Amid growing skepticism that airlines can achieve net zero emissions in 2050, a report lays out a road map for rapidly scaling up sustainable aviation fuels.
Listen in as one of those skeptics, Aviation Week’s Graham Warwick, talks with Kearney's Claudia Galea, a co-author of the report.
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Transcript
Announcer:
With a global team of 52,000 employees building on more than a century of innovation and learning, GE Aerospace is committed to inventing the future of flight, lifting people up and bringing them home safely. Learn more about how GE Aerospace and its partners are defining flight for today, tomorrow, and the future at geaerospace.com.
Joe Anselmo:
Welcome to this week's Check 6 Podcast. I'm Joe Anselmo, Editorial Director for the Aviation Week Network and Editor-in-Chief of Aviation Week magazine. Two years ago, Air New Zealand became only the second airline to set a science-based target to reduce its carbon emissions by 2030. Last month, the carrier achieved a more dubious milestone when it became the first airline to remove its 2030 target.
A rising chorus is questioning the viability of the airline industry's nearly four-year-old goal of achieving net-zero emissions by 2050. Cutting edge technologies such as electric or hydrogen propulsion won't be ready on a large scale, meaning sustainable aviation fuel, or SAF, will have to play a central role.
But there's no agreement on how the gargantuan quantities of SAF that would be needed by airlines will be produced, let alone how they would pay for it. But it can be done. A report issued earlier this year by the World Economic Forum in collaboration with Kearney lays out a roadmap for how stakeholders such as energy producers, airlines, aircraft builders, financiers, and governments can unite to achieve a rapid scale-up of SAF.
With us today is one of the co-authors of that report. Claudia Galea is the global sustainability director at Kearney. Joining her is Aviation Week editor, Graham Warwick, our foremost authority on sustainable aviation technologies. Claudia, thanks for joining us. Do you want to tell our listeners a little bit about what your report says?
Claudia Galea:
Absolutely. Thank you. Sustainable aviation fuel, as we all agree, is the only solution we have for this hard-to-abate sector in the near term. As we've talked about many times, electrification and hydrogen is way out there beyond 2030, '35 even, and that leaves us with the only solution we have at hand. It doesn't come without any challenges of course, and there's also rising skepticism on how we're going to reach the 2030 and let alone the 2050 net-zero targets that most of the aviation players have committed to.
Now, as you said, Joe, in your opening statement, there are airlines that are backing out from that commitment, but it doesn't mean that the aviation sector will take a pass. We are all committed as a global citizen to reduce carbon emissions for this planet and there's no one sector alone that can do it. So we all have to do our part.
Now, our report that was issued earlier this year, as you said Joe, looked at the ecosystem. We looked at companies that are producing sustainable aviation fuel and jet fuel. We looked at airports, we looked at OEMs, airlines, passengers, corporate customers, and finally regulators. All of these players in the ecosystem need to collaborate in order to achieve these targets and scale sustainable aviation fuel.
Joe Anselmo:
Claudia, you posted on LinkedIn that you were going to come on this podcast and clear up some misconceptions about SAF. What exactly are the misconceptions about SAF?
Claudia Galea:
Thank you for pointing that out. So the misconception is that when sustainable aviation fuel is blended with jet fuel in the airplane, at the tailpipe, emissions are going to be lower than if an airplane is using jet fuel by itself. That is not the case. The benefit and the value of SAF is at the source, and that is why we are now collaborating across different industries, which in my case, is the first time that I'm collaborating with energy companies, but also agriculture players as well. So in a way, it's very important to understand the different pathways that SAF can be produced and the difference in carbon emission reduction that each pathway has resulted.
Of course, every pathway has its own cost and every pathway has its own feasibility, and each pathway is very relevant to where the SAF is being produced. So meaning a region that has abundance in let's say corn or sugarcane, like what we're seeing, some of my clients are in Brazil, there is an alcohol to jet pathway that is used and explored now to scale SAF. Before we go into the details of the different pathways, what I'm saying is the selection of feedstock processing can make an impact as wide as from reducing SAF carbon emissions from under 30% to over 85% based on getting the right feedstock selection and the processing methodologies.
