A Game Of Chicken

IATA’s sustainability SVP and chief economist Marie Owens Thomsen told a crowd at the association’s World Sustainability Symposium in Brussels last week that “we have developed a habit of searching for a villain each year. One year it's aviation, the next it's beef or cruise ships or fast fashion or data.”

Aviation represents around 2.5% of global CO2 emissions, a figure that moves closer to 4% when considering non-CO2 warming effects. The industry thinks it’s expected to pay a disproportionate price to bring those emissions down. ReFuelEU Aviation mandates that fuel suppliers blend fuel with SAF — the cost of which is typically passed onto airlines — and the EU Emissions Trading Scheme (EU ETS) penalizes airlines for emissions within Europe.

Rather than tackling emissions by sector, Owens Thomsen argued for addressing their root cause: the global energy system.

SAF is considered one of aviation’s biggest levers in curbing its fossil fuel use. Europe’s SAF mandate was discussed as a hindrance during the conference, and its uptake limited by supply and cost, which the industry says it can’t absorb on margins that peaked at around 5%. 

Owens Thomsen said that the aviation industry is “the ultimate cash cow”: it can’t use fuels that don’t exist, so it has to foot the bill by investing in them or paying for EU ETS permits. 

Agreements to buy future supplies of SAF over a long period of time, known as offtake agreements, were positioned as ways to build out supply and demand, along with incentives and greater cooperation. Critics of aviation’s climate action argue that few players have actually put offtakes into action. Data compiled by ICAO shows around 90 purchasers of SAF globally since 2013. 

Offtake agreements are a demand signal, not a guarantee. Many plants aren’t built at the time of the announcements and risk never coming to fruition. Troubled SAF producer Velocys canceled its Mississippi plant, for example, and Gevo scrapped a South Dakota plant that was slated to be its first SAF facility. The producers have offtake deals with Southwest and American, respectively. 

But Europe’s EU Aviation Safety Agency’s first stocktake of the EU blending mandate found the fuel supplied at the bloc’s airports was 2.8% SAF — exceeding the 2% requirement, which Transport & Environment argued was evidence that the mandate was working. 

Agreements have slowed, however: global offtake deals totaled just 989 million liters so far this year, as of October 19, compared with the 2022 peak of 21,715 million liters, according to the ICAO data. The slowdown raises questions over the future EU blending mandate, which hockey-sticks up to 70% in 2050. 

The EU’s forthcoming aviation strategy is expected to include measures to alleviate SAF supply and demand challenges. It comes as the EU proposes to extend EU ETS to some international flights, which IATA opposes. 

Until SAF reaches price parity with fossil-based kerosene, which few executives in Brussels expect soon, the aviation industry and policymakers are locked in a game of chicken. 

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