Abstract

European airlines are fully committed to decarbonising air transport and accelerating their efforts to make Europe the world’s first carbon-neutral continent by 2050 through the reduction of CO2 emissions in absolute terms and through CO2 mitigation. Acknowledging its responsibilities despite the current crisis, the EU aviation sector recently published “Destination 2050 – A Route to Net Zero European Aviation” roadmap showing a pathway to reaching net zero CO2 emissions by 2050 Destination 2050 – A Route to Net Zero European Aviation, A4E, ACI Europe, ASD, ERA, CANSO, February 2021. www.destination2050.eu/.

The use of sustainable aviation fuels (SAFs) is generally considered one of the most realistic and effective means to reduce aviation emissions in the next decades and as a long-term solution for decarbonising long-haul. To reap the benefits of SAFs, Europe needs a dedicated, innovative aviation fuels industrial strategy, financing and legislation. A4E welcomes the European Commission’s ReFuel EU Aviation initiative under the European Green Deal to ramp up the production, deployment and supply of affordable, high-quality SAF in Europe. The important thing now is to get this legislative initiative right on fundamental elements such as high sustainability criteria, scope, reporting and obligations, but also on the crucial details related to technical standards, certification and the quality and origin of the feedstock.

This paper sets out guiding principles for any future SAFs legislation. It also suggests solutions to support the development of SAFs in Europe and provides policy recommendations on the development of a European policy framework such as the market conditions necessary before the implementation of an efficient EU blending mandate.

Introduction

Alongside radical fleet renewal, improved air traffic management and technological advances such as hydrogen and electric power, the use of SAFs is generally considered one of the most effective means to reduce CO2 emissions from aviation in the next decades, particularly for longer-range flying, where alternatives to liquid fuel will not be available within a foreseeable timeframe By 2050, improvements in aircraft and engine technology and subsequent fleet replacement hold the largest promise for decarbonising European aviation. This includes the introduction of a hydrogen-powered single-aisle aircraft on intra-European routes in 2035. The generation of commercial passenger aircraft to be developed in the next 10 years has the potential to realise a step-change in energy efficiency. Introduced from 2035 onwards, these aircraft types are forecast to reduce fuel burn by 30% or more per flight compared to predecessors. Source: Destination 2050, NLR/SEO, February 2021..  Currently approved SAFs not only reduce our dependency on fossil fuels but also, under a Life Cycle Assessment, have a CO2 footprint up to 85% lower CO2 than regular kerosene with biofuel generally in a lower band compared to synthetic fuels. As part of our efforts to make aviation more sustainable, further accelerated by the European Green Deal, we must speed up the development, production and use of drop-in SAFs in Europe.

Many initiatives have been undertaken in Europe since the first commercial SAF flight in 2011. The European Commission, technology companies, the energy industry, airlines and others have invested significant resources in the development of conversion technologies, projects to determine the impact of sustainable fuels in the aircraft, supply networks and scientific studies on the best ways to develop and mobilise the entire value chain in order to incentivise production and voluntary off-take.

In 2012, the European BioFuel Flightpath 2020 See notably here on the launch of the biofuel flightpath in 2012: set out its ambition to reach two million tons of SAF produced in Europe. Nearly a decade later, many valuable lessons have been learned – but production is still seriously lagging in Europe.

The current cost to produce SAFs is at least three times that of conventional jet fuel. Its price is also higher than that of sustainable alternative fuels used in other transport modes. As a result of these higher production costs, SAFs are, in the absence of an orchestrated support strategy, not an economically viable substitute to conventional jet fuel.