Joe Anselmo:
Graham, you were just on Check 6 in May lamenting that reaching that 2050 net-zero goal looks really, really tough. Do you still feel that way after reading Claudia's report?
Graham Warwick:
Going back to that podcast with our colleague, William [Moore], we gave William a bit of a hard time on that podcast, I mean, he basically said that they should abandon the targets, they were totally infeasible. And my argument was twofold. One is that it's actually wrong to compare the current rate of growth in SAF with the rate of growth of air transport. The point he made was that since we've recovered from 2019, aviation is back on its kind of traditional growth curve, and that means that if we don't do something, we're going to massively increase our share of the emissions in the long term. At the same time, SAF is really, really in its infancy and very small amounts are being produced, and he just looked at the two and said, "This just isn't going to work."
Well, they're on two different curves. One is a long-established curve that's been going for decades. SAF is at that beginning of the S curve. It's just starting to pick up. IATA, which is the international airlines association, said this year that SAF has tripled from... SAF production will be three times this year, what it was last year. Now that's still a tiny amount, but it's showing you that it's starting to move up that S curve. The Energy Information Agency says that US SAF production will increase around about 15 fold by 2030 based on announced projects to build refineries and could be 25 times that by 2030, again based on announced... So the fact is that curve is accelerating as we speak, right
The second thing, the point that I made at the time is that even if we miss the 2050 target for some reason, we've got to hit 2050 on a downward trajectory to continuously lower emissions. So 2060 will be real emissions reductions versus 2050, not net, but real, and 2070, we'll be getting close to real operational carbon zero operations. Because as Claudia says, and this is my biggest issue with SAF, and we've literally just seen this happen, SAF does not reduce tailpipe emissions. You are still putting the same amount of carbon into the... It might be a slightly cleaner fuel, less particles, less this, that and the other, but you're still putting carbon into the atmosphere. And we just saw that kind of illustrated with the Virgin Atlantic 100% SAF flight. They ran an advertisement in the UK saying world's first 100% sustainable aviation fuel. Joe Public listened to the ad and said 100% sustainable. That's the two words they saw together. They didn't see that it was 100% of a particular type of fuel, they saw it was 100% sustainable.
And I think the problem with SAF long-term at the moment, because it doesn't reduce tailpipe emissions, it's not the long-term solution for aviation. The long-term solution for aviation is real emission reductions, which is electric, hydrogen, maybe synthetic fuels that we can come up with that are less emitting. I don't know. So my point was that if we take the foot off the pedal on the net-zero 2050, we risk hitting 2050 and then simply just going flat and not reducing emissions really, just accounting for them differently. And that's my concern as we speak at the moment with people rethinking these targets, is that these targets are drivers. These targets are adding urgency to the need to do something, and it's urgency on SAF production. It's also urgency on saying SAF isn't always going to be the answer. We need to keep moving electric hydrogen more efficient, turbine engines, you name it, we need to keep this moving.
My concern when you get a thing like Air New Zealand doing what it did is that if that spreads, then the foot off comes off the accelerator and we just kind of bottom out, and then we just bubble along, not really making any difference to what goes on. So those are my two things and I still feel the same way. In fact, I feel more so that we really need to be very, very careful about playing with these targets. I think we need them, the industry needs them. We've got to be realistic about what these targets actually mean. But we've got to look beyond 2050. We've got to hit 2050 on a downward trajectory to be cleaner and cleaner and cleaner.
Joe Anselmo:
And when Graham mentioned William Moore, he was talking about William Moore, Aviation Week’s sustainability analyst. Claudia, I want to let you respond to that. He just dangled 2070 out there. You're still looking at 2050, aren't you? And you talked about some pathways, maybe you want to educate us on that.
