SAF: Policy to Pave the Way

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January 04, 2023

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by Graham Noyes and Alex Menotti (Biodiesel Magazine) To reach U.S. sustainable aviation fuel goals, adequate policy will be crucial. -- The Sustainable Aviation Fuel (SAF) Grand Challenge represents a breakthrough in federal energy policy, establishing a comprehensive strategy developed by multiple agencies to scale up new technologies and rapidly commercialize SAF in order to fully supply U.S. jet fuel demand by 2050. The International Renewable Energy Agency estimates that it will require approximately 35 billion gallons of fuel annually to achieve this goal. The first established milestone toward this is 3 billion gallons of domestic SAF production by 2030. Given that the SAF industry must scale by orders of magnitude in seven years to hit the milestone, the crucial question emerges: Is there sufficient policy to drive the rapid expansion?

The passage of the Inflation Reduction Act of 2022 provides the first indication of whether there exists sufficient will and capability in the federal government to execute on the promise of the SAF Grand Challenge.

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... and so the industry will now benefit from five years of tax incentives. While it is unlikely that these incentives will be of sufficient duration to provide an investment signal robust enough to put the industry on track to producing 3 billion gallons in 2030, they will certainly help address existing SAF production policy and structural disincentives that have, to date, driven production of renewable diesel instead.

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The SAF Blender’s Tax Credit will be effective from 2023-’24, and is generally consistent with the existing $1 per gallon biodiesel and renewable diesel tax credits, but differs in several key respects. First, qualifying SAF need not be from biomass alone, but can be produced from nonbiogenic feedstocks like captured carbon and other waste streams, so long as SAF is not derived from petroleum or palm fatty acid distillates. In a first from Congress for fuels tax credits, the SAF BTC further adds an additional performance-based requirement that eligible SAF achieves a carbon intensity (CI) reduction of at least 50% relative to petroleum jet fuel to be eligible to receive an enhanced $1.25 per gallon credit.

Notably, Congress incentivized further reductions beyond the 50% minimum threshold by providing an additional one cent per percentage improvement beyond 50%, with SAF demonstrating a 100% reduction eligible for the maximum incentive of $1.75 per gallon. To be eligible, the SAF must also meet ASTM D7566 or the Fischer-Tropsch coprocessing provisions of ASTM D1655, Annex A, and be blended and sold in the U.S.—along with other statutory requirements.

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From 2025 to 2027, the SAF BTC transitions to the Clean Fuel Production Credit, which is also applicable to other transportation fuels, but like the SAF BTC, it provides an enhanced value for SAF.

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Other elements of the IRA, including $244 million in dedicated SAF grant funding through a new U.S. Department of Transportation program and complementary clean energy tax credits, will help scale SAF, but effective policy will require long-term extensions of tax credits that are robust enough to support the vision of the SAF Grand Challenge and synergistic state policies.

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As of January 1, California, Oregon and Washington will have in place clean fuel standard policies for which alternative jet fuel is eligible to credit generation on an opt-in basis, but these policies alone do not provide sufficient incentives for SAF relative to ground transportation fuels—additional state policy support is required. READ MORE

How sustainable aviation fuels can tackle aviation’s carbon footprint (World Economic Forum/Heathrow Airport)

Sustainable aviation fuel offers flight path to net-zero air travel (World Economic Forum)

Why businesses are choosing to fly on Sustainable Aviation Fuel (World Economic Forum)

Here’s how sustainable aviation fuel can take off in Europe (World Economic Forum)

The aviation sector wants to reach net zero by 2050. How will it do it? (World Economic Forum)

What 6 aviation executives say about an EU sustainable aviation fuel blending mandate (World Economic Forum)

Excerpt from World Economic Forum/Heathrow Airport: Businesses can send the market signals needed to increase the demand for SAF and more sustainable fuels.

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SAF is incredibly versatile; it can be used in any existing aircraft without the need for technical modifications and has already powered 250,000 flights around the world; it can be blended with kerosene and soon be used as a complete replacement. This is a critical advantage during the energy transition, since it means that a plane can fly one way on SAF and return on kerosene removing the need for all airports to have a SAF supply.

SAF can be made from waste from agriculture, households, forestry and industry, delivering lifecycle carbon savings of 70% or more. Many developing countries with a large agriculture sector are well placed to become suppliers to this market, increasing their energy independence. In the future, synthetic fuel made using carbon extracted from the air and clean energy has the potential to achieve a 100% carbon saving.

Limited production volumes of SAF means it remains in short supply, subscale and expensive. We need to send clear market signals to scale up supply and bring down costs to make it affordable, particularly for developing countries. Just as in other sectors, we need the right policy framework and market signals.

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However, governments can take years to put policy in place, and the clock is ticking. So how can big companies send the market signal needed to increase production?

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Looking at the air travel carbon footprint of a sample of financial sector organisations, just 30 companies making a commitment to use 30% SAF could account for the first 1% of the 10% by 2030 objective, or even more.

At COP27, the Sustainable Markets Initiative (SMI), in partnership with Clean Skies for Tomorrow, launched a pocket guide to build understanding of SAF among the business community and encourage greater uptake for corporate travel. The guide sets out how businesses can use SAF for their travel and where they can purchase it.

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To send a market signal, we (Heathrow Airport) launched our flagship SAF incentive programme, becoming the first airport to link airport charges with SAF usage. This first year of the incentive was designed around a £10 million fund aiming to cover 50% of the cost premium of using SAF. It resulted in approximately 0.5% of SAF use in 2022 – more than any other major airport globally – and whilst this is a small percentage, it saved 55,000 tonnes of CO2.

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Whilst SAF will help to remove carbon from flying now, there are complementary technologies being explored for the future, such as electric and hydrogen.

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SAF is the critical technology to get to net zero aviation by 2050. With the right action now, we can protect the benefits of aviation in a world without carbon. The faster we scale up supply, the faster we can decarbonise.

All of us at the World Economic Forum can help lead this just energy transition by committing to purchase at least 30% SAF for our corporate travel by 2030. Please play your part. More information about the SAF buyer’s guide can be found here. READ MORE