Sustainable aviation fuel, otherwise known as SAF, will be pivotal in the effort by airlines to reach net zero. But while the recently enacted Inflation Reduction Act in the United States took an important step toward increasing the supply, there still won’t be enough SAF by 2030 to stop the rise in greenhouse gas emissions from air travel.
Signed by President Biden, the new law contains a provision that raises the existing $1 blender’s tax credit for SAF by 25 to 75 cents per gallon — an incentive aimed at encouraging use and production. The sliding-scale credit is linked to the level of emissions per gallon versus conventional jet fuel — lower the emissions, the higher the credit.
Still, the best-case scenario for 2030 envisions a supply of about 5.4 billion gallons, according to Oliver Wyman’s proprietary calculations based on our fleet and demand forecasts. That’s one-third the production necessary to stay even at the same level as 2019 emissions. Our most likely SAF scenario — even with the higher tax credit — projects a supply of 3.1 billion gallons, equivalent to about 2.9% of global consumption. To hold emissions at 2019 levels would require a supply of 16 billion gallons, or about 15% of total consumption.
For aviation, considered a hard-to-abate industry because of its reliance on fossil fuel-powered aircraft, SAF is the key to moving forward on decarbonization — at least between now and 2050. While new propulsion technologies, such as batteries, hydrogen fuel cells, and hydrogen as a fuel, are being explored for aviation use, they are not likely to reach commercial scale production for airliners until well into the 2030s — if at all. Once that happens, it will take several more decades for the current fleet of fossil fuel-propelled aircraft to be replaced fully by new planes with low-carbon technology. That means SAF — a gallon of which can emit up to 80% less carbon dioxide than conventional jet fuel — will be needed through much of this century for use in older aircraft.
Anticipated SAF production capacity would have to almost triple by 2030 to cut airline emissions
Besides SAF, the aviation industry is also trying to solve the emissions challenge by pushing the envelope on fuel efficiency. This can include engine and aircraft upgrades, looking for shorter ways to fly from one place to another, reducing aircraft weight, and cutting time on the tarmac and waiting to land. But these operational improvements usually only produce 1% to 2% gains in fuel efficiency annually, which would not be enough to offset the anticipated increases in emissions from additional flying. This makes adding SAF to the mix essential.
Many airlines have come to understand the pivotal role of SAF and are encouraging SAF production with pledges of 10% usage by 2030. Those commitments, while not binding, would exceed the proposed blending targets called for by the European Commission and the International Air Transport Association.
In the United States, even before the Inflation Reduction Act, the Biden administration had recognized SAF’s importance. It announced a plan to develop 3 billion gallons of capacity by 2030, which would represent 10% of US demand. While the government is kicking off the project with a $4 billion investment, it will take tens of billions more to complete. Much of this additional money will need to come from private investors.
Why Incentives Matter
So far, there hasn’t been enough investment in SAF production because of the fuel’s opaque pricing environment and inadequate government support mechanisms compared with those provided to similar immature technologies, such as renewable diesel (RD) and renewable energy.
US production of RD, used in road transport, grew by more than 300% between 2017 and 2021, largely thanks to the Renewable Fuel Standard. This federal usage mandate requires transportation fuel sold in the US to contain a minimum percentage of renewable fuels. RD also is eligible for the same $1 blender’s tax credit as SAF. In RD’s case, the mandate and credit lowered investor risk and helped build a credible market for the lower-carbon fuel. SAF production has lagged behind RD because of its higher production costs and less developed marketplace.
Probably the key for SAF is figuring out how to get swing biofuel capacity — the 20% or so of production capable of turning out either RD or SAF — to switch to SAF. Here’s where the recently enacted, more generous incentives for SAF could help.
SAF and RD rely heavily on hydroprocessed esters and fatty acids (HEFA) from used cooking oils, animal fats, and other biowaste as feedstock. To ensure adequate feedstock supplies moving forward, more incentives could be created to push advanced SAF production technologies that depend on alternative feedstocks, such as municipal solid waste and woody biomass byproducts, ethanol, and e-SAF.
Need Versus Obstacles
SAF faces significant hurdles. Without sufficient supply and a reliable market, airlines are likely to be hesitant to enter into long-term SAF agreements, and investors and producers will likely move too cautiously to expand production without binding airline commitments. Those conditions will lead to too little SAF, too late.
Chandler Dalton, Oliver Wyman’s chief of staff for the firm’s climate and sustainability platform in the Americas, contributed valuable research and insights to this article.