The U.S. ambition to significantly increase the production of sustainable aviation fuel (SAF) may face obstacles as producers are deterred by low-profit margins and airlines express concerns about the expensive transition, according to experts.
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President Joe Biden, who has prioritized addressing climate change, initiated a challenge in 2021 to produce at least 3 billion gallons of SAF annually by 2030, a substantial increase from the current 15.8 million gallons. However, S&P Global Commodity Insights predicts that U.S. SAF production will only reach 2.1 billion gallons by 2030, based on forthcoming projects.
The U.S. Energy Department has emphasized the importance of SAF as alternative sources like battery technologies and hydrogen are not expected to significantly reduce aviation emissions until after 2050. Currently, SAF costs $6.69 per gallon compared to $2.85 for traditional jet fuel, which may discourage airlines from using it. Major airlines such as Delta Air Lines and Southwest Airlines aim to replace 10% of jet fuel with SAF by 2030, but SAF currently accounts for only 0.1% of the total U.S. jet fuel pool.
A survey commissioned by GE Aerospace suggests that high costs and supply issues are major barriers to achieving net zero emissions by 2050. European regulators have mandated that SAF should make up 2% of fuel available at EU airports by 2025, increasing gradually to 70% by 2050. However, SAF producers are currently eligible for a tax credit of up to $1.75 per gallon under the Inflation Reduction Act (IRA), which may not be sufficient to compensate for poor margins. The high project costs for SAF and tight supply of feedstocks such as cooking oil also pose challenges. The Biden administration is yet to decide on the role of ethanol in the aviation fuel subsidy program and whether SAF made from corn-based ethanol should qualify for IRA subsidies.
