‘Tens of billions’ needed to scale up sustainable aviation fuel ahead of 2030

The aviation industry insists sustainable aviation fuels will help decarbonise flights, but experts say it is time for a reality check

Sustainable aviation fuel is part of a suite of options that could help reduce the aviation industry’s emissions. While airlines make promises of hydrogen-powered flight and electric aircraft, currently the only alternative to kerosene being used for commercial flights is SAF. 

SAF includes synthetic kerosene, also know as e-kerosene, produced by combining hydrogen with carbon dioxide, and biofuels produced from organic feedstocks. These feedstocks can be plant matter, including plant oils and sugarcane, and waste material, such as used cooking oil and waste animal fats from the meat industry.

While 60 e-kerosene projects have been announced worldwide for the period up to 2035, only a fraction have secured investments, according to a paper by the Potsdam Institute for Climate Impact Research.

Synthetic kerosene production requires hydrogen production and direct air capture to provide the raw materials, both of which have high production costs. There are few demonstration factories in operation around the world, but none of them are yet operating on a scale sufficient to power aircraft. For example, the Haru Oni factory in Chile can produce up to 350 litres of e-fuels a day at a cost of around €50 a litre but a Boeing 737-200 short-haul passenger aircraft has a total fuel capacity of 22,596 litres.

The factory says the price could drop to €2 a litre if the fuel were produced at industrial scale, but this figure would still be four times higher than the cost of fossil fuel kerosene. 

SAF made from biofuels blended with kerosene is already being used to power aircraft, albeit in very small quantities, powering less than 1 per cent of flights in 2021, the International Energy Agency says.

“Achieving just a 10 per cent SAF blending by 2040 would necessitate around 400 plants, each with a capital cost ranging from $1bn to $3bn,” Oliver Sweeney, vice president of the climate investments team at impact investment firm Lightrock, tells Sustainable Views.

Sweeney estimates that “tens of billions” of dollars will be needed to decarbonise flight ahead of 2030, adding: “This estimate does not account for the potential electrification of short-haul flights, which would introduce additional costs for charging infrastructure and batteries.” 

The International Air Transport Association predicts 325mn tonnes of SAF are needed to reach net zero globally by 2050. Kerri Moss, founder of Impetus Carbon, an aviation decarbonisation start-up that trades carbon credits under the EU Emissions Trading System, tells Sustainable Views there is currently “inadequate capacity to produce that amount of SAF … especially bearing in mind there were only 240,000 tonnes produced in 2022”.

But Moss, who is also a committee member of non-profit industry body the International Society of Transport Aircraft Trading, insists that there is a “healthy appetite” from investors for SAF projects.

Who is investing?

“Airlines, lessors [who rent aircraft to airlines], venture capital firms, investment funds and energy companies, including [Finnish biofuel giant] Neste, are the main players in SAF investment,” Moss says.

Lightrock’s Sweeney describes the investment landscape as “vibrant”, adding: “Some [investors] are focused on direct investment in SAF projects, while others prefer venture and growth equity investment in companies contributing to the sector.”  

But the current macroeconomic environment, including falling interest rates, “will be a key determining factor as to whether ‘first of a kind’ and ‘second of a kind’ projects will be funded,” he adds, referring to the large amounts of capital needed for early-stage new technologies, which take a long time to become profitable.

Jonathon Counsell, head of sustainability with the International Airline Group, the parent company of airlines such as British Airways and Iberia, says the investment landscape for SAF is “varied”. “[Investors include] a mix of financial institutions, traditional biodiesel companies and more recently the oil majors,” he tells Sustainable Views.

IATA chief economist Marie Owens Thomsen told reporters in December that on average, only 3 per cent of oil and gas majors’ capital budgets are invested in SAF production. A 2023 briefing paper by the Air Transport Action Group predicts that $1.45tn in capital finance will be needed between now and 2050 for the infrastructure to deliver the needed quantities of SAF.

“The key to bringing in investment is policy support,” Counsell says, adding production has grown, especially in the US, where tax credits are available to producers under the Inflation Reduction Act.