Worldwide, the only plant that is continuously producing SAF is in California. Other plants are currently under construction. Although there are various biofuel refineries in Europe that can produce SAF the Total La Mède HEFA refinery can produce SAFs, and Neste is involved in similar projects in Finland, albeit on a limited basis. However, the production of road fuels is more economical due to the tax penalty obligation in France, production at these refineries is still batch-wise. There are two key differences between initiatives in the United States and those in Europe. First, in two states in the U.S., commitments and off-take agreements were in place prior to the modifications of the plant. A second important difference is that there is a stable set of policy incentives that ensure an acceptable return on investment (ROI) period and provide guarantees that certain feedstock can be used over a longer period Measures put in place in California include the 2007 California Low Carbon Fuel Standard (LCFS) regulated by the California Air Resources Board (CARB). Under the LCFS, producers and refiners are responsible for reducing their overall lifecycle emissions by 10% by 2020 as measured on a carbon intensity scale (g CO2 / MJ). To meet these targets, the LCFS utilizes carbon offset credits and renewable fuels. As of January 1, 2019, SAF is eligible for producing credits under the LCFS. Until CARB adopted this provision allowing biofuel to qualify as an eligible credit-generating fuel under the LCFS and the Cap-and-Trade Program, the biofuel industry had no incentive to produce fuels nor create new production capacity for additional SAF volumes. In addition, the extension of state-level low carbon fuel standards to aviation biofuel was a positive market signal to begin to close the gap..

With the knowledge and experience that we have today, a successful trajectory to build production capacity and secure off-take is within reach.

Guiding Principles

• Do not compromise on the sustainability of SAFs.
• Establish a coherent and stable policy framework.
• Prevent carbon leakage and distortions to a level playing.
• Prioritise the aviation sector vis-à-vis sectors with more technological alternatives.
• Pave the way for the emergence of zero-carbon technologies.
• Prioritise the use of regional feedstock / raw materials and European production.

For all existing and future policies, regulatory frameworks, CO2 life cycle assessments (LCA), or support mechanisms, the following guiding principles should be at the core of any successful development and deployment of SAF in Europe:

i) SAFs must be truly sustainable without any compromise.
The production of SAF cannot occur at the expense of food supplies for people or animals and/or may not cause damage to the environment as in the case of deforestation. The LCA assessment applied should be feedstock and conversion technology neutral. It should account for end-of-life uses of existing wastes to avoid the destruction of carbon sinks. In addition, it should ensure a comprehensive manner, which not only considers greenhouse gas emissions but also human and labour rights, local food security, rural and social development, (ground) water resources, soil quality and indirect land-use change effects. The existing Renewable Energy Directive REDII does not sufficiently guarantee that sustainable fuels meet these criteria.

ii) Use of regional feedstock / raw materials and production in Europe should be prioritised.
Europe strives to reduce its dependency on imports from other continents. Therefore, all initiatives should focus on regional supply chains, using local feedstock and raw materials, which should be produced regionally. This prioritisation contributes to the realisation of the UN Sustainable Development Goals as it could support economic growth (SDG 8) in several European regions.
SAFs have the potential to bring multiple benefits to the economic development of the EU, by creating world-leading breakthrough carbon solutions, clean growth, jobs, intellectual property, and improved fuel security.

iii) A coherent and stable policy framework should be put in place.
To spur R&D for novel and not fully mature conversion technologies, such as for example access to lignocellulose feedstock and power to liquid/solar fuels, and de-risk investments in new production facilities, a long-term perspective must be developed6. If this is not changed and a five to ten-year timeframe remains in place, new R&D and demonstration projects and initiatives to increase production capacity are hampered because:
a) there is increased financial exposure for producers who do not write off all investments before the policy framework changes and at the same time
b) there is a risk that frequently changing legislation and policies will lead to unacceptably high prices for the product c) radical innovative technologies are unable to access commercial finance. As a result, they will not reach full-scale production without more comprehensive support in the form of grants, loan guarantees and public-private partnerships. This support is essential to enable the financing of first-of-a-kind facilities and to support the green jobs and growth that domestic production would bring.

iv) Carbon leakage and distortions to a level playing field must be prevented.
Regionally limited mandates always induce distortion of competition. Neither scope of a mandate currently discussed is free of distortive effects. EU carriers could be adversely impacted by a mandate that does not apply to their competitors in equal measure. As regards non-EU competition, indirect flights (flights connecting through Europe) would be the worst affected.

v) The aviation sector must have priority.
Legislators must consider prioritising the feedstock and SAF available in Europe for the aviation sector vis-à-vis other modes of transport, such as road transport, which enjoy a wider range of technological alternative solutions to decarbonise.

vi) Pave the way for the emergence of zero-carbon technologies.
The future European SAF policy framework should not hamper airlines’ ability to support and invest in other CO2-reducing technologies that may be introduced to commercial aviation in the future, such as hydrogen and electric propulsion. A long-term perspective is appropriate, enabling airlines to move funds away from SAFs once better technologies are available.

