerster, Member of the Executive Board Customer, IT & Corporate
Responsibility, at Lufthansa, adds: “The industrialization of sustainable
aviation fuels (SAF) is vital for mitigating airline emissions. … We now need
regulators for an accelerated market introduction, and this report represents a
joint proposal which balances ecological ambitions as well as economic
requirements such as level playing field competition.”
This policy
report was signed by Airbus Group, Deutsche Lufthansa AG, Deutsche Post DHL
Group, Dubai Airports, Groupe ADP, Heathrow Airport, International Airlines
Group, KLM Royal Dutch Airlines, Neste, Ørsted, Royal Dutch Shell, Royal
Schiphol Group, SkyNRG, The Boeing Company, and Velocys, Inc. For more
information on the Clean Skies for Tomorrow coalition or the Forum’s Shaping
the Future of Mobility platform, please contact kevin.soubly@weforum.org.
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