“The EU Innovation Fund has pledged €4bn towards decarbonising the aviation industry,” says Moss. The UK government has also committed to provide a revenue certainty scheme to accompany its ambition to have five plants under construction by 2025, but no final decisions have been made.

The revenue scheme would provide financial incentives for SAF manufacturers that choose the UK as their production location in the form of “tradable certificates with a monetary value”, UK transport minister Mark Harper said in a statement in September 2023. The government has set a target for at least 10 per cent of jet fuel to be sustainable by 2030.

In December 2023 several UK non-profits signed an open letter calling on the government to provide assurance that its proposed SAF revenue certainty mechanism is not funded by UK taxpayers.

“Fifteen out of the last 17 years, the majority of British people did not fly. Of those that did, most flew abroad only once each year. It would therefore be grossly unfair for the taxpayer to cover the funding costs of the future revenue certainty scheme,” said the letter, which was signed by think-tank Green Alliance, advocacy group the Campaign for Better Transport and campaigning network Greenpeace.

The government has previously said it intends for the scheme to be “industry funded” but it has not yet outlined how this will work in practice.

Genuine innovation or myth?

Many remain unconvinced that SAFs can truly decarbonising flying. Johnny White, a lawyer at international environmental law non-profit Client Earth, describes the technology as “a dangerous myth”.

“Although the limited amount of genuinely waste-based biofuels, like used cooking oil, can be usefully used in the aviation fuel mix, promoting the idea of sustainable aviation fuel as the solution to aviation’s climate issues risks justifying more emissions than it can ever mitigate,” he tells Sustainable Views.

White adds that SAF has been linked to deforestation and land grabs resulting in overall CO₂ emissions potentially higher than those from fossil kerosene. “Limiting aviation growth is the only way to align the sector with global climate goals,” he says.

According to Matt Finch, UK policy manager at think-tank and campaign organisation Transport & Environment, the environmental credentials of SAF derive largely from the feedstocks used to produce it. He tells Sustainable Views that “good” SAF is produced from waste products that cannot be recycled, while “bad” SAF comes from purpose-grown crops. (In the UK and the EU, first-generation biofuels are banned from being used for SAF.)

“SAF produces exactly the same tailpipe emissions as fossil kerosene,” adds Finch. “I’ve never seen the industry claim SAFs are zero emissions – but I have seen many claims that they can reduce emissions by some percentage. This comes from the fact that they use feedstocks that have captured some carbon from the air at some point.”

“The sustainability of the SAF is considered in terms of life-cycle emission reductions,” says Laurent Donceel, managing director at industry association Airlines for Europe. This is why airlines can say SAF lowers emissions, compared to fossil kerosene, despite it continuing to produce CO₂ at the tailpipe.

For Impetus Carbon’s Moss, the current industry buzz around SAF has sparked some unsustainable practices. “When used cooking oils are being imported to be used to produce SAF, that’s a signal the S in SAF isn’t living up to its namesake,” she says. “We need to balance the numbers with the science and make sure that the PR story doesn’t provide a distorted view of reality.”

Biofuel ‘feedstock crunch’

Moreover, the science suggests finding sustainable feedstocks for biofuels-based SAF will be problematic. An IEA report published in December 2022 predicts the biofuel industry will reach a “feedstock crunch” between 2022 and 2027. It forecasts a 56 per cent increase in demand for vegetable oil, waste and residue oils and fats, to reach 79mn tonnes by 2027, compared to 2022. 

Transport & Environment’s Finch says “biofuel competition will grow” as numerous industries compete for feedstocks. Lightrock’s Sweeney agrees, and says solving the issue of biofuel feedstocks is necessary to “provide investors with stability, and mitigate potential risks associated with feedstock shortages”.

“The industry is actively working to diversify away from the hydroprocessed esters and fatty acids pathway [which includes used cooking oil],” says Sweeney, and he suggests that municipal solid waste or biomass from wood could provide alternative feedstocks.

However, both of these have sustainability challenges – wood biomass production can lead to unsustainable deforestation if not sourced from waste materials, and household waste contains significant amounts of plastic.

“Environmentally it is better to recycle plastic than burn it, so there will be serious question marks on any SAF plant that produces fuel from plastics,” says Finch.