The climate can't wait for electric planes. Sustainable fuel may be the answer

London(CNN Business) More than 50 airlines, oil companies and other companies, including Delta (DAL), BP (BP) and Boeing (BA), pledged on Wednesday to replace 10% of global jet fuel supply with sustainable aviation fuel (SAF) by 2030.

It is one of the boldest commitments yet to tackle the environmental impact of air travel and will require an exponential increase in the production of SAF, which currently accounts for only 0.1% of jet fuel used in commercial aviation.

Produced mainly from recycled food and agricultural waste, such as used cooking oil, SAF is a type of biofuel that cuts greenhouse gas emissions by 80% compared to conventional jet fuel, and is viewed as critical to reducing aviation's fast-rising carbon emissions.

Given that electric and hydrogen-powered planes won't be available for at least another decade, even for short-haul flights, SAF "holds one of the most important keys to decarbonizing aviation," said Matteo Mirolo, aviation policy officer at Transport & Environment, a green campaign group in Europe.

But SAF's green credentials come at a hefty price, and it's in very short supply. That's what makes Wednesday's announcement from the "Clean Skies for Tomorrow" coalition so ambitious. Other signatories include Airbus (EADSF), American Airlines (AAL), British Airways, Cathay Pacific (CPCAY), Japan Airlines (JAPSY) and Shell (RDSA).

SAF currently costs between two and eight times more than its fossil fuel-based alternative.

In 2019, fewer than 200,000 metric tons were produced globally — less than 0.1% of the roughly 300 million metric tons of jet fuel used by commercial airlines, according to a November 2020 report by the World Economic Forum (WEF) and McKinsey, which has also signed up to the pledge as a business that relies on air travel.

The report found that if all publicly announced SAF projects are completed, volumes will reach just over 1% of expected global jet fuel demand in 2030 — a fraction of the target unveiled on Wednesday.

"This is a fundamental step up in the industry," said Anna Mascolo, president of Shell Aviation, which this week announced it would produce 2 million metric tons of SAF a year by 2025, or 10 times more than what was produced globally in 2019.

"We need to put more effort into decarbonizing the [aviation] sector," Mascolo told CNN Business, adding that "sustainability will have a price."

Who will pay is unclear. Germany's Lufthansa (DLAKY) says fewer than 1% of its passengers currently make use of an option to offset their CO2 emissions by paying more for their tickets to cover the extra cost of using SAF.

According to Mascolo, cargo operators, whose revenues are more resilient than passenger carriers, will play a key role in SAF investments, as will companies that want to offset emissions from business travel.

Fueling demand

The pledge unveiled on Wednesday seeks to send a "strong demand signal" to the market so that fuel producers have more confidence investing into SAF, said Lauren Uppink Calderwood, head of aviation, travel and tourism industries at the WEF, which brought the coalition of companies together.

"We need to see money going into new [SAF] plants," she added, noting that there are currently only about three producing significant volumes, with a further 10 sites expected next year.

To encourage more business travelers to cover the higher costs of SAF, the coalition — which also includes Bank of America (BAC), Deloitte, and Boston Consulting Group — has developed a SAF certification system that enables companies to buy SAF to offset their emissions from travel. This is important for companies that have already set net zero emissions targets.

"Carriers alone aren't going to be able to carry the cost burden," Uppink Calderwood said. "If they were to commit to purchasing the fuel they wouldn't be able to sustain their business," she added, saying that the purpose of the coalition is to distribute the risk and cost across the value chain.

A growing number of airlines around the world are already using SAF in their operations, but generally in small amounts blended with standard jet fuel.

Over the past decade, SAF has been used on 360,000 commercial flights, the vast majority of which took place in the past five years, according to the International Air Transport Association (IATA).

IATA estimates forward purchase agreements for SAF will total $13 billion this year, up from just $2.5 billion in 2016. That number could reach $30 billion by 2025, which would still amount to less than a fifth of the global airline industry's jet fuel bill in 2019, according to IATA.

Governments are also adopting policies to promote and even mandate the use of SAF, which experts say will be critical to boosting supply and demand. Norway and Sweden, for example, require that a minimum amount of aviation fuel sold in the countries must be SAF.

SAF mandates have also been proposed in the United Kingdom and European Union, while the current US administration is contemplating incentives to support SAF production, according to a recent Reuters report.

"In 2016 there were two countries that had a SAF policy, now there are 36 countries," said Chris Goater, head of corporate communications at IATA.

"More and more governments are starting to see the benefit of embracing SAF in different ways. Ultimately, that's got to give momentum to some sort of global agreement," he added.

Decarbonizing aviation

The pandemic delivered a sharp cut to aviation's carbon emissions in 2020, but the reduction promises to be temporary.

Global air traffic is expected to double to 8.2 billion passengers in 2037, according to IATA, which predicts that aviation's 2019 emissions peak of around 900 million metric tons of CO2 will be exceeded within the next two to three years.

At the same time, the window to cut the world's reliance on fossil fuels and avoid catastrophic changes to the climate is closing rapidly.

The International Energy Agency forecasts that aviation's share of global carbon emissions will increase to 3.5% by 2030 from just over 2.5% in 2019 in the absence of efforts to further decarbonize.

While the aviation sector has not yet committed to reaching net-zero emissions by 2050 — a goal that some experts say is necessary to align with the Paris climate goals — SAF will nonetheless be critical to helping the industry reach its existing goal of halving carbon emissions by 2050 relative to a 2005 baseline.

That amounts to a threefold reduction on emissions in 2019.

"Aviation has a huge climate problem and if we don't provide it with SAF, it's not going to start solving its problem," said Mirolo at Transport & Environment.

But not all SAF is created equal. There are multiple ways to produce the fuel, not all of which are considered sustainable.

For example, reusable plastics and even some edible oils and sugars generate more CO2 than jet fuel over their lifecycle when burned. There are also concerns that fueling planes with edible material may increase demand for land, putting food security at risk while contributing to deforestation and therefore increasing greenhouse gas emissions.

"Sustainable aviation fuel can live up to its name only if the feedstock fulfills sustainability criteria," according to the report by the WEF and McKinsey, which lists waste and residue oils, such as used cooking oil and animal fats, as among the more sustainable raw materials.

Other sustainable raw materials include various agricultural and forestry residues and municipal solid waste, although the processes to turn them into SAF are more complex and the technology not yet available at scale.

By far the cleanest means of producing SAF is through combining green hydrogen with carbon dioxide captured directly from the atmosphere to produce synthetic fuel. This is sometimes called e-kerosene or power-to-liquid.

But the technology to develop this is immature and it could take a decade before it is widely available, according to Sami Jauhiainen, vice president of business development at Finland's Neste, currently the world's largest SAF producer.

"We are actively looking at investment opportunities on the e-fuel side," Jauhiainen told CNN Business. He said that the challenge of decarbonizing aviation is such that a range of technologies and feedstocks need to be explored.

"If you look at the urgency we are dealing with in tackling climate change, and the carbon budget we have available to meet a 1.5 degrees Celsius trajectory, we can't wait to have e-fuels," he added.