Supporting the development and production of SAF: Solutions

With the prerequisites in place, one should differentiate solutions that can deliver in the short-term and those novel technologies with great potential, but which require further development before large-scale commercial use:

A. Short-term potential – HEFA is the only viable solution

The only option for short-term deployment uses the HEFA technology (Hydrotreated Esters and Fatty Acids). This conversion technology is already used at commercial scale and is approved by ASTM American Society for Testing and Materials, https://www.astm.org/ for use in commercial aviation up to a 50% blend with fossil kerosene. Although all other ASTM approved sustainable aviation fuels have already been certified, their conversion technology is not yet mature enough to produce it on a large commercial scale.

HEFA fuels can be produced at lower costs than other non-fossil fuels, however, controversies around the raw materials used remain. Vegetable oils from agricultural lands or products with high ILUC (Indirect Land-Use Change) affect form, together with waste oils (tallow and used cooking oil), the basis for the feedstock pool. Although still permitted under the Renewable Energy Directive and used to produce road transport fuels, raw materials will have to progressively be able to cope with tightening sustainability criteria. The EU tends to exclude all crops in the future, but truly sustainable alternatives are available.

The International Civil Aviation Organisation (ICAO) is working on sustainability standards to recognise feedstocks produced through low ILUC land management practices. Some of these methods, for example, cover crops, yield improvements, and the use of degraded lands can increase soil carbon. The EU could take a leadership position in developing low ILUC feedstock in Europe, prioritising wastes with high-emission end-of-life uses to avoid disrupting carbon sinks. This offers a great opportunity to increase production capacity on short notice and deliver affordable fuels, whilst creating green jobs and growth.

B. Medium to long-term options – not one clear winner

In addition to the availability of sustainable biomass in Europe, atmospheric carbon is another (unlimited) regional feedstock source. Both have their own challenges, but given the guiding principle of regional supply chains, both options should be further developed. Several pathways are already approved by the American Society for Testing and Materials (ASTM), but the technology maturity needs to be increased before production at demonstration and/or commercial scope can start. Multiple projects should be launched in Europe, with EU support.

Where biomass is used as feedstock, specific attention should be given to the technology development, because of each individual feedstock’s specific characteristics. The biological structure of various biomaterials differs significantly depending on the region of origin. This requires different catalysts and enzymes to break down these products into usable building blocks, enabling the production of SAFs.

The challenge for renewable fuels of non-biological origin (RFNBOs), synthetic fuels, or e-fuels, is different. Carbon capture from air requires large volumes of renewable energy and green hydrogen in the conversion process. Only if the energy used for capturing carbon and hydrogen production is sustainable, is the LCA of this synthetic fuel better than a fossil counterpart. Given the different usages of green hydrogen, it is also required that all green energy used in the capturing and production process comes from additionally produced energy. Taking green energy from the grid under existing regulatory frameworks is not possible. The price of green energy and hydrogen is currently high, leading to an expected premium that could go as high as 10 times fossil fuel prices. Therefore, the development of the synthetic fuel path

must go hand in hand with an ambitious energy transition strategy to increase availability and reduce costs.

Policy Recommendations

At present, it remains uncertain which SAFs have the largest potential in Europe. It is therefore not surprising that expert views on the issue differ. On one hand, some experts consider the e-fuel route to be the option for Europe, whereas others believe that a mix of various types of sustainable fuels is required to meet the expected volumes needed. At this stage, with the challenge ahead of us, we should not make any decisive choices or disregard options with relatively small volume potential. All existing and future initiatives require the same long-term perspective and R&D support. Once commercial-scale production is possible, an initial support to cover the price premium between the SAF and fossil kerosene must be secured e.g. from the revenues of the auctioning of EU ETS allowances, through the EU ETS Innovation Fund, or through national Recovery plans. Proper European policies and a stable regulatory framework should provide the requested long-term perspective.

