News
03/07/26
Airlines could buy more Corsia credits, then SAF: Panel
Singapore, 3 July (Argus) — Airlines could buy more carbon credits to meet their
near-term decarbonisation targets and increase their sustainable aviation fuel
(SAF) purchases in later years when prices fall, said panelists at the MyAero
Sustainable Aviation APAC Symposium in Putrajaya, Malaysia, over 30 June-2 July.
"As sustainable aviation fuel (SAF) is so much more expensive today, we probably
need a greater share of credits to address aviation emissions' impact, and a
smaller share of SAF to lay the foundations for greater use in future," said
Puar Si Liang, vice-president of Singapore-based investment platform GenZero.
"But when we get to 2050, a huge chunk of aviation decarbonisation should be
addressed by SAF, and carbon credits used for the residual emissions," he added.
Some volume of carbon credits is still needed to address residual emissions even
under International Civil Association Organization's (ICAO) most aggressive
long-term aspirational goal (LTAG) Fuel Scenario 3 for aviation emissions
reduction, given that SAF and low-carbon aviation fuels will not be able to
reduce all of it, Puar said. Buyers are often purchasing carbon credits instead
of SAF because they can fulfil obligations and are a fraction of what SAF costs,
founder and managing director of commercial advisory firm Stratx, Izabela
Santos, said. Stratx is involved in live SAF offtake negotiations, and works
with project developers, investors, airlines and other stakeholders to help SAF
projects reach final investment decisions (FID). Argus assessed the spot price
for the ICAO's Carbon Offsetting and Reduction Scheme for International Aviation
(Corsia) Phase 1 credits at $9.30/t CO2e on 2 July, the lowest levels since the
assessment's launch last November — although demand is also likely dampened as
end-users await more clarity from the EU's emissions trading system (ETS) review
planned for mid-July, where the ETS' scope may be extended to international
aviation emissions from departing flights. In comparison, the RED
HEFA-SPK-jet/kerosene CO2 abatement Strait of Malacca price — which measures the
cost of abating a tonne of CO2e greenhouse gas emissions by consuming SAF rather
than jet fuel — stood at around $459/t CO2e on 2 July. Countries in the
Association of Southeast Asian Nations (Asean) have a pipeline of 100 new
projects, which could bring an additional 133mn-302mn Corsia-eligible emissions
units into Corsia's second phase running from 2027-35, possibly worth
$1.3bn-7bn, according to a report jointly published by aircraft manufacturer
Boeing, GenZero, and carbon services firm Abatable, and also announced at the
conference. Global demand for Corsia Eligible Emissions Units (EEUs) is
estimated at 1.2bn-1.8bn during Corsia's second phase. Not all airlines Credits
also align better with airlines' procurement cycles compared with long-term SAF
offtake agreements, Santos said. Airlines need to show demand signals, but it is
difficult for us to into SAF contracts with fuel suppliers for more than around
a year due to price uncertainty, said Japan Airlines' vice-president for
promotion of Japan-made SAF Atsushi Kita. "It's also very tricky for us to
strategise and decide on the duration of SAF offtakes, due to unstable feedstock
prices and recently volatile SAF prices," said Malaysia Airlines' (MAG) head of
sustainability Rahimah Ali. "It's a step for airlines — even the strongest of
them — to change the well-trodden process of buying fuel 12-24 months out, and
to think in the timeframe of a SAF facility, which usually require 15-20 years
of guaranteed procurement. That's many years of procurement commitment that sits
on your balance sheet as a risk," said chief of ICAO's Finvest hub Robert Boyd.
Finvest aims to accelerate the financing of cleaner energy solutions for
aviation by connecting various stakeholders, with a focus on SAF. European
airlines like KLM and IAG have signed long-term offtake agreements, but this is
not seen across the industry yet, Boyd said. Banks will require from SAF project
developers a binding level of legal commitment towards SAF purchases, which is
hard to achieve, he said, adding that a letter of intent or memorandum of
understanding will not be enough. "And colloquially speaking, even if fuel
suppliers buy SAF from producers, they will typically just pass on those costs
to the airline. Fuel suppliers similarly do not want to lock themselves into
10-15-year agreements especially when the SAF price is expected to fall," Santos
said. Competing for now, complementary in future? Carbon credits and SAF
compete, Santos said. Not in every case, but to a significant enough degree to
impact a SAF project's FID pipeline, she added. "Airlines and fuel suppliers'
budgets are finite. If airlines can fulfil decarbonisation obligations at a
significantly cheaper price, credits will win every single time — unless there's
an external factor changing this calculus. The ability to use credits takes
pressure off them to sign offtake agreements, without which no projects will be
built — except in China, where it's a different ballgame," Santos said. Of
roughly 600 SAF projects announced since 2016, only around 35 are currently
operational, Boyd said. Corsia is a compliance cost for airlines, but SAF is
still an important decarbonisation lever for them, with more jurisdictions
imposing targets, Malaysia Airlines' Rahimah Ali said. Carbon credits and SAF
are complementary strategies, with credits enabling airlines to reduce emissions
as much as possible within the value chain and SAF for further reductions,
GenZero's Puar said. Corsia's phases have an end-date of 2035 but the aviation
industry's net-zero emissions goals are by 2050, so the strategy of reaching
that should include SAF, which will be better understood by then, ICAO's Boyd
said. "If there is the commitment for decarbonisation to be in-sector — meaning
areas that airlines can control — SAF will play the leading role in that out to
2050, and perhaps beyond," he added. "And even if we achieve our net-zero by
2050 goals, we still need energy sources to maintain that [status]. Right out, I
can see that both Corsia credits and SAF will play a role [in decarbonisation]
out till 2100," Boyd said. By Sarah Giam Send comments and request more
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