The Kodak Moment: The World’s Airlines Consider Their Low-Carbon Options in an Era of Flight-Shaming

December 14, 2019

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by Jim Lane (Biofuels Digest) ... Now, the airlines were just about the first customers to clamor for advanced biofuels. In 2006, Richard Altman of the recently-formed Commercial Aviation Alternative Fuels Initiative showed up at one of the earliest advanced biofuels events, and when he laid out the intent of the airlines and their commitment to making sustainable fuels a part of their future, longtime industry leader Graham Noyes remembers, “I was just stunned.”

13 years later, sustainable aviation fuels have become a reality, yet airlines are gasping in their efforts to voluntarily meet the industry target of cutting their 2050 emissions by half, compared to 2005. Even a decade of great progress in cutting CO2 levels per passenger mile has not been enough. Global growth in passenger traffic is one villain. Slow uptake of sustainable aviation fuels is the other.

Meanwhile, pressure on the airlines to make more dramatic emission cuts have been enormous. IAG, which owns British Airways and Iberia, made the stunning announce that they would reach net zero carbon emissions by 2050.

If you blinked at this, you wouldn’t be alone.

Some might ask how an industry without a pathway to cut half their emissions can reset their aim to cut out all of them, in the same timeline and facing the same headwinds. However, as IAG’s Jonathan Counsell noted, some 43 percent of that reduction to zero is expected to come from industry-purchased offsets.

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“Amazing is not good enough any more.”

But Haldane Dodd, speaking at the SAF Symposium for the Air Transport Action Group, said that direct carbon reduction (as opposed to indirect offsets), resonated better with passengers, recent research had found, in a study conducted for the industry by FleishmanHillard.

Dodd said that airlines have to “communicate more effectively,” but also need to take more robust action.

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he FleishmanHillard study explains that up to 37 percent of passengers would be willing to give up flying if they do not think airlines were addressing environmental issues, Dodd revealed. And he cited recent UBS Bank research suggesting that 27 percent are thinking of reducing their flying due to climate concerns, and 21 percent already have.

However, passengers are known to support climate change more ardently in surveys than in boots on the plane. For example, 70 percent say they want personal carbon offsetting as an option, but the actual take up is around 3 percent, Dodd told the SAF Symposium.

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The long-time head of fuel procurement at US Airways, Michael Baer, was pessimistic that long-term existential threats move airline CEOs to action; he said that airline CEOs are asking for effective solutions to meet CORSIA or ESCH goals, and that is a more reliable driver for demand.

IAG’s Jonathan Counsell agreed.

“We’ve got to convince investors to put in billions, and targets have a value in that. They help unlock policymaker support, as well. Plus, we believe that market based measures [offsets] are a must if the industry is to reach net zero carbon by 2050.”

Baer said there was airline willingness to pay premiums for several years, but that “mandates and regulations that are being socialized are blunt instruments. Offsets will not decarbonize aviation and may have other shortcomings.”

At the Symposium, Baer launched his SAF Now consortium to catalyze SAF purchasing across the airline sector. He said SAF Now would be airline-owned, same as the consortia that have been developed for fuel infrastructure. The SAF Now consortium would work with all airlines, all producers — more on that at energyforairlines.com.

SAF, the biggest untapped measure

Which brings us back to fuels. As Boeing’s Sean Newsum observed, “SAF is the single biggest essentially untapped measure”.

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“Airlines aren’t willing to pay the price premium over the long term,” said United Airlines’ Aaron Robinson. “We do believe in investing to build the SAF market, not to subsidize it. We are paying some premiums because SAF is not yet at scale; there’s been an investment gap, and we want to help close it. Institutional investors want airlines to take the lead. That’s why we made the Fulcrum investment.”

And United pledged this past month to invest another $40 million towards decarbonization. “We need more airlines to do their part,” Robinson observed.

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To avoid mandates that create bottlenecks and drive price and CO2 intensity up, (Norwegian Airline’s Simon) Mueller prescribed reaching global scale and sensitizing and steering government bodies towards helping to create a global market rather than tiny micro-production markets everywhere.

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The cost and availability issues were there in 2006 when airlines first started showing up at biofuels conferences to offer a demand signal. But, the underlying drivers of the gap are not the same.

Then, there were questions as to whether aviation biofuels were safe, or even possible to make. Those technical considerations have been long resolved. The fuels can be made, and safe.

Back in 2007-08, the expectation was that oil prices would hover in the $100 per barrel range. Today, oil prices have dropped into the 50s and the chill has swept across the sustainable fuel industry, which has labored for a decade to drag the costs down. The Navy led an effort to foster the development of commercial-scale production, and by 2016 AltAir was able to sell 10 percent renewable diesel and jet fuel blends to the Navy for $2.10 per gallon.

