Global airlines body urges oil sector to invest more in sustainable fuel
(Reuters) - The oil and gas sector and alternative fuel producers need to beef up efforts to produce greener aviation fuel to help airlines cut carbon emissions, the chief economist of global aviation industry body IATA said on Wednesday.
Aviation accounts for an estimated 2-3% of global carbon emissions and is not an easy industry to decarbonize compared with other forms of transport such as road travel.
Sustainable aviation fuel could reduce aviation emissions by up to 80% and is seen as the key green solution for the sector.
But it makes up only 0.2% of global jet fuel use, or about 500,000 metric tons of production, which is lower than the aviation industry expected, based on IATA figures. It also costs between three to five times more than traditional jet fuel.
Only 3% of global oil and gas capital budgets are invested into SAF production, while profit margins are much higher in the sector than in aviation, which is set to reach a 2.7% profit margin in 2024, IATA chief economist Marie Owens Thomsen told a media event in Geneva.
"This clearly has to change," she said.
By 2050, 500 million metric tons of SAF will be needed to meet environmental targets, while by 2030, 63 million metric tons of SAF is set to be in production, based on an IATA forecast.
That investment burden cannot fall to airlines alone, IATA said.
Owens Thomsen estimated that airlines could spend up to $2.4 billion in 2024 on top of their regular costs to secure SAF.
Dozens of airlines have signed uptake agreements with SAF producers around the world, especially as pressure rises in Europe to meet regulatory requirements that come into force in 2025.
OVERSUPPLY CONCERNS ARE 'NONSENSE'
SAF producers have complained that they lack certainty in terms of how much fuel to produce and that they could face oversupply issues in the coming years.
In November, a Neste executive said the oil refining company could have excess SAF production capacity by 2028 and requires more certainty about long-term demand to justify investment after that point.
"This is nonsense from Neste," said IATA's head Willie Walsh. "Every drop of SAF that's produced has been used and will be used."
Neste was not immediately available for comment.
Thomsen also said the SAF market needs to become more global, so that production can meet demand across the world, not just in areas where SAF plants are located.