We therefore propose the following recommendations:

I. Develop a policy framework to support the production and deployment of SAFs in Europe built on clear objectives, with a robust Life Cycle Assessment (LCA)/validation methodology neutral towards conversion technology a wider set of technologies capable of converting unrecyclable solid waste into useful products, such as green fuels and renewable energy, in an environmentally beneficial way and raw materials

The production of SAF cannot be at the expense of food supplies for people or animals and/or cause damage to the environment as in the case of deforestation. Therefore, these criteria should be solidly embedded in sustainability certification schemes to ensure that only the development and use of SAF are incentivised. Such criteria would benefit both the environment and the aviation industry.

Such a policy framework should last for at least 20 years to generate a solid business case and create confidence amongst investors to step in. The European Green Deal provides an opening to revise the strategic objectives of the RED in conjunction with existing policies and regulatory frameworks. To deliver large volumes of affordable SAF, the EU should develop the right regulatory framework that ensures the production and use of truly sustainable aviation fuels in the next decades. With the increased ambition level of the Green Deal, a revision of REDII and other related regulations is necessary.

II. Consider support for the production and availability of feedstock for SAF production

Studies Searle, S., & Malins, C. (2016). Waste and residue availability for advanced biofuel production in EU Member States. Biomass and Bioenergy. indicate that there is an abundance of various raw materials that can be converted into (advanced) renewable fuels, including options for HEFA. Production and, if needed, import of raw material for (advanced) renewable fuels needs to be encouraged.

The European Commission should take a leadership role in developing low ILUC feedstock in Europe and not proceed towards a general ban on crop use for renewable fuel production. ICAO’s work on sustainability standards for low ILUC land management practices should be the starting point.

III. Create a coherent support scheme for SAF technology development and capacity build-up in Europe

Given the various stages of technology maturity and ASTM approval, we should differentiate between three types of initiatives:

a) Project with ASTM approval and mature technology (commercial scale production proven).
b) Projects with ASTM approval, but the technology is not yet at a commercial deployment level.
c) Projects without ASTM approval, possibly using a technology that is not yet at a commercial deployment level.

• Projects should prioritise raw materials of European origin. On top of contributing to the realization of the Energy Union, it would prevent trade in raw materials that both make traceability difficult and limit commercial effects and movements of raw materials to the locations where they yield the most.
• ASTM-approved fuels projects should be subject to a condition to deliver SAF to market through e.g. long-term purchase agreements whereby at least 70% of the intended production capacity is committed. It is precisely this commitment that de-risks investments and is a crucial factor in attracting investors while protecting airlines from unacceptable prices and preventing producers from switching to the production of road transport fuels.
• For projects without ASTM approval, it must be mandatory to complete the initial stages of the ASTM approval process (phase 1 reporting, fast-track, or clearing house procedure). If parties do not commit to this, one could question the intent to deliver to the market.

Support schemes differ as well per type of project:

• For ASTM approved fuels projects, the support should come via low-cost loans from governments, development banks, loan guarantees, or insurance packages In this respect, financial support schemes from any future so-called “EU climate bank” or the EIB could be considered.. Besides financial support, local governments can also facilitate non-financial support such as through permits or to building new or refurbished production locations and logistics infrastructure around the production location.

• The majority of support should come when the plant is operational. Based on the actual supply, producers/buyers should get a set contribution to cover the additional costs compared with fossil fuels. Many European countries have similar feed-in tariffs in place for green electricity from PV installations of wind energy. This feed-in tariff should be granted for a fixed period, without the possibility to extend this period and could come from national budgets harmonized at the EU level as aviation fuels may count towards their renewable energy targets and support them in their energy transition from fossil to renewable.

• Development projects for non-ASTM approved fuels should get funds for their research work in line with the European standard programmes. Additionally, a fixed amount should be granted to cover the costs of the initial ASTM procedures. Due to the ASTM process, these types of projects might run longer than the standard research projects.

