When it comes to cutting greenhouse gas emissions, commercial aviation faces one of the toughest challenges of any industry. Currently, aviation accounts for about 2.6% of emissions worldwide, but it risks rising to as much as 5% of the global total, as the industry falls behind others when it comes to decarbonization.
The reasons for the jump are simple. Substantially more people will be traveling by air by 2030, and the current pledges made by airlines to use more low-carbon alternative fuel will at best only help cancel out a chunk of that growth. That leaves the industry exposed to public criticism and regulation — and the planet in peril.
Between 2019 and 2030, the global aircraft fleet is expected to expand 30%, and air travel — particularly in places like China and India — will be up substantially. Because of this growth, emissions from aviation could rise as much as 20% by 2030 — at a time when the planet needs the global economy to halve its greenhouse gas output, not increase it. Just to keep emissions close to flat with 2019 levels, every global airline would have to substitute low-carbon sustainable aviation fuel (SAF) for more than 15% of their current consumption. Anything less and emissions will move in the wrong direction.
Innovation at scale
To cut emissions, even a little, will take commercially scalable new technology and new fuels. Right now neither is within immediate reach.
Admittedly, aerospace has a short but impressive history of innovation at scale. In just the past century, it has moved from crude propeller planes to jets, to supersonic aircraft, to rockets that travel beyond Earth’s atmosphere. Over that 100 years, aerospace manufacturers have consistently pushed the envelope on developing ever more efficient engines that burn less and less fossil fuel. But to make progress on the emissions problem by 2030 would require the industry to mount an effort as urgent as the search for the Covid-19 vaccine, and so far that hasn’t emerged.
To keep emissions flat, airlines would have to substitute SAF for more than 15% of their current fuel consumption.
For now, it’s one step forward, two steps back for aviation on emissions because of the insatiable demand for air travel. For instance, while aviation managed to cut the amount of fuel burned per passenger by 24% between 2005 and 2017, there was simultaneously a much bigger percentage increase in air travel. Passengers flew 60% more on average in 2017 than they did in 2005, and that was bad news for emissions. Most experts also believe we’re close to the apex on the efficiency that can be achieved with fossil-fuel-powered engines.
SAF to the rescue?
Probably the nearest thing to a short-term solution the industry has is SAF. Made from used cooking oils, waste animal fats, and other sustainable low-carbon feedstocks, SAF could make up a steadily increasing percentage of the fuel commercial aviation consumes from now through 2050 at least. A month ago, more than 50 of the biggest airlines and energy companies committed to expand use of SAF to 10% by 2030. But those are voluntary commitments, and even the European Union’s proposed Renewable Energy Directive II regulation only targets 5% by 2030. At present, a handful of jurisdictions have SAF mandates.
But insufficient commitments aren’t the only problem. One of the reasons airlines have hesitated on SAF is because of the uncertain supply of feedstock necessary to make it. Right now, SAF has to compete with renewable diesel for much of the same feedstock and renewable diesel has typically been prioritized by regulators.
Renewable diesel (RD), which is used in trucks, buses, boats, farm equipment, and other commercial transport, requires slightly less upfront investment by fossil fuel refineries looking to convert. Also, given current regulatory mandates, RD has more predictable demand and value, which means most existing and announced projects focus on RD. That said, much of the existing and new capacity could be converted to SAF with the proper incentives and capital investment.
Feedstock challenges could be remedied with breakthroughs on research into turning waste or algae into fuel, but many of these avenues of inquiry have been in the works for decades with insufficient progress. Other nascent technologies, such as waste-based ethanol to SAF, would also expand potential feedstock pools, but corn-based and sugar cane-based fuels raise concerns because they could put fuel in competition with feeding the planet and protecting forests.
The cost of SAF is currently three times the cost of a gallon of Jet A-1, a kerosene grade of fuel used by commercial airliners. Using 5% to 10% SAF could raise airline operating costs 2% to 4%, unwelcome economics in an industry with historically tight margins that is still trying to escape the grip of Covid-19.
Until airlines are willing to commit or mandates exist, it makes investment in new SAF capacity risky. Currently, planned global capacity is about 4 million metrics tons. To fulfill a proposed EU mandate requiring 5% SAF, approximately 3 million metric tons would be necessary. But if the European Commission were to increase the mandate to 10%, 6 million in capacity would be required — 50% more than projects announced to date.
The current price differential is driven in part by the fact there are only a handful of SAF producers worldwide. Expansion of supply — perhaps in response to regulatory mandates or incentives — would likely bring that price differential down, although it would probably never reach parity with traditional jet fuel given the higher costs of production.
Current SAF prices suggest a healthy return on the $1 billion-plus investment required to build or convert a small refinery. But some in the industry are reluctant to invest because they are uncertain about the sustainability of those prices without the security government mandates provide.
No easy answers
No doubt, solving aviation’s emissions problem is complicated. Even though industry doesn’t always welcome regulation, more mandates would provide the clarity and certainty investment needs. But governments could also provide incentives too, such as money to jumpstart the research into alternative feedstocks. One of the most promising on the horizon: synthetic fuels, made from the carbon already in the atmosphere or produced by industry.
If the aviation industry is to reduce emissions by mounting the kind of effort science put together for Covid, it will need to work more closely and even partner with its supply chain as well as government regulators. There simply needs to be more investment and more urgency.
Also contributing to this article were Oliver Wyman’s partners Khalid Usman, Matt Poitras, David Stewart and David Knipe, vice president Andrew Buchanan, senior manager Ian Reagan, and senior consultant Matt Landes.