Claudia Galea:
I really enjoy partnering with people like Graham because they not only confirm the need that our vision is achievable with the right levers and with the right efforts, but it also provides the data that I don't actually look at on a daily basis. I mean my work on a day-to-day is literally on the ground with energy producers and with airlines trying to convince them both that one has to produce affordable SAF for airlines to consume because airlines are running on laser thin margins, and airlines need to stop complaining and make the commitments between now and 2030, and not in onesie, twosie year off take agreement, but we need to see five, 10 year agreements with real commitment, not a lot of outs from those off takes. So it does take a coercive effort. And then the other thing that I would like to respond to Graham is I would love to look beyond 2050, but right now, I can't see beyond 2030.
The US goal is three billion of SAF per year by 2030 to be produced, and then 35 billion to be produced per year by 2050. We are now a drop in the ocean, where we are with SAF production. And I really enjoyed hearing Graham saying that there is movement and we're starting to see the uptick because like I said, I am here on the ground with my clients that are pouring, some them even their own money, on SAF productions. And a SAF production plant doesn't require a $100 million investment, it requires billions of dollars of investments. So I have net worth individuals that are actually pouring between $3.5 to $4 billion in the US to produce SAF.
What are they going to be doing with the SAF? They're looking at exporting it to Europe. Why? Because Europe is putting pressure on airlines to be sustainable, not only by increasing the requirements for them to have SAF, like for example, now shifting to Asia. Singapore came up with a requirement that every airline that leaves Changi Airport has to have a percentage of SAF by 2026. The European Union is putting pressure on airlines that with the carbon tax, with the jet fuel carbon tax. So essentially, that's going to make jet fuel more expensive.
So the way I'm advising my clients, if you want to price it in a way that airlines would be willing to pay the price, because really at the end of the day it's all about financials, they need to start looking at SAF price plus the carbon tax. SAF is always going to be more expensive than jet fuel, at least for the near future. In order to bridge that gap, the finance gap, we need public and private funding capital. And I'm sure we'll be talking about the solutions later on in this podcast, but I just want to tease it out a little bit, is that even by putting SAF at the price point of jet fuel plus carbon tax, still the energy producers will be producing SAF at a loss. So how are we going to bridge that gap?
And then one more final point I want to say, going back to the original opening statement of this podcast is that the misconception of SAF, it is cleaner fuel, it is cleaner the way it's produced. So that is how we are extracting carbon from the air in order to produce SAF. It doesn't come up without risks. So depending, let's say HEFA is the pathway that we're using, is most available and looked at in the near term, but there are risks with that pathway. There is deforestation risk, there is soil loss risks, there's water pollution, and it's also the risk for shooting food prices up because we don't want to compete with food sources. To mitigate those risks. We need to look at selecting the right feedstock for the right region, understanding which pathway makes more sense for that region and for the available raw material and the prices that raw material has at the point.
And also let's not forget the transportation element of SAF. It's produced in one place but has to be consumed in somewhere, sometimes in a different continent, right? So we're talking about the south green corridors and we're talking about green corridors. It has to be transported and also in a sustainable way. So looking at shipping routes, using other fuel, alternative energy for shipping to ship SAF to other regions. So this is a very complex ecosystem that has to start working together like a machine. Right now, we're really just skimming the surface with getting players on the same page.
One last comment. I do have hope. I see a lot of commitment not only from airlines, producers, but also government and lobbying and associations. So all together, we are understanding what kind of policies and maybe blended financing mechanisms would require in order to get over this impasse that we are right now in terms of airlines don't want to commit, producers don't want to put so much money. How do I get over that? We are seeing some movement, as Graham mentioned, but there's still a long way to go.
Graham Warwick:
Claudia says how complicated this is. An illustration of this is that when the Biden administration created the SAF Grand Challenge, there was kind of an assumption that the US's huge agricultural industry would be the driver, the engine of that, the massive sort of corn ethanol industry, which is under pressure because the electrification of vehicles could move across. So they, in the inflation reduction act, actually finally created a tax credit incentive for sustainable aviation fuel production. But to qualify for it, you have to meet certain life cycle carbon intensity reduction targets, a minimum of 50% up to 100%. So there was a lot of controversy over corn ethanol because it depends on which model you use or who you believe. Corn ethanol hasn't got the greatest carbon intensity. So what they did finally when they put the rules out, they tied the eligibility of corn ethanol to the combined use of three, what they call smart farming techniques, three ways of growing crops that help that reduce carbon emissions, but also actually help sequester carbon in the long term.
