Airlines Lagging in Green Jet Fuel Transition, Says New Study

The aviation industry is struggling to keep up with the transition to sustainable aviation fuel (SAF), according to a recent study. Despite the urgent need to reduce carbon emissions, airlines have been slow to adopt greener alternatives, leaving the industry far from its net-zero goals.

The study, released by the World Economic Forum (WEF), highlights the challenge of scaling SAF production to meet growing demand. While airlines have set ambitious targets for reducing their carbon footprint, the availability of SAF remains limited. As of 2024, production capacity is estimated at just 1.5 million metric tons (Mt), barely 0.5% of total jet fuel needs. By 2030, mandated and target demand could reach 16 million Mt or more, yet estimated global production capacity is uncertain, with potential shortages looming.

The high cost of SAF is a significant barrier to its adoption. Currently, SAF costs around 3 times more than fossil fuel kerosene. To incentivize airlines to switch to SAF, governments and investors can offer financial incentives such as tax credits, subsidies, and carbon credits. The UK government, for example, aims to have at least 10% of aircraft fuel made from sustainable materials by 2030, indicating potential support for SAF adoption. Additionally, carbon trading systems can provide financial incentives, with airlines paying for their emissions if they don't use SAF.

Another challenge is the limited availability of suitable feedstock for SAF production. Airlines and fuel producers must collaborate to diversify their sources and ensure a steady supply of green jet fuel. This could involve partnerships with waste management companies to convert municipal waste into SAF or collaboration with agricultural industries to access crop residues and other biomass materials.

The slow transition to SAF also presents opportunities for investors. Energy stocks, particularly those involved in SAF production, could be under-owned sectors with significant growth potential. Strategic acquisitions, such as those made by Salesforce, can drive organic growth and create value for shareholders.

Despite the challenges, there are reasons for optimism. Innovations in energy storage and smart grid technology are expected to drive the adoption of renewable energy, including SAF. Additionally, the decreasing costs of renewable energy sources make them more competitive with traditional fossil fuels.

The aviation industry must accelerate its transition to SAF to meet its net-zero goals. Collaboration among airlines, fuel producers, and governments is essential to scale SAF production and address the challenges of feedstock availability and high production costs. By working together, these stakeholders can foster a more sustainable aviation industry and create long-term value for investors.

In conclusion, the study highlights the need for airlines to step up their commitment to green jet fuel. The slow transition to SAF threatens the industry's ability to meet its net-zero targets, but with the right incentives, collaboration, and innovation, a sustainable future for aviation is still within reach.