Update on Sustainable Aviation Fuel: The Ride Gets a Little Bumpy

This report reviews the status of policies to encourage and mandate the production and uptake of sustainable aviation fuel (SAF), as well as recent market developments. In summary, policies to encourage SAF production and uptake have evolved rather quickly, as I have stated before, but it is really true now (see report Sept. 26, 2023; report Dec. 21, 2022). Consider that a few years ago, there were no mandates and other supportive policies were scant. Today, around 75% of projected global fuel demand in 2030 is covered by either discussed, proposed or already adopted policies in 42 countries.[1] Moreover, in 2023, SAF volumes reached over 600 million liters (0.5 million tonnes (Mt)), double the 300 million liters (0.25 Mt) produced in 2022. In 2024, SAF production is expected to triple to 1.875 billion liters (1.5Mt).[2]

But there are problems, some key ones highlighted in this report. For example, is the current slate of policies being adopted and under consideration really enough to lift off an international market? Producers say no. Another issue: policies (such as between the U.S. and EU) may not be aligned globally and that may be dragging on uptake as airlines and corporate customers try to figure out how their purchases of SAF should be accounted from a legal perspective.

Then there is the competition between SAF and renewable diesel (RD). Without certainty and enough support for SAF, is it worth it for some refiners to invest in the switch to SAF? Policies, especially in the U.S., still strongly favor RD over SAF. And then there are the questions about pathways and feedstocks; like, what will augment and/or supplement the hydroprocessed esters and fatty acids (HEFA) pathway? These issues are explored in this report, starting first with a policy update and then with discussion of market status and issues impacting the SAF market. It closes with an annex summarizing the status of SAF pathways.

Key Points:

• There has been policy movement just in the last 8-10 months in seven countries, including the U.S.
• Asian and Latin American governments are also developing progressive policies to support SAF, generally through mandates.
• The vast majority (85%) of current and planned capacity centers on the HEFA pathway. Other pathways, especially ATJ are being scaled up.
• SkyNRG estimates US$1 trillion will be needed to fully scale a global SAF market with 500-800 plants around the world. I estimate just a fraction of that has been committed to date.
• Policies between the U.S. and EU are not aligned because of the LCA model employed. That has introduced massive uncertainty for SAF customers who are legally liable for the GHG emissions reductions they claim.

[1] World Economic Forum, Scaling Up Sustainable Aviation Fuel Supply: Overcoming Barriers in Europe, the US and the Middle East, March 2024 at https://www.weforum.org/publications/scaling-sustainable-aviation-fuel-supply-overcoming-barriers-in-europe-north-america-and-the-middle-east/.

[2] These figures from International Air Transport Association (IATA), SAF Volumes Growing but Still Missing Opportunities, Dec. 6, 2023 at https://www.iata.org/en/pressroom/2023-releases/2023-12-06-02/.