So what you're doing is improving land's ability to sequester carbon, at the same time is reducing the amount of greenhouse gases you generate through farming. But of course, this is a huge thing for the farmers. I mean, very few farmers in the US use one of these techniques, let alone three of them together. So now we're in a situation where the farming lobbies are saying the farmers can't do these three things at the same time. It's very expensive. One of them includes using certain types of fertilizers, very expensive. So I think what Claudia is alluding to, we're in the negotiation bit of saying, how do we make this happen?
And the reality is if you look at the history of anything like this, we always do make something work in the end. It's just a really painful process to go through. And so that's just one example, that's the biggest region perhaps, but it's one example of the complexity. The second thing is everybody everywhere, refill EU mandate, "Great, yay." The US blender's tax credit, "Yay." And then they sit down as if they've done their job. They're only at the start.
A mandate's not enough because it's a stick and there's no carrot. A blender's tax credit is not enough because it's a carrot and there's no stick. You need integrated policymaking, and you kind of need policymaking that's not completely different in each geographic region. So you end up with this almost becoming a geopolitical issue, who can make the fuel? Claudia pointed out, the US will make the fuel then export it to Europe. You end up with a geopolitical issue just simply because of how you go about doing these things. So we're in that horrible making the sausage bit at the moment of this.
Joe Anselmo:
So Claudia, when it gets down to it, people say they're for sustainability, but they don't want to spend more to fly. Airlines don't want to spend more to fly airplanes. So how do you get past that hurdle? Because you can't get to net-zero and adapt SAF without making flying more expensive.
Claudia Galea:
Love that question. But before I answer that, I want to go back to Graham's comment in terms of Europe has these mandates and the US doesn't have mandates, it's the carrot versus the stick. And what's happening, as we mentioned, is that producers are going to sell the fuel where it's more lucrative for them. So this is why we are putting urgency also on policymakers here in the US. There's an election coming, both administrations will have a different view on how we're going to tackle this hard to obey sector. However, we're still in one world, aviation is still a global industry and we cannot afford to have one region lag behind the other just because there isn't the carrot or the stick that is more effective. And I agree with Graham, these are all short-term fixes. However, we need something to, pun intended, prime the pump. We need something to get SAF into the system and then scale it.
Now to your question, Joe, in terms of passing the price premium to the passenger, there is a price premium that is going to be passed to the passenger anyway because jet fuel is inherently going to become more expensive. Now whether the US is going to have the same tax like the EU, that's a different question. But regardless, air travel is becoming more expensive. Lufthansa came up with an experiment and declared price increases on their fares. They made it public that there was a percentage, I think it was less than a few euros per ticket, that was associated to the use of sustainable aviation fuel. Guess what happens to the passenger numbers and the capacity in the airplane? Zero impact. The passenger is still willing to pay the price to go from A to B.
And if the price is not three to six times more than what they're paying right now, that's not going to make a dent in aviation demand. The last misconception that I'd like to clear up, we keep saying that SAF costs two to six times more than jet fuel, but it doesn't mean that the tickets are going to be twice or six times more expensive. The calculation there is that there's 30% from an airline operating cost perspective that is associated with fuel. Even with that 30%, only a percentage of that is going to be SAF because we're not flying 100% SAF from the beginning. So the impact on the passenger ticket, I think it's more noise.
Graham Warwick:
I actually agree. Because SAF production is something that doesn't happen overnight, we are talking about small percentage. Even if you can get 50%, you're allowed today to use 50% SAF in blend, nobody can really get anywhere close to 50% because of availability. So what you kind of want to see is you want to see the production ramp up in a way that the price comes down as the production ramps up, to the point where when you can start using higher and higher blends, you're actually paying less and less of a premium. And then they've got these other mechanisms on top of that. So I don't think we will ever get to parity, but I also think that at some point rather... This is where it gets to societal issues, at some point rather, if society decides that sustainability is the issue that we believe it is, everything is going to get more expensive because of that. Because we have to rethink everything we do.