Yet, aviation fuel prices have fallen by as much as half in recent years, as oil producers scramble to protect their 8 percent of the petroleum barrel that goes to serve the 117 billion gallons jet fuel market. Now, the price of jet fuel is hovering at $1.88 per gallon and airlines say that their ability to spend more for renewable fuels is limited.

And now, there is another problem, and that is the unintended consequences of low carbon policies adopted by governments around the world.

Generally, aviation fuels were exempted from schemes such as the US Renewable Fuel Standard and the California Low Carbon Fuel Standard. At the time these scheme were hatched, sustainable aviation fuels were hardly available, and the focus was on converting cars and light-duty trucks over to ethanol. today, there are opt-in provisions that support aviation in some fuel standards, but no mandates, and no obligated parties. The result is Force 10 winds behind renewable diesel and a mild zephyr behind sustainable aviation fuels.

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Conventional jet fuel is available and affordable, but not sustainable. There’s plenty of advanced fuel available that’s sustainable, just not affordable. And SAF that’s affordable and sustainable is not yet available because carbon policy loaded too much value into on-road diesel.

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For ready solutions, Europe is thinking about what Europe usually does, a little old-fashioned autocratic absolutism, in a tech-speaky 21st century form. Silky bureaucrats are offering mandates without much of a plan to ever bring down the cost of the alternative fuels, and they have tipped that taxes designed to cool off demand for flying are in the offing.

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Couple of data points offered in New Orleans:

1. 1 in 5 airline passengers reduced their flying owing to climate impact concerns
2. When asked, a well informed aviation fuels expert described a shift to using as much as 2 percent sustainable aviation fuels by 2025 as more or less “a far-fetched scenario”, adding helpfully that the target was useful as a stretch goal.

Which is why a number of attendees at the IATA SAF Symposium indicated that the approach of “we’ll do [fill in the blank] by 2050” may not be a good fit for the times.

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“Last year, we bought the entire [Paramount refining] facility and we will grow from 3000 barrels per day to 25,000 barrels per day. And a little asphalt facility that was headed for idling will eventually produce 10 percent of the California distillate and 100% of its renewable jet fuel.” (World Energy’s chief commercial officer Bryan Sherbacow)

“ENI has done something similar in Italy and we hope that keeps happening. Neste has a significant installed diesel base, and they and others will bring this to 3 billion gallon annual production in the next years, and a percentage of that could be for aviation. We need government policy to choose that fuel type, we need more feedstocks like woody biomass and municipal solid waste and cellulosic sugar fermentation. We need lots of technologies and we meed more winners. Right now, we’re selling 95 percent of the fuels and that’s not a good thing, it;’s a bad thing.”

“One thing we need is to be able to produce on a booking claim basis based on mass balance. We’d like to put it into supply locally and allocate it to other markets on paper. Moving it adds to the carbon footprint and is not efficient,. But we’d like to serve foreign customers who could get the environmental attribute wherever they are, when theirs is the demand and the price that caused us to make it.”

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No one actually thinks that when you order some renewable power, that a solar facility has to be built next to your home to provide it. Renewables are built where the sun shines or the wind blows or the cows live. The electrons are then fed to the grid and the renewable attributes go to the buyer, but it doesn’t mean that someone has to load those exact electrons into a boatload of Duracell batteries and ship them to you.

In natural gas circles, it is the same. You might buy gas from a producer in Pennsylvania and use it in California, which means that the production is fed into the pipeline in Pennsylvania and you extract molecules from California. The molecules you caused to be captured with your order will never be exactly the ones you end up using. The same goes for renewable natural gas.

Sherbacow gave the business jet sector as an example. He noted that the low-carbon commitments of corporations could be served via purchasing low-carbon fuels in a business program that provides more value for the jet services provider for low-carbon flight services.

“The more we excite the corporates about opportunities, the more they can help shoulder the risk. We have a really big opportunity and need and we need to activate a really big community. And we need to get that message out. And we need to have great relationships with big oil companies who have customers with low-carbon needs. We need to take advantage of those well positioned entities and their relationships, and continue to advocate for adoption and interest at the board level. Some of the relationships may seem non-intuitive, but big oil companies are all about hydrocarbons and we can help them as their customers evolve and collaboration is the key.”

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“We have to bring dairy biogas to replace fossil heat and wind to replace fossil power,” he thundered. “We have to sequester CO2 wherever we can and capture value with co-products such as high-value animal protein. We have to access cellulosic feedstocks, encourage our farmers to use practices which build carbon in the soil and support market rewards for their improvements in farm practices." (Gevo’s Tim Cesarek)

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As Fulcrum’s Bruno Miller noted, “the issue of waste, especially plastics, has come to the forefront. Yet, garbage is in large volumes, ideal locations, has established infrastructure and is a carbon rich feedstock with a predictable cost, and no competing uses. Converting it to renewable fuels resolves waste disposal problems, and we can use post-recycled, end of life materials. We can collect vast amounts of metals and plastics that go back into the system.”

