The aviation industry is under increasing pressure to reduce its carbon footprint, currently responsible for around 2.5% of global CO₂ emissions—equivalent to 1 billion tons in per year. Its contribution to global warming is estimated at 4%, and as income levels rise globally, emissions are projected to climb. Green Molecules™ technologies, like Sustainable Aviation Fuel (SAF), offer transformative solutions to decarbonize aviation and reverse this trend. In this newsletter, we explore SAF's potential and the regulatory landscape driving its adoption.
SAF is a drop-in fuel, meaning it can replace conventional jet fuel without requiring any modifications to aircraft or fueling infrastructure. It can cut lifecycle greenhouse gas emissions by up to 80% today, with the potential to reach 100% in the future. SAF is produced from a variety of feedstocks, including waste materials like used cooking oil, as well as renewable resources such as agricultural and forestry residues. By using waste streams that would otherwise be discarded, SAF helps close the carbon loop, making it a more sustainable option compared to fossil fuels.
There are currently four main pathways to create SAF, which fall into two main categories: Power-to-liquid SAF and Biofuel SAF. Biofuel SAF is created from a wide variety of biological sources while Power-to-liquid SAF is created through carbon capture processes. Biofuel SAF was developed first and therefore is currently cheaper and more common today. Some countries are incentivizing or mandating Power-to-liquid SAF above and beyond general SAF because it has the potential for 100% CO2 reduction (compared to around 80% or so for biofuel SAF).
Governments worldwide are implementing mandates and incentives to scale SAF production and adoption. Here’s a look at key regions:
1. European Union: ReFuelEU Aviation Initiative
The EU's ReFuelEU Aviation Initiative mandates increasing SAF blends in aviation fuel, starting with a 2% blend by 2025, 6% by 2030, and 70% by 2050. Synthetic fuels must also make up a portion of the blend, starting at 1.2% in 2030 and reaching 35% by 2050. The regulation ensures that at least 90% of jet fuel uplifted at EU airports must be SAF-compliant, with revenues from penalties supporting R&D.
2. United Kingdom
The UK SAF mandate targets a 2% blend by 2025, scaling to 10% by 2030 and 22% by 2040. The country also has a power-to-liquid fuels mandate, which starts at 0.2% in 2025, aiming for 3.5% by 2040. This approach leverages CO₂ capture and green hydrogen to produce synthetic fuels, offering an alternative pathway to decarbonize aviation.
3. United States: Inflation Reduction Act and SAF Grand Challenge
The Inflation Reduction Act provides significant incentives for SAF, including a tax credit of $1.25 per gallon for SAF achieving a 50% emissions reduction, with additional incentives for greater reductions. The SAF Grand Challenge sets ambitious targets to produce 3 billion gallons annually by 2030 and to meet 100% of domestic aviation fuel demand with SAF by 2050.
4. Canada: Low Carbon Fuel Regulation
British Columbia leads North America with the first aviation fuel mandate, requiring 1% renewable content by 2028, increasing to 3% by 2030. Additional emissions reduction targets aim for a 10% reduction in aviation fuel emissions by 2030.
5. Global Initiatives: CORSIA
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) requires airlines to maintain emissions below 2020 levels for international flights. The scheme will be mandatory starting in 2027, pushing the industry towards greater use of SAF to meet compliance.
Regulatory mandates are set to drive SAF demand significantly, with projections estimating an increase from 1.5 million metric tons (Mt) in 2024 to 4.5 Mt by 2030. If additional targets and airline commitments are met, demand could exceed 16 Mt. The market, valued at $1.3 billion in 2023, is expected to reach $41.6 billion by 2032, reflecting a compound annual growth rate (CAGR) of 46.9%. To help meet this demand, Energy Capital Ventures portfolio company Cemvita recently secured a 20-year off-take agreement with United Airlines. They are advancing through their FEED study for a FOAK project, which focuses on producing sustainable, cost-competitive fuel from reliable feedstocks with minimal land, water, and electricity requirements—a promising solution for the aviation industry.
According to the European Aviation Environmental Report, SAF supply in the EU should increase to 27.7 Mt by 2050. Most of this growth is expected to come from gasification, power-to-liquid, and alcohol to jet pathways. HEFA (SAF produced from organic oils and fats) will likely plateau around 1-2 Mt per year. This is due to constraints that have been put around qualifiable inputs to prevent SAF competing with food production.
Today planned SAF supply is greater than SAF demand. However, as the regulatory mandates outlined above are put into action, the demand for SAF is expected to begin to outpace supply. This will drive up the price of SAF, encouraging more players to enter the market with a wider array of technologies and pathways.
SAF is undoubtedly a cornerstone of the aviation decarbonization plan. Planes are inherently difficult to decarbonize because increasing the weight of fuel (such as by using batteries) directly reduces passenger and cargo capacity. SAF offers a viable solution for medium- to long-distance flights due to its energy density being similar to conventional jet fuel but with 50-100% fewer net carbon emissions.
Achieving the regulatory targets outlined above could enable SAF, along with other green molecule technologies, to reduce aviation-related emissions by up to 30% by 2030. According to McKinsey, SAF volumes could reach between 10% and 30% of total jet fuel used by 2030. With continued advancements in SAF production technologies and feedstock utilization, the aviation industry has the potential to achieve net-zero emissions by 2050, revolutionizing the way we approach energy in aviation.
At Energy Capital Ventures, we support transformational Green Molecules™ technologies like SAF, fostering innovations that drive the decarbonization of hard-to-abate sectors, ensuring these solutions scale to meet global sustainability goals.
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