European airlines are exploring pathways towards a net-zero, or low-carbon European air transport through reduction of CO2 emissions in absolute terms and CO2 mitigation. The use of sustainable aviation fuels (SAFs) is generally considered as one of the most realistic and effective means to reduce aviation CO2 emissions in the next decades. In order to reap the benefits of SAFs, Europe needs a dedicated, innovative aviation fuels industrial strategy including financing and legislation.
The European Commission’s Green Deal foresees to consider legislative options to boost the production and uptake of SAFs. This paper sets out guiding principles for any future legislation on SAFs. It also suggests solutions to support development of SAFs in Europe and provides policy recommendations on the development of a European policy framework.
Introduction
Alongside radical fleet renewal, improved air traffic management and technological advances such as hydrogen and electric power, the use of sustainable aviation fuels (SAFs) is generally considered as one of the most effective means to reduce CO2 emissions from aviation in the next decades.1 Currently approved SAFs not only reduce our dependency on fossil fuels but also emit up to 80% less CO2 than regular kerosene. As part of our efforts to make aviation more sustainable, further accelerated by the European Green Deal, we must speed up the development, production and use of drop-in sustainable aviation fuels in Europe.
Many initiatives have been undertaken in Europe since the first commercial SAF flight in 2011. The European Commission, technology companies, the energy industry, airlines and others have invested significant resources in the development of conversion technologies, projects to determine the impact of sustainable fuels in the aircraft, supply networks and scientific studies on the best ways to develop and mobilise the entire value chain in order to incentivise production and voluntary off-take.
In 2012, the European BioFuel Flightpath 20202 set out its ambition to reach two million tons of SAF produced in Europe. Nearly a decade later, many valuable lessons have been learned — but production is still seriously lagging behind in Europe.
The current cost to produce SAFs is at least three times that of conventional jet fuel. Its price is also higher than that of sustainable alternative fuels used in other transport modes. As a result of these higher production costs, SAFs are, in absence of an orchestrated support strategy, not an economically attractive substitute to conventional jet fuel.
Worldwide, the only plant which is continuously producing SAF is located in California (USA). Other plants are currently under construction. Although there are various biofuel refineries in Europe that can produce SAF,3 production at these refineries is still done through batch production. There are two key differences between initiatives in the United States and those in Europe. First, in two states in the U.S., commitments and off-take agreements were in place prior to the modifications of the plant. A second important difference is that there is a stable set of policy incentives which ensure an acceptable return on investment (ROI) period and provide guarantees that certain feedstock can be used over a longer period.4
With the knowledge and experience that we have today, a successful trajectory to build production capacity and secure off-take in Europe is within reach.
Guiding Principles
For all existing and future policies, regulatory frameworks, CO2 life cycle assessments (LCA) or support mechanisms, the following guiding principles should be at the core of any successful development and deployment of SAF in Europe:
SAFs must be truly sustainable without any compromise
The production of SAF cannot occur at the expense of food supplies for people or animals and/or may not cause damage to the environment as in the case of deforestation. The LCA assessment applied should be feedstock and conversion technology neutral. In addition, it should ensure a comprehensive manner, which not solely considers greenhouse gas emissions but also human and labour rights, local food security, rural and social development, (ground) water resources, soil quality and indirect land-use change effects. The existing Renewable Energy Directive does not sufficiently guarantee that sustainable fuels meet these criteria.
Use of regional feedstock / raw materials and production in Europe should be prioritised
Europe strives to reduce its dependency on imports from other continents. Therefore, all initiatives should focus on regional supply chains, using local feedstock and raw materials, which should be produced regionally. This prioritisation contributes to the realisation of the UN Sustainable Development Goals as it could support economic growth (SDG 8) in several European regions.
SAFs have the potential to bring multiple benefits to the economic development of the EU, by creating world-leading breakthrough carbon solutions, clean growth, jobs, intellectual property, and improved fuel security.
A coherent and stable policy framework should be put in place
To spur R&D for novel and not fully mature conversion technologies, such as for example access to lingo cellulose feedstock and power to liquid/solar fuels, and de-risk investments in new production facilities, a long-term perspective must be developed. If this is not changed and a five to ten-year timeframe remains in place, new R&D projects and initiatives to increase production capacity are hampered because:
there is increased financial exposure for producers who do not write off all investments before the policy framework changes, and at the same time;
there is a risk that frequently changing legislation and policies will lead to unacceptably high prices for the product;
new technologies are unable to access commercial finance. As a result, they will not reach full scale production without more comprehensive support in the form of grants, loan guarantees and public-private partnerships. This support is essential to enable the financing of first-of-a-kind facilities and to support the green jobs and growth that domestic production would bring.