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“Petrochemical infrastructure, and the large forest of the southeast,” (Velocys') Philipp Stratmann listed, in highlighting the project’s virtues to the audience. That’s not as pithy as ‘Sugar and Shell’, but it’s of equal value in the final analysis. “Vast volumes,” Stratmann described the forest resources, adding that Mississippi’s government is looking ardently for projects for north of the Interstate 10. “South of 1-10, they’re benefiting from oil & gas boom,” Stratmann said. “North of 1-10, it’s a different story. Pulp and paper plants are shuttering, and they are often the only major business in these communities. At Natchez we’ll operate a 25 million gallon plant at a shut-down pulp & paper site that used to consumer six times the wood that we need. The infrastructure is all there.”

All compelling thoughts, yet that’s not the Natchez secret sauce, not by a long shot. Because Natchez, for another reason, may offer a window seat to airlines seeking vast quantities of SAF fuels at affordable prices.

In the movie National Treasure, it was said that the secret lies in Charlotte, but here the secret lies in carbon capture. Velocys (we might add) is developing a CCS project in Japan — they’ve got chops in this field. Add carbon capture and sequestration to this project, and according to the Velocyans one might reach a carbon intensity of -85. Yep, carbon negative, a project that acts as a Hoover for skyfill.

And if you’ve seen the carbon credits available under the California Low Carbon Fuel Standard for carbon levels that low, well, hmmm. And if you’ve considered that an airline flying with a 50/50 blend of this fuel and conventional fossil fuel would be at a net carbon intensity of 7, or about 90 percent below where airlines were in 2005, well, hmmm, hmmm.

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On the docket for Neste? New feedstocks. With capacity expansion comes the (Sami) Jauhiainen pointed to algae MSW, lignocellulosics, and that they are looking to collaborate with an invest with partners.

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If you’ve noticed, there’s so much shape-shifting and model-bending going on in the sector, that it might as well serve as an installment in the Transformers movie franchise. We have airlines becoming investors, technology suppliers becoming project developers, and oilcos becoming distributors. So why not a fuels aggregator becoming a project developer? Enter SkyNRG.

At the SAF Symposium, SkyNRG’s Theye Vess outlined the first dedicated DSL-01 SAF refinery, at the chemport in Delfzijl. The target is 100000 tons of sustainable aviation fuel with a 85% reduction in CO2, ready to start production in 2022, based on a €250 million budget.

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Shell’s ambitions are Olympian. The company aims for a 20 percent reduction in emissions intensity by 2035, and 50 percent by 2050, and (Bryan) Stonehouse noted that there is internal thinking now about net carbon zero. Shell has tied executive pay to emission targets, and the result, it appears, is a different mindset when it comes to to decarbonizing.

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Cindy Thyfault of Global Biofuture Solutions commented on the rise in deal flow for aviation-related projects and noted that more are finding the 25-35% equity, investment-grade feedstock and offtakers, are signing EPC contracts with performance guarantees, to secure a financeable BBB- ratings.

She warned that absolutely every source of revenue and risk mitigation had to be pursued zealously by every project developer. Despite $502 billion available for “IMPACT investing,” Thyfault said that large purchasers of green bonds and environmentally-friendly company stock had urgent and often un-met needs to quantify risk and sustainability.

“Yes, SAF. But also we need to bring co-products, RINs, LCFS or other carbon credits. We need a Warm Idle provision or some other type of monetary penalty, if fuel is not purchased.”

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Carbon is the answer, which is to say carbon pricing, which is to say going carbon negative, seriously, which means, for now, focusing on waste, emissions in the process, and a means to sequester. It’s a sequester quest, and it’s on at an airline near you. READ MORE

RSB Hosts Aviation Leaders at the IATA Alternative Fuels Symposium (Roundtable for Sustainable Biomaterials)

UK public wrestles with environmental impact of aviation in face of mid-century net zero emissions target (GreenAir Online)

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carbon/CO2 sequestration Aviation Fuel/Sustainable Aviation Fuel (SAF) Jetfuel (Sustainable Aviation Fuel (SAF)) carbon offsets Sustainability history markets/sales market forces environmental policy Transportation Fuels Policy Renewable Fuel Standard (RFS and RFS2) LCFS (Low Carbon Fuel Standard) Renewable Diesel/Green Diesel/HVO/Paraffinic Diesel Investing Financing Big Oil/Oil Majors California Netherlands Finland Mississippi Nevada Oregon CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) oil prices fuel prices European Union (EU) Spain waste-to-fuel plastic-to-jet recycled plastics woody biomass Japan carbon capture and storage (CCS) carbon price carbon tax BioRefineries/Renewable Fuel Production Regulations-Federal Regulations-State UK (United Kingdom)

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