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Sustainable Aviation Fuels: Paving the way for greener skies

The aviation industry is striving for climate neutrality with sustainable fuels, exploring various avenues for market expansion.


Flight shame, kerosene guzzler, climate killer: the aviation industry has been in the crossfire of the climate debate for years. No wonder, aircraft not only emit large amounts of CO₂ but also release climate-damaging gases at high altitudes. As critics advocate to stop air travel, the industry is working on its green revolution: Sustainable Aviation Fuels (SAF) are set to significantly reduce the ecological footprint of flying and become the new standard in aviation.

EY teams have conducted an in-depth global study to explore whether aviation can transition from a climate offender to a sustainability leader. The study examines the challenges in production and implementation and identifies who will ultimately bear the costs. It also highlights the issue of a lack of global production capacity, explains why hundreds of projects are still not being financed, and discusses how the European Union (EU) can support further supply market development. Download the comprehensive 150-page global study below to unlock exclusive insights from industry professionals and our extensive research to discover the current state of SAF and future developments.


Sustainable Aviation Fuels for Greener Skies

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SAF — the fuel of the future?

According to the International Air Transport Association (IATA), SAF could save up to 65 percent of emissions in the aviation sector. The development of SAF is therefore a decisive step toward climate-friendly aviation.
 

Two types of SAF are currently in focus: Bio-based SAF, which is made from biogenic raw materials such as vegetable fats, residuals or algae, and E-SAF, which is made from CO₂ and green H2. Both products have the potential to replace fossil kerosene — but there are technological and economic hurdles.
 

Bio-based SAF is currently produced from waste materials, such as old frying fat, using already established production processes. Some global airlines are already using this fuel to improve their carbon footprint. Therefore, production capacity has risen rapidly in recent years, but there could be a shortage of raw materials in the long term. E-SAF, on the other hand, could theoretically be produced indefinitely as soon as there is enough renewable energy and green CO₂. Production requires enormous amounts of green electricity. For instance, to achieve the EU's planned E-SAF quota of 2% by 2032 in Germany alone, approximately 75 terawatt hours of renewable energy would be needed, along with 1 million tons of CO₂. In addition, there is a great need for further investments in infrastructure and technology.
 

Regulatory support for SAF

Political decisions and regulations have given the industry a major boost. With the “ReFuelEU Aviation” initiative, the EU has set clear quotas for the supply of SAF: The ambitious targets envisage increasing the SAF share from a modest 2% in 2025 to an impressive 70% by 2050. SAF is thus to be transformed from a niche solution into the new standard. The targets are creating considerable pressure to scale up more sustainable fuels more quickly.
 

In addition, the strict European Emissions Trading System (ETS) is making CO₂ emissions more expensive for airlines. With rapidly rising EU ETS prices for aviation and a limited supply of allowances, the long-term use of kerosene is becoming increasingly unattractive — giving SAF a growing competitive edge. The introduction of environmental labels for flights from 2025 by the European Aviation Safety Agency (EASA) should also influence passengers' choices. Those who are aware of the ecological footprint of their flights may choose airlines that rely on SAF more often — a further incentive for the industry to fly sustainably. Some major air freight customers are already demanding greener services from airlines.

Financing the green revolution in the sky

The use of environmentally friendly fuels is essential to achieve the aviation industry's climate goals. However, it entails enormous costs for both producers and investors.

Currently, SAF is up to six times more expensive than fossil kerosene, which hinders its further adoption. Additionally, production capacities are lagging behind demand. Industry data suggest SAF will account for only 0.7% of total jet fuel demand in 2025, with a volume of 2.1 million tons.

High investments
The estimated investment in SAF production facilities and infrastructure that will be required to meet demand by 2050.

E-SAF, which is produced from green hydrogen and CO₂, is cost-intensive. However, costs could decrease by up to 50 in the coming decades due to technological advancements and economies of scale. At the same time, bio-based SAF is likely to become more expensive due to a possible shortage of raw materials. A significant price gap remains compared to conventional kerosene, making SAF less attractive for widespread use in the short term.

To scale SAF production to meet the aviation industry's demand, massive investments are required. Estimates suggest that between 1.0 and 1.5 trillion US dollars will need to be invested in the coming years.

The overlooked climate threats

SAF alone will not solve all aviation problems. In addition to CO₂ emissions, flying generates other climate factors such as contrails, soot particles and nitrogen oxides. These so-called non-CO₂ effects are estimated to have a greater impact on global warming than the CO₂ emitted. Although SAF releases fewer soot particles and thus reduces the formation of contrails, they do not completely eliminate these effects. Without additional measures such as the optimization of flight routes and possible flight altitudes, more efficient engines and, above all, less air traffic, the carbon footprint of flying will remain burdened.

 

Outlook for sustainable aviation

The aviation industry is working intensively on the use of SAF to reduce its carbon footprint. Politicians have recently increased the pressure on the industry through quotas and the emissions trading system. SAF could reduce up to 65% of emissions, but high costs and technological hurdles are slowing down their large-scale use. Estimates predict investments of up to 1.5 trillion US dollars in the coming years — a large sum given the lack of bankability of the projects to date. In addition, non-CO₂ effects continue to have a negative impact on the climate. The decisive factors will be how quickly technological advances reduce the costs of SAF, whether investors, companies and customers are prepared to shoulder the enormous sums involved and how the EU can support the market with funding instruments.

Summary

The aviation industry is under scrutiny for its environmental impact, but Sustainable Aviation Fuels offer promising solutions. SAF, including bio-based and E-SAF, can significantly reduce emissions. However, challenges such as high production costs, limited raw materials, and the need for substantial green energy persist. Regulatory support, like the EU's "ReFuelEU Aviation" initiative, aims to increase SAF usage. Despite the potential, SAF alone won't solve all aviation-related climate issues, and additional measures are necessary to mitigate non-CO₂ effects.

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