• ASTM approved fuels without fully mature production technologies should be a mix of both as research work is needed. However, for these projects, most of the support should come when delivering fuels into the market.
IV. Share information and best practices
We support and undertake initiatives to support the sharing of information and best practices, in particular:

• We are researching the creation of a collaborative platform to facilitate purchase agreements. Within the boundaries of competition law, we will consider methodologies to reach jointly sufficient volumes that make continuous production possible.

• Individual airlines support research projects or investigate voluntary SAF off-take possibilities.

• Through the European Sustainable Aviation Fuel Users Group (SAFUG), members try to support and stimulate the global SAFs deployment and ASTM developments to make approval less complex, timely and costly.

• We support the set-up of a European SAF Alliance to share information and collectively discuss the right policies and necessary funding to support the scale-up of SAF in Europe.

V. Only consider the introduction of a blending mandate under mature market conditions

Several European Member States are introducing or considering national blending obligations. Timing, percentages, and scope differ, which will affect the level playing field. Despite the drive to accelerate developments through obligations, policies should only support fuels at volumes that are assuredly sustainable and are in line with our guiding principles. At present, volumes of waste oil-based fuels are limited, and other technologies have not reached commercial maturity.

Mandates implemented prematurely would lead to higher prices for the industry since there is limited availability of SAF. Moreover, it would also stimulate a ‘’race to the bottom’’ and lower sustainability standards as users seek to fulfil their obligations under such a mandate. It could also lead to more tankering of fuel. The aviation industry is a global industry and therefore requires global solutions. Introducing a mandate at the global level requires coordination and an unambiguous and uniform regulatory framework at the ICAO level.

VI. Accounting system (book & claim system)

To achieve the lowest cost and highest efficiency, an accounting framework similar to the framework for renewable electricity might be needed: airlines should be able to purchase SAF attributes (similar to Guarantees of Origin for renewable electricity) and only airlines that have purchased such SAF attributes can claim the associated emission reductions. These attributes should be issued for uplifted SAF, but any airline, regardless of whether it effectively tanks SAF or not, should be able to buy them. SAF production facilities may not be distributed evenly in Europe. Some areas will have more feedstocks than others. To increase the use of regional supply chains, production facilities are likely to be built close to these regions.

The SAF could then be distributed to the nearest airports, as long as this does not require changes to the existing fuel supply infrastructure. The airport infrastructure will supply a given amount of SAF through its fuel system, but only airlines that actually purchase the SAF attributes will be able to account for it in the booking system. Airlines should be given the possibility to then decide on which flights to actually account for the SAF. This prevents airlines from carrying extra fuel on board if SAF is not available at a certain airport. Airlines that aim for higher CO2 emission reductions will decide to buy a larger amount of SAF and distribute the SAF in the most economically efficient way across the fleet. If the price of EU-ETS allowances remains higher than CORSIA offsets, it is likely that airlines will decide to use the SAF on intra-European flights first, the remaining being taken into account on international flights.

VII. Claiming and reporting

Ensure that the calculations and claims of SAF for the end-user are clear. Each SAF offtake should benefit the airlines’ scope 1 and mandate percentage. A bad example is the current SAF mandate in Norway, where carbon credits seem to be claimed by the supplier only. Claiming the CO2 reduction under the ETS or CORSIA should be the sole privilege of the end-user using and paying for the SAF. The supplier should provide the right and complete information needed to claim to the end-user (e.g. the airline).

Regulatory considerations for an EU SAFs blending mandate

A European blending mandate needs to:

• Supplant national mandates and harmonize all relevant legislation. A Regulation is preferred to a Directive to avoid diverging implementations.
• Avoid market distortions.
• Avoid carbon leakage.
• Guarantee that stringent sustainability criteria are met.
• Foresee strict reporting rules with transparency requirements notably with regards to the sustainability of the fuel provided.
• Obligate first the SAF supplier.
• Ensure that the CO2 saving is claimed by the end-user of the SAF if in scope (not linked to physical use).
• Avoiding leading to significant market power or the creation of monopolies.
• Avoid additional cost increases due to lack of market competition or absence of incentives to lower prices (eg. at smaller airports).