Carbon leakage and distortions to a level playing field must be prevented
Previous studies commissioned by A4E members5 showed that EU carriers would be adversely impacted by a mandate applied to all fuel uplifted in Europe. Indirect flights (flights connecting through Europe) would be the worst affected.
In addition, the future European SAF policy framework should not hamper airlines’ ability to support and invest in other CO2-reducing technologies that may be introduced to commercial aviation in the future, such as hydrogen, electric and hybrid-electric flights.
Supporting the development and production of SAF in Europe: Solutions
With the aforementioned prerequisites in place, one should differentiate solutions that can deliver in the short-term and those novel technologies with great potential, but which require further development before large scale commercial use:
A. Short-term potential — HEFA is the only viable solution
The only option for short-term deployment uses the HEFA technology (Hydrotreated Esters and Fatty Acids). This conversion technology is already used at commercial scale and is approved by ASTM6 for use in commercial aviation up to a 50% blend with fossil kerosene. Although all other ASTM approved sustainable aviation fuels are safe to use, their conversion technology is not yet mature enough to produce it on a large commercial scale.
HEFA fuels can be produced at reasonable costs compared to fossil fuels, however there is a lot of controversy around the raw materials used. Vegetable oils from agricultural lands or products with high ILUC (Indirect Land-Use Change) affects form, together with waste oils (i.e. tallow and used cooking oil), the basis for the feedstock pool. Although still permitted under the Renewable Energy Directive and used for the production of road transport fuels, raw material will have to progressively be able to cope with sustainability criteria as expressed above. The European Commission tends to exclude all crops in future, but there are truly sustainable alternatives available. The International Civil Aviation Organisation (ICAO) is working on sustainability standards to recognise feedstocks that are produced through low ILUC land management practices. Some of these methods, for example cover crops, yield improvements, and the use of degraded lands, can increase soil carbon. We believe that the EU could take a leadership position in developing low ILUC feedstock in Europe. This creates a great opportunity to increase production capacity on short notice and deliver fuels at an affordable cost while creating new green jobs and supporting EU growth.
B. Medium to long term options — not one clear winner
In addition to the availability of sustainable biomass in Europe, carbon is another (unlimited) regional feedstock source. Both have their own challenges, but given the guiding principle of regional supply chains, both options should be further developed. Several pathways are already approved by American Society for Testing and Materials (ASTM), but the technology maturity needs to be increased before production at demonstration and/or commercial scope can start. Multiple projects should be launched in Europe, supported by the European Commission and Member States.
Where (woody/ligno cellulose) biomass is used as feedstock, specific attention should be given to the technology development, because of the specific characteristics of each individual feedstock. The biological structure of various biomaterials differs significantly depending on the region of origin. This requires different catalysts and enzymes to break down these products into usable building blocks, enabling the production of aviation fuels.
The challenge for synthetic fuels (or e-fuels) is completely different. Carbon capture requires large volumes of green energy and hydrogen in the conversion process. Only if the energy used for capturing carbon and the production of hydrogen is sustainable, the LCA of this synthetic fuel is positive. Given the different usages of green hydrogen, it is also required that all green energy used for in the capturing and production process comes from additionally produced energy. Taking green energy from the grid under existing regulatory frameworks is not possible. Currently the price of green energy and hydrogen is high, leading to an expected premium that could go as high as 10 times the prices of fossil fuels. Therefore, the development of the synthetic fuel path must go hand in hand with an ambitious energy transition strategy to increase availability and reduce costs.
Policy Recommendations
At present, it remains uncertain which sustainable alternative/aviation fuels have the largest potential in Europe. It is therefore not surprising that expert views on the issue differ. On one hand, some experts consider the e-fuel route to be the option for Europe, whereas others believe that a mix of various types of sustainable fuels is required in order to meet the expected volumes which will be needed. At this stage, with the challenge ahead of us, we should not make any decisive choices or disregard options with relatively small (volume) potential. All existing and future initiatives require the same long-term perspective and R&D support. Once commercial scale production is possible, an initial support to (partially) cover the price premium between the sustainable renewable kerosene and fossil kerosene must be secured. Proper European policies and a stable regulatory framework should provide the requested long-term perspective.