And if aviation becomes more expensive, as long as it's logical why it's become more expensive, as long as it's explainable and explained why it's become more expensive, and as long as airlines still offer a service that people want, if they're still connecting people in a way that they cannot connect in any other way, either because of distance or because of speed and convenience or whatever, then long term cost isn't the issue. I'm increasingly believing that, like all of these things, we're seeing the whole of the problem at once and we're being overwhelmed by the whole of the problem. We kind of have to somehow rather scale back to the pieces of the problem and attack the pieces of the problem.
So I was at AIAA Aviation a week or so ago, and one of the things I came away with is that the aircraft industry, the developers of aircraft, the biggest thing they need to focus on is keep making aircraft more efficient. That's what they do best, supply the airlines with the most efficient airliner that they possibly can. It's the airline's job to get the fuel into that airplane, that is the most sustainable fuel. And the airlines have got to work with the fuel producers to do that. It's not Boeing's job or Airbus. They can be as facilitators. Airbus and Boeing's job is to keep doing what they've done for decades, more and more and more efficient airplanes. And then the airlines have to step up and instead of just sitting there waiting for something to be delivered to them, they've got to step up and say, "Our future depends on this. We have got to work with the feedstock producers, the fuel producers, the distributors, because we've got to supply for those new airplanes the best fuel we can." And that's where the realization has to come. That's where the responsibility lies, I think.
Joe Anselmo:
Claudia, let me give you the final word.
Claudia Galea:
I agree. I mean, we are talking about how airlines need to step up. At the same time, I am cognizant of the fact that they are running on razor-thin margins every day. They wake up in the morning, look at their operations on a daily basis, and I worked at an airline myself, and it's how are you going to get the plane up in the air so you minimize the downtime and get it to the destination from the origin in the most efficient way. The airlines also have a responsibility to not continue flying older equipment because those older equipment are emitting more emissions. And also the lessors. Let's not forget that there is also a big component in this industry that is taken up by aircraft lessors. So everybody has to do their part. My final word on this, because we're talking about SAF, it is a journey, and understanding the different pathways and understanding the different solutions that exists right now for the industry is critical.
In the near term, we have HEFA. In the midterm, we can have a combination of HEFA and alcohol to jet. And then finally we can look at power to liquid, which is essentially more the synthetic fuels that Graham was talking about. Obviously along the curve, these are more expensive, but with economies of scale, the cost will come down. So my final comment and my final word here is we need blended finance in order to scale the system with SAF. We need to have public and private partnerships pooling in funding to scale SAF towards the producers and towards the airlines.
At the same time, we need some form of guarantee that if airlines are committing to substantial off-take agreements, and let's say a COVID-19 and a 9/11, God forbid, again happens, some department from the US government and from other governments have to step in and be the guarantee, because we cannot afford to have all of this money pulled in to scale SAF, and then in extraordinary circumstances, we won't be able to consume it. All of these extraordinary circumstances come to an end, hopefully. So when we have these blips in the system, we also have to be prepared. So my final comment here is understand the risks, mitigate for the risks, and always be prepared with the risk case scenario, yet be positive and optimistic that sustainable aviation fuel is a scalable product and with the right knowledge and with the right players in place and the blended financing mechanisms, it is doable to reach these targets.
Joe Anselmo:
Okay, well Claudia said it's a journey. We will be reporting on this, I have no doubt, for many more years, but I certainly hope not in 2070 because Graham, I'll be more than 100 years old. But for now, that is a wrap for this week's Check 6 podcast. A special thanks to our podcast producer in London, Guy Ferneyhough. To our listeners, we thank you for your time. Have a wonderful week, and join us again next week for another Check 6.
Announcer:
With a global team of 52,000 employees building on more than a century of innovation and learning, GE Aerospace is committed to inventing the future of flight, lifting people up, and bringing them home safely. Learn more about how GE Aerospace and its partners are defining flight for today, tomorrow, and the future at geaerospace.com.
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