Flight or fantasy? Are alternative aviation fuels ready for take-off?
It is telling that COVID-19 is not the biggest challenge that the aviation industry currently faces. The long-term effects are uncertain, but some analysts believe that the aftershock of the pandemic will persistently reduce aviation demand growth. Nevertheless, COVID does not challenge the basic foundations of the passenger aviation industry. Climate change does.
Currently, it has been estimated that aviation contributes around 3.5% of anthropogenic net radiative forcing. As the number of flights increases while emissions from other sectors start to fall, this percentage is going to increase. That in turn will put more and more of a spotlight on aviation as a disproportionate contributor to the climate problem and could even challenge the aviation industry’s social license to operate.
This is not news to the airlines – it has been clear for many years that action would need to be taken to improve the carbon footprint of flying. Back in 2009, the aviation industry committed to a goal of reducing total sectoral CO2 emissions by 50% by 2050, compared to 2005 levels. Scenarios for delivering this commitment involve improved efficiency of new aircraft and operational savings, but the largest contribution comes from the assumption of a more or less 100% transition to the use of alternative aviation fuels. Up until recently it had been widely assumed that this would be dominated by the use of biofuels, but recently attention has also turned to the potential of electrofuels, which avoid some of the sustainability issues presented by such a largescale mobilisation of biomass resources.
This is not news to the airlines – it has been clear for many years that action would need to be taken to improve the carbon footprint of flying.
It is 12 years since the industry announced that commitment, and in the meantime the International Civil Aviation Organisation has adopted efficiency standards for planes and an offsetting mechanism (‘CORSIA’). These actions look promising on paper, but the efficiency standards were described by the International Council on Clean Transportation as “already obsolete by the year they were agreed to” while there are well publicised concerns that the CORSIA mechanism will allow notional emissions reductions to be claimed on the back of credits for projects that would be happening anyway, and that the value signal from CORSIA will be far short of what is required to drive investment in alternative fuel projects.
The aggressive ramp up of alternative fuel production capacity that is required to come close to delivering the stated targets by 2050 has barely started. Deployment is inhibited by the high cost of alternative fuel compared to fossil jet. The lowest cost biojet pathways are still about twice as expensive as the fossil jet price, while estimates of the production cost for electrojet are significantly higher even than that.
The prospects for good returns on successful and sustainable projects coming online in the next few years are better than they have ever been.
None of this sounds like the best news when presented through my rather critical lens – but within this tale of delayed action there is a silver lining for would-be investors in alternative aviation fuel projects. The CORSIA mechanism is weak in itself, but it does provide a context for action at the national or regional level that could be much more effective. In the United States, the California Low Carbon Fuel Standard (LCFS) has entered its second decade and now allows aviation fuels to earn credit – LCFS credits have recently been worth as much as $200 per metric ton CO2e, over a hundred times more than CORSIA credits.
As the U.S. Congress reengages on climate a bill for a federal Sustainable Aviation Fuel Act has been proposed. In the UK, a ‘development fuel’ mandate has been added to the Renewable Transport Fuel Obligation, offerin advanced alternative aviation fuels a credit worth as much as $2 per litre, equivalent to a carbon abatement price of the order of $1000 per metric ton CO2e. The European Union already supports alternative aviation fuel use through bonuses within its Renewable Energy Directive, has project grants available through its Innovation Fund, and is at an advanced stage of development of a proposal for additional aviation alternative fuel targets in its ‘ReFuelEU’ initiative.
The truth is that alternative aviation fuel production has been far too slow out of the blocks, but that climate change is an existential challenge to the current aviation business model and the industry cannot afford another decade of minimal progress. The inertia of the 2010s has given added impetus to policy makers to beef up the value proposition to investors, and that means that the prospects for good returns on successful and sustainable projects coming online in the next few years are better than they have ever been.
