Sustainable Aviation Fuel – the key to CORSIA compliance
November 21, 2019
By Megan Boutwell
Last month we looked at how CORSIA, the International Civil Aviation Organization’s (ICAO) carbon offsetting and reduction scheme for international aviation, is being implemented. The rule is currently in the baseline development phase and won’t be mandatory for international flights until 2027. This international rule is one pillar in a larger strategy set forth by the International Air Transport Association (IATA), the industry trade association for the world’s airlines, to mitigate CO2 emissions from air transport. The targets the aviation industry has set for itself are to:
- Improve fuel efficiency by 1.5% per year from 2009 to 2020
- Cap net aviation CO2 emissions from 2020 (that’s where CORSIA comes in)
- Reduce net aviation CO2 emissions by 50% by 2050 relative to 2005 levels
The industry has a four-pillar strategy to address these targets, including:
- Deploying new technology, including sustainable aviation fuel
- Improving aircraft operation efficiency
- Improving and modernizing infrastructure, including air traffic management
- A single Global Market-Based Measure (GMBM) to fill the remaining emissions gap
The goal is that the implementation of CORSIA will develop a robust GMBM so that the industry will rely on a single, global market-based measure to address CO2 emissions from international aviation. However, airlines expect to be able to reduce their emissions to such a degree that purchasing carbon offsets would be a small portion of their compliance strategy. Reducing the carbon in their jet fuel is a more direct way to reach reduction goals.
So what about that first pillar – sustainable aviation fuel? What is it? How much supply is there? And what incentives are available to increase production?
What’s Sustainable Aviation Fuel?
Sustainable Aviation Fuel (SAF) – also known as alternative jet fuel (alt jet), biojet, or renewable jet fuel – is a low carbon drop-in fuel made from renewable sources which can be blended and used with conventional (petroleum) jet fuels without the need to modify aircraft engines and existing fuel distribution infrastructure. Feedstocks for SAF production include woody biomass and forest residue, municipal solid waste (MSW), sugar, starch, and cellulosic biomass. SAF production technologies include hydroprocessing esters and fatty acids (HEFA) in the same way renewable diesel is produced, Fischer-Tropsch (FT), and fermentation of sugars to create alcohol-to-jet synthesized paraffinic kerosene (ATJ-SPK).
How much SAF supply is available?
The short answer is there is not a lot of SAF on the market today. Global jet fuel demand is currently 8 million barrels per day, or 120 billion gallons per year (bgy), and is expected to grow. According to the EIA, U.S. demand for jet fuel was 26 bgy in 2018. In general, the industry is in the demonstration phase with very little commercial availability. In 2018, the World Energy facility in Paramount, CA produced 4 million gallons of SAF. The company is expanding the Paramount facility to 306 million gallons per year (mgy) of renewable fuel production, approximately half of which will be SAF. The expansion is expected to be completed in 2020. World Energy has offtake agreements with United Airlines and KLM at LAX and currently supplies 1 mgy to the airport.
Neste is another player in this niche market, supplying volumes to airports in Europe. As part of their Singapore refinery expansion, Neste has built capacity of 100,000 tons per year (or 33 mgy) of SAF.
The table below lists other active and planned facilities in the U.S.
What incentives are available to increase production?
The airline industry has internal targets to increase SAF use, and once CORSIA is mandatory, failure to comply with the CO2 reduction targets will result in enforcement actions. Neither of these measures does enough to increase the value of SAF to drive investment in more production. SAF is expensive to produce, and according to IATA can be two-to-seven times more expensive than fossil jet fuel. Incentives are necessary to reduce the cost of production and drive investment.
In the U.S., SAF qualifies for incentives under the federal Renewable Fuels Standard (RFS), California’s Low Carbon Fuel Standard (LCFS), and Oregon’s Clean Fuels Program (CFP). SAF producers can opt-in to the RFS to generate renewable identification numbers (RINs) which can be sold to refiners to offset their renewable fuel blending obligations. While fossil jet fuel is exempt from generating deficits under the LCFS and CFP, SAF producers can opt-in to these programs to generate credits which can be sold to deficit generators. In 2019, both California and Oregon approved provisional pathways for SAF. In the second quarter of 2019 723,542 gallons of SAF were sold under the California provisional pathway, generating 3,600 credits. SAF has not yet shown up as a CFP credit generator. As low carbon fuel standards are adopted in other jurisdictions, regulators are likely to include provisions for SAF to increase credit generation and incentivize growth in the industry.