We therefore propose the following recommendations for European policymakers:
I.) Develop a European policy framework to support the production and deployment of SAFs in Europe built on clear objectives, containing a robust Life Cycle Assessment (LCA)/validation methodology and one that is neutral towards conversion technology7 and raw materials
The production of SAF cannot be at the expense of food supplies for people or animals and/or cause damage to the environment as in the case of deforestation. Therefore, these criteria should be solidly embedded in sustainability certification schemes to ensure that only the development and use of truly SAF is incentivised. Such criteria would benefit both the environment and the aviation industry.
Such a policy framework should last for at least 15 years in order to generate a solid business case and to create confidence amongst investors to step in. The European Green Deal that the European Commission presented in December 2019 provides an opening to revise the strategic objectives of the RED in conjunction with existing policies and regulatory frameworks. To deliver large volumes of sustainable and affordable SAF, the European Commission should develop the right regulatory framework that ensures production and use of truly sustainable aviation fuels in Europe in the next decades. With the increased ambition level of the European Green Deal, a revision of the Renewable Energy Directive and other related regulations is necessary.
II.) Stimulate the production and availability of HEFA feedstock for SAF production
Studies8 indicate that there is an abundance of various raw materials that can be converted into (advanced) renewable fuels, including options for HEFA. Production and import of raw material for (advanced) renewable fuels needs to be encouraged.
The European Commission should take a leadership role in developing low ILUC feedstock in Europe and not proceed towards a general ban of crop use for renewable fuel production. ICAO work on sustainability standards for low ILUC land management practices should be the starting point.
III.) Create a coherent support scheme for SAF technology development and capacity build-up in Europe
Given the various stages of technology maturity and ASTM approval, we should differentiate between three types of initiatives:
a.) Project with ASTM approval and mature technology (commercial scale production proven).
b.) Projects with ASTM approval, but the technology is not yet at a commercial deployment level.
c.) Projects without ASTM approval, possibly using a technology which is not yet at a commercial deployment level.
Depending upon the stage of the project, different requirements can be formulated:
· All projects should prioritise raw materials of European origin. On top of contributing to the realization of the Energy Union, it would prevent trade in raw materials that both make traceability difficult, and limit commercial effects and movements of raw materials to the locations where they yield the most.
· ASTM-approved fuels projects should be subject to a condition to deliver SAF to market through (long-term) purchase agreements whereby at least 70% of the intended production capacity (demo or commercial scale) is committed to a customer (airline). It is precisely this commitment that de-risks investments and is a crucial factor in attracting investors, while protecting airlines from unacceptable prices and preventing producers to switch to the production of road transport fuels.
· For projects without ASTM approval, is must be mandatory to complete initial stages of the ASTM approval process (phase 1 reporting, fast-track or clearing house procedure). If parties do not commit to do this, we should question the intent to get their product finally delivered into the aviation market. ASTM approval is often such a hurdle that many initiatives do not go beyond a research project that will not lead to impact.
Support schemes differ as well per type of project:
· For ASTM approved fuels projects, the support should come via low-cost loans from governments, development banks, loan guarantees or insurance packages.9 Besides financial support, local governments can also facilitate non-financial support such as through permits or to build new or refurbished production locations and logistics infrastructure around the production location.
· The majority of support should come when the plant is operational. Based on the actual supply, producers (or buyers) should get a set contribution to cover (a part of) the additional costs compared with fossil fuels. Many European countries have similar feed-in tariffs in place for green electricity from PV installations of wind energy. This feed-in tariff should be granted for a fixed period, without the possibility to extend this period and could (partially) come from national budgets as aviation fuels may count towards their renewable energy targets and support them in their energy transition from fossil to renewable.
· Development projects for non- ASTM approved fuels should get funds for their research work in line with the European standard programmes. Additionally, a fixed amount should be granted to cover the costs of the initial ASTM procedures. Due to the ASTM process, these types of projects might run longer than the standard research projects. — ASTM approved fuels without fully mature production technologies should be a mix of both as research work is needed. However, for these projects, most of the support should come when delivering fuels into the market.
IV.) Only consider the introduction of a blending mandate under mature market conditions
The aviation industry is a global industry and therefore requires global solutions. European policymakers should support the development of a worldwide blending mandate if supply volumes from the right feedstock / raw materials have reached significant levels. At present, volumes of waste oil-based fuels are limited and other technologies have not reached commercial maturity. Introducing a mandate at global level requires coordination and an unambiguous and uniform
regulatory framework at ICAO level. This approach should be part of the global CORSIA scheme, ensuring that airlines do not suffer competitive distortions as a result of regional mandates.
