It’s been a while since I’ve written and since coming back from a SAF conference last week, the challenges faced by the entire ecosystem continues to weigh on my mind. The most obvious challenge in the fact that producers (energy companies or feedstock suppliers venturing into SAF production) and users (airlines) diverge sharply on their views of what is a price that the market can exist and perpetuate at.
To me, this is a symptom of underlying issues including the fact that SAF mandates are crudely determined with a volumetric blend, and that more often than not, the mandates could just force all airports to try and adopt SAF as opposed to starting with some key nodes and rolling out to the minor airports. Or the mandates could just be fulfilled by airlines at the level of their fleets. Or in the case of domestic carriers and flights, all of the flights for that year of reporting. This allows airlines to meet the mandates flexibly. And the market can then optimise for the logistics of delivery as well.
Another issue with the volumetric blending mandates is that typically there’s a threshold of emissions reduction that the fuel must meet to be considered SAF, and the users will purchase just the cheapest one available. That means that producers are not incentivised to produce any fuel better than the mandated threshold. This throws up questions: whether you could blend a bit of A1 Jet fuel into a SAF with much lower carbon intensity than the threshold and then call it ‘neat SAF’? Tricky. And controversial.
At the end of the day, what are regulators and the economy trying to achieve? Decarbonisation. Is aviation important enough for policymakers to focus their attention? Yes and no. Yes because it is hard-to-abate and if no regulations are in place, they will just keep going and spew more carbon into the air. But no because ultimately, aviation emissions are only 2.5% of the global emissions. The proportion will surely grow as the rest of the economy decarbonises; so most of the approach now essentially is to throttle that aviation emissions growth.
Will throttling aviation emissions growth destroy aviation demand? Surely without a doubt. Should we do that only in places where there’s substitutes which are low-carbon (such as trains and electric transportation)? Perhaps. For individual government and agencies making decisions, ultimately, aviation is really not a huge area compared to most other carbon-emitting industries. There’s perception that aviation will have higher willingness-to-pay but I don’t think that should necessarily be the excuse to push the emissions reduction on them.
Again, those are just my opinions and musings for the week.