13 September 2024 – Sustainable aviation fuel (SAF) is one of the few low-carbon technologies that can help decarbonise the aviation industry. The aviation industry accounts for 11% of transport greenhouse gas (GHG) emissions, making it the third-largest source of transport emissions. Transitioning to sustainable liquid fuels is considered the biggest long-term opportunity to decarbonise aviation.
SAF production has begun and by 2024 production is expected to triple from 2023 levels to approximately 1.875 billion liters. The supply chain is maturing and existing industrial infrastructure is being used for SAF production. SAF investment increased due to federal and state tax credits supporting increased production.
Although SAF production has grown significantly, it will be able to meet only 0.53% of aviation fuel demand and 6% of renewable fuel production at 2024 levels. Barriers to the scalability and widespread adoption of SAF remain. Currently, SAF is not a one-for-one replacement, nor is it as energy-intensive as conventional injection fuels, and limited production capacity results in higher costs.
As the industry moves toward a low-carbon and sustainable aviation future, continued innovation, regulatory stability, public-private partnerships and investment are needed to help overcome the challenges and barriers to reducing aviation’s greenhouse gas emissions.
What is sustainable aviation fuel?
SAF is an alternative fuel that can be produced from non-petroleum feedstocks such as waste cooking oils, greases, fats, municipal solid waste, algae, agricultural and forestry wastes and residues, lumber mill waste, and specialty energy crops. SAF is a “straight-forward” fuel, meaning it can be blended with conventional fossil injection fuels to varying degrees depending on the feedstock and the way it is produced.
Commitments, incentives and plans to decarbonise aviation
Numerous measures and commitments have put the aviation industry at the forefront of decarbonization efforts. The Biden administration has set a goal of achieving net-zero greenhouse gas emissions from the economy by 2050. In addition, through the Sustainable Aviation Fuel Grand Challenge launched in 2021, the US Department of Energy (DOE), the US Department of Transportation (DOT), and the US Department of Agriculture (USDA) are working to reduce SAF costs, improve their sustainability, and reduce the cost of traditional aviation fuels, compared to fuels, We will continue to work toward a reduction of at least 50% in life cycle greenhouse gas emissions and expand the production and use of SAF.
The US Departments of Energy, Transportation, and USDA are working together to accelerate SAF research, development, demonstration, and deployment to increase production to 3 billion gallons per year by 2030 and 35 billion gallons per year by 2050.
Additionally, members of the International Air Transport Association (IATA) are committed to achieving net-zero carbon emissions by 2050. The Carbon Offsetting and Reduction Scheme for International Aviation ( CORSIA ) is a global market-based measure to offset emissions from international aviation, allowing aircraft operators to reduce offset requirements by using eligible fuels and encouraging the use of SAF, including CORSIA.
Through the Inflation Reduction Act, SAF producers are eligible for a tax credit of $1.25 per gallon of qualified SAF that reduces greenhouse gas emissions by 50%, and an additional $0.01 for each percentage reduction above 50%.
In addition, several states have implemented tax credit programs designed to encourage the production and consumption of SAF within the state. For example, in Minnesota , companies that produce or blend SAF sold between June 30, 2024, and July 1, 2030, may be eligible for a tax credit of $1.50 per gallon.
To qualify, SAF must (1) be derived from biomass rather than palm fatty acid distillate, (2) reduce lifecycle greenhouse gas emissions by at least 50%, (3) be produced in Minnesota and made into aviation, gasoline, or related aviation, gasoline, or jet fuel in Minnesota, and (4) sold to a buyer in Minnesota who certifies that the SAF was used as fuel for aircraft departing from a Minnesota airport.
In addition to these tax incentives, several states have developed low-carbon fuel programs that issue credits to support low-carbon fuel production. For example, California established the Low Carbon Fuel Standard ( LCFS ) to reduce the carbon intensity of California’s transportation fuel pool and encourage low-carbon fuel production. Transportation fuel providers must demonstrate that the fuel blends they offer in California meet the LCFS carbon intensity standards or baselines each annual compliance period, or must purchase credits to meet the standards.
Fuels and fuel mixes with higher carbon intensity than the baseline will generate a deficit, while fuels and fuel mixes with lower carbon intensity than the baseline will generate a credit.
Under California’s LCFS program, SAF can generate credits but does not currently incur losses from using conventional injection fuel. In August 2024, the California Air Resources Board released proposed amendments to the LCFS plan that would eliminate exemptions for fossil aviation fuels in the state beginning in 2028.
If implemented, this would create a shortage of fossil aviation fuel used on interstate flights, leading to clean transportation fuel projects and increased production and use of alternative fuels like SAF. Other states could follow suit, establishing low-carbon fuel programs and treating SAF equally.
SAF balances supply and demand
To support the continued growth and performance of the SAF supply chain, DOE recently sought stakeholder feedback on supply chain development. DOE identified two key themes from the responses received.
First, long-term and stable policies are needed to provide regulatory certainty for the industry, promote supply chain incentives, and create market demand for SAF. Consistent policy at the federal and state levels will help reduce risk, encourage investment, and support continued innovation in the aviation industry.
Secondly, a functional platform for collaboration and participation by different groups of supply chain participants will support the scalability and sustainability of the SAF supply chain. This platform will enable stakeholders to identify common goals and collaborate to address financing and investment risks as well as infrastructure constraints.
Demand is growing and outstripping available supply. Every barrel of SAF produced to date has been purchased and used, with demand fueled by the emissions reduction goals, policy initiatives, and incentives mentioned above.
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The adoption and integration of SAF will play a key role in mitigating the effects of climate change in the aviation industry. Further investment, innovation and supply chain maturity will be required to reduce the gap between expected SAF production and demand. This can be supported by market participants entering into long-term SAF offtake agreements, leveraging government subsidies and incentives, developing SAF production facilities and infrastructure, and supporting more SAF research, development and demonstration.
Companies producing and blending SAF will want to ensure that the carbon intensity of SAF has been accurately assessed and verified, given eligibility requirements for tax incentives, benchmarks set under various low-carbon fuel schemes, and intense scrutiny of carbon emissions. When reviewing SAF or its carbon intensity, it can also be useful to understand the feedstock and processes used to produce SAF.
The regulatory environment is rapidly evolving and companies operating in this industry must closely monitor developments to ensure compliance with all applicable requirements.
Pamela Wu is a regular columnist on energy and decarbonization issues for Askume Legal News and Westlaw Today.
The views expressed are those of the author. They do not reflect the views of Askume News, which is committed to integrity, independence and non-partisanship under the principles of fiduciary duty. Westlaw Today is owned by Thomson Askume and operates independently from Askume News.