Several European Member States are introducing or considering national blending obligations. Timing, percentages and scope differ, which will affect the level playing field. Despite the drive to accelerate developments through obligations, policies should therefore only support fuels at volumes that are assuredly sustainable, are in line with our guiding principles, and are applied ideally globally or on an intra-EU basis at a minimum.
Mandates implemented prematurely would lead to higher prices for the industry, since there is limited availability of SAF. Moreover, it would also stimulate a ‘’race to the bottom’’ and lower sustainability standards as users seek to fulfil their obligations under such a mandate. It could also lead to more ‘’tankering of fuel’’. This phenomenon refers to the situation in which air carriers (from outside the EU) carry more fuel on board than is actually needed. They do so in order to avoid the higher costs for SAF at the fuel tank at European airports with a blending mandate. More fuel on board means that an airplane is heavier and uses more fuel. Consequently, this leads to higher unnecessary CO2 emissions. These potential negative effects on the environment should be avoided.
V.) Share information and best practices
We support and undertake initiatives to support the sharing of information and best practices, in particular:
We are researching the creation of a collaborative platform to facilitate purchase agreements between SAF producers and airlines. Within the boundaries of competition law, we will consider methodologies to reach jointly sufficient volumes which make continuous production possible.
Individual airlines support research projects or investigate voluntary SAF off-take possibilities.
Through European Sustainable Aviation Fuel Users Group (SAFUG), members try to support and stimulate the global SAFs deployment and ASTM developments to make approval less complex, timely and costly.
Conclusion
We should be proud of the achievements jointly reached in the last decade. We should remember that the first commercial flight using SAF was operated in 2011, less than 10 years ago! In a very restricted environment and operating in a very competitive market, the European Commission, together with the aviation sector airlines, took the responsibility to develop new fuels, demonstrate both the technical feasibility and proof that there is a market for sustainable fuels. Those early adaptors also raised the bar on sustainability voluntary beyond anything in place up to today.
We stand now at a tipping point where all efforts and investments made should start to pay-off. To do this in the right way, collaboration needs to continue and accelerate. We urgently request EU policymakers to help the aviation industry with a consistent European approach. This European dimension is key to avoid possible market distortions that could be caused by a patchwork of national policies. Airlines and other market players need to operate in a level playing field and have equal opportunities.
Recommendations
Creation of additional SAF production capacity in Europe through, e.g. access to finance, loans, grants to facilitate scaling-up of plants.
Stimulus for the production and availability of HEFA feedstock for SAF production.
Creation of a coherent support scheme for SAF technology development and capacity build-up in Europe.
Recognition of mature market conditions as prerequisite to the introduction of a blending mandate.
Development of hydrogen, Carbon Capture and Storage, renewable electricity.
Respect principles of technology neutrality
1A recent study notably shows that up to 30% emissions savings can be achieved by 2050 thanks to such fuels. Source: Sustainable Aviation UK, 2019. See also European Aviation Environmental Report 2019, EEA, EASA, Eurocontrol.
2See notably here on the launch of the biofuel flightpath: https://ec.europa.eu/energy/sites/ener/files/20110622_biofuels_flight_path_launch.pdf
3The Total La Mède HEFA refinery according to the company is capable of producing SAFs, and Neste is involved in similar projects in Finland, albeit on a limited basis. However, production of road fuels is more economic due to the tax penalty obligation in France.
4Measures put in place in California include: The 2007 California Low Carbon Fuel Standard (LCFS) regulated by the California Air Resources Board (CARB). Under the LCFS, producers and refiners are responsible for reducing their overall lifecycle emissions by 10% by 2020 as measured on a carbon intensity scale (g CO2 / MJ). To meet these targets, the LCFS utilizes carbon offset credits and renewable fuels. As of January 1, 2019, SAF are eligible for producing credits under the LCFS. Until CARB adopted this provision allowing biofuel to qualify as an eligible credit-generating fuel under the LCFS and the Cap-and-Trade Program, the biofuel industry had no incentive to produce fuels nor create new production capacity for additional SAF volumes. In addition, the extension of state-level low carbon fuel standards to aviation biofuel was a positive market signal to begin to close the gap.
5https://www.nera.com/content/dam/nera/publications/archive2/EVT_Radov_Brussels_0612.pdf
6American Society for Testing and Materials, https://www.astm.org/
7A wider set of technologies capable of converting unrecyclable solid waste into useful products, such as green fuels and renewable energy, in an environmentally beneficial way.
8Searle, S., & Malins, C. (2016). Waste and residue availability for advanced biofuel production in EU Member States. Biomass and Bioenergy.
9In this respect, financial support schemes from any future so-called “EU climate bank” or the EIB could be considered.
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