The International Air Transport Association's (IATA) chief economist, Marie Owens Thomsen, has called for increased efforts from the oil and gas industry and alternative fuel producers to develop more eco-friendly aviation fuel. This is in a bid to help airlines reduce their carbon emissions. Currently, aviation is responsible for 2-3% of global carbon emissions, making it a challenging industry to decarbonize, especially when compared to other forms of transport like road travel.
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Sustainable aviation fuel (SAF) has the potential to cut aviation emissions by up to 80% and is considered the primary eco-friendly solution for the industry. However, SAF currently constitutes just 0.2% of global jet fuel usage, equivalent to about 500,000 metric tons of production. This is less than what the aviation industry had anticipated based on IATA data. Moreover, SAF costs three to five times more than conventional jet fuel. Thomsen highlighted that only 3% of global oil and gas capital budgets are allocated to SAF production, despite the sector having significantly higher profit margins than aviation. The latter is projected to achieve a profit margin of 2.7% in 2024. Thomsen emphasized the need for change at a media event in Geneva.
By 2050, environmental targets will require 500 million metric tons of SAF, while by 2030, IATA forecasts that 63 million metric tons of SAF will be in production. IATA stressed that airlines should not bear this investment burden alone. Thomsen estimated that in 2024, airlines could incur additional costs of up to $2.4 billion to secure SAF. Numerous airlines worldwide have entered into agreements with SAF producers, particularly in Europe, where regulatory requirements are set to take effect in 2025. SAF producers have expressed concerns about the uncertainty of fuel production volumes and potential oversupply issues in the future.
In November, an executive from oil refining company Neste stated that the company might have surplus SAF production capacity by 2028. They called for more certainty about long-term demand to justify investment beyond that point. IATA's head, Willie Walsh, dismissed these concerns, stating, "Every drop of SAF that's produced has been used and will be used." Neste did not immediately respond to these comments. Thomsen also suggested that the SAF market needs to become more global to meet demand worldwide, not just in regions where SAF plants are situated.
