Exploring the Pricing Dynamics of Sustainable Aviation Fuel

The aviation industry is at a critical point in its goal to achieve net-zero carbon emissions by 2050. While there are several possible pathways to net zero, all of them highlight the importance of Sustainable Aviation Fuel (SAF) as a crucial factor in reducing carbon emissions within the hard-to-abate air transport sector

The SAF (Sustainable Aviation Fuel) market is embryonic, presenting challenges in estimating a global price. The prices varied significantly across different regions, highlighting the complexities of this emerging market. The price is roughly two and a half times higher than conventional jet fuel, underscoring the urgent need for advancements in SAF production and adoption to make it more competitive and accessible

Collaboration between governments and key industry stakeholders is essential to significantly increase the production of Sustainable Aviation Fuel (SAF). This cooperation will help create aligned strategic policies worldwide, providing incentives and facilitating the necessary investments to expand SAF capacity and production. This is vital for the aviation sector to achieve its net-zero commitment by 2050

A transition to carbon-neutral flying is both achievable and essential, with SAF emerging as the most promising pathway for decarbonisation in the near term. The airline industry must prepare for increasingly stringent regulations as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is set to become mandatory worldwide by 2027. Currently, 82 countries are participating in the initial voluntary phase of CORSIA, which is expected to cover approximately 80% of the growth in international aviation CO2 emissions starting at the end of this year. Sustainable aviation fuel is a drop-in replacement for conventional jet fuel (CJF). These fuels are free of sulfur and contain fewer particulates, contributing to a cleaner environment

Among the various production pathways for SAF, Hydroprocessed Esters and Fatty Acids (HEFA) fuels are closer to achieving price parity with conventional jet fuel, primarily due to their longer history of technological development

The advancement of Sustainable Aviation Fuel (SAF) technologies faces challenges, particularly concerning costs and technological readiness. Currently, AtJ (Alcohol-to-Jet), Gas-FT (Gas-to-Liquids), and PtL (Power-to-Liquid) technologies are still in the early stages of development, existing primarily in lab-scale or pilot-scale demonstrations

To transition these technologies to full commercialization, it is essential to maintain ongoing investments in research, development, and demonstration initiatives

Government Support

Governmental support is crucial for sustainable aviation fuels to achieve the aviation industry’s climate goals. Initiatives such as opportunity zones and tax reductions on the use of green and clean aviation fuels will drive the long-term growth of sustainable aviation fuel.