Why Airlines Can’t Get Enough Sustainable Aviation Fuel

Key Concepts

• SAF (Sustainable Aviation Fuel): A non-petroleum-based fuel produced from renewable resources, designed to reduce aviation's carbon footprint.
• HEFA (Hydroprocessed Esters and Fatty Acids): The primary technology currently used to convert waste fats and oils into jet fuel.
• Fischer-Tropsch (FT) Process: A chemical reaction that converts biomass or waste gas into liquid hydrocarbons.
• Mandate vs. Levy: Regulatory approaches where mandates force volume targets (e.g., EU/UK), while levies (e.g., Singapore) focus on cost-predictability and centralized procurement.
• Ethanol-to-Jet (AtJ): A conversion pathway that turns alcohol-based feedstocks into aviation-grade fuel.

1. The Supply Challenge of SAF

Aviation contributes approximately 2% of global CO2 emissions. Unlike ground transportation, commercial aviation lacks a viable battery-electric solution at scale. The industry is pivoting to SAF, primarily derived from used cooking oil (UCO). However, the supply chain for UCO is fragmented, relying on small-scale collection from restaurants and food factories, making it difficult to scale compared to the highly organized fossil fuel infrastructure.

2. Technological Pathways

• HEFA Technology: Currently accounts for 80% of global SAF production. It uses hydrogen to strip oxygen and impurities from waste fats, resulting in high-performance fuel.
• Emerging Technologies: To move beyond the limited supply of cooking oil, companies are investing in:
  • Ethanol-to-Jet (AtJ): LanzaJet has launched the world’s first plant using this method.
  • Fischer-Tropsch (FT): DG Fuels is developing a $4 billion facility to convert waste biomass into fuel.
  • Waste Gas Conversion: Companies like Neste are exploring the conversion of industrial waste gases into SAF.

3. Regulatory Frameworks and Mandates

Governments are shifting from incentives to mandatory requirements to force adoption:

• European Union: Requires 2% SAF blending by 2025, scaling to 6% by 2030, 34% by 2040, and 70% by 2050.
• United Kingdom: Requires 2% by 2025, 10% by 2030, and 22% by 2040. The UK includes a "buyout price" of £4.70 per liter, which acts as a penalty for airlines that fail to source enough SAF.
• United States: Focuses on tax credits to reach a voluntary target of 3 billion gallons by 2030, with a long-term goal of 35 billion gallons by 2050 to meet 100% of domestic demand.

4. Economic Impact and Cost Distribution

SAF currently costs two to five times more than conventional jet fuel. Because airlines operate on thin margins, these costs are expected to be passed on to passengers.

• Singapore’s Levy Model: Instead of a mandate, Singapore will implement a mandatory SAF fee starting in 2027. Fees range from $1 SGD (short-haul) to over $40 SGD (long-haul premium), which funds a government-owned nonprofit to centrally procure fuel. This approach prioritizes cost predictability over volume control.

5. Key Perspectives and Arguments

• Supply-Side De-risking: Experts argue that mandates alone are insufficient. Policy support must also focus on "de-risking" supply-side projects to attract investment and expand production capacity.
• Price Volatility: Mandates create high demand for a limited supply, driving up prices. The transition to alternative feedstocks (biomass, waste gas) is viewed as the necessary "bigger bet" to stabilize prices in the long term.
• Stakeholder Responsibility: While governments provide tax credits, the consensus is that the financial burden will ultimately fall on the consumer in competitive markets.

Conclusion

The aviation industry is at a critical juncture where regulatory mandates are outpacing the current supply of sustainable feedstocks. While HEFA technology using used cooking oil provides a necessary starting point, the long-term viability of SAF depends on scaling advanced technologies like Fischer-Tropsch and Ethanol-to-Jet. The success of this transition will rely on a combination of government-backed de-risking for suppliers and structured cost-sharing mechanisms for passengers to manage the inevitable price premiums.