Airline executives descended on climate events in New York this week to emphasize their commitments to use more sustainable aviation fuel (SAF) — and to hint that these goals will prove difficult absent additional government support.
At events tied to the UN General Assembly and Climate Week NYC, supporters of alternative jet fuels said that a range of policies were growing the market, including tax incentives, US states' low-carbon fuel standards and increasingly stringent mandates for SAF usage in the EU. While US production capacity of SAF is expected to rise significantly in the coming years, there is still concern that limited supply and a steep premium to conventional petroleum jet fuel will hinder adoption.
SAF "will always be more expensive because it's a better product," said Aaron Robinson, vice president of US SAF for the International Airlines Group, a holding company that includes British Airways and Iberia.
Executives, while calling generally for more policies to stimulate supply and demand, were more inclined to support subsidies over mandates. The airline industry already runs on tight margins, and executives fear that prospective customers could stay home instead of paying more for lower-carbon flights.
"I think the worst thing we could do right now is choose a very short-term solution that takes that green premium and directly saddles it onto our customers," said Delta Air Lines chief sustainability officer Amelia DeLuca. She argued that the EU's SAF mandates were "pushing the fuel forward a little bit too fast in terms of where the supply and the green premium are."
Still, the most prominent government subsidy for SAF — a tax credit kicking off next year in the US that will offer up to $1.75/USG for domestic SAF producers — was described as helpful but insufficient. The Inflation Reduction Act, which included that credit, was "historic, monumental, not good enough," said United Airlines chief sustainability officer Lauren Riley.
President Joe Biden's administration has frustrated US biofuel groups by not yet providing guidance around qualifying for that credit, known as "45Z," which requires SAF to meet an initial carbon intensity threshold and increases the subsidy as the fuel's greenhouse gas emissions fall. Regardless, airlines and fuel producers say that the credit — which expires at the end of 2027 — is too short-lived to build up a supply chain.
Policies like the 45Z credit should "have an end" but the end needs to be "far enough into the future," ExxonMobil vice president of strategy and planning for product solutions Tanya Vetter said this week at a clean energy event in Washington, DC.
Competing interests
Prolonging the 45Z credit would require legislation, but reopening a debate over clean fuels incentives in Congress could divide groups generally supportive of SAF.
Airlines and refiners support more flexibility around feedstocks — including fuels produced from foreign sources like Chinese used cooking oil and fuels produced by co-processing petroleum — while farm groups want policy to increase demand for domestically produced vegetable oils and corn ethanol. A bipartisan group of farm state lawmakers this week introduced legislation that pairs an extension of the 45Z credit through 2034 with restrictions on fuels sourced from foreign feedstocks.
With Congress set to debate tax policy next year regardless of who controls the White House, airlines supportive of more generous and longer-lasting SAF subsidies will also have to contend with Republicans that want to repeal much of the Inflation Reduction Act and with competing lobbies that would rather devote funds to extending other incentives.
For instance, Justine Fisher — the chief financial officer at the Canadian carbon capture company Svante — signaled interest this week in increasing a tax credit for carbon capture, utilization, and storage that is included in the law. The incentive, which offers $85/metric tonne for captured carbon and is more popular than other parts of the law among oil and gas companies, is currently not "high enough to make project economics work," she said.
