News
26/10/02
Air, sea sustainable fuel tipping points still far off
Strong global policy is needed to change sustainable shipping fuel economics,
writes Michael Ball Washington, 2 October (Argus) — Significant work remains to
transition the world away from fossil fuel in aviation and shipping, despite
repeated support pledged at UN climate talks. The need to ramp up the use of
alternative fuels will be a focus of the UN's Cop 31 climate summit next month
in Antalya, Turkey. The host wants countries to join a new pledge to boost
electricity to 35pc of all global final energy consumption by 2035, up from
about 20pc currently. Last year's host, Brazil, has its own initiative to
quadruple global output and use of sustainable fuels, including biofuels, by
2035. And past Cops have produced other pledges to reduce emissions in aviation
or shipping. But alternative fuels have not yet reached their tipping point,
accounting for less than 1pc of the fuel used in aviation or shipping globally.
Cost and politics remain two of the major roadblocks. The sustainable aviation
fuel (SAF) industry has shown signs of growth. Major fuel users, including Delta
Airlines and FedEx, have recently extended and expanded SAF offtake agreements .
And production is on the rise. For example, Neste, the leading producer of SAF,
currently has production capacity of 1.5mn t/yr, which it plans to grow to 2.2mn
t/yr in 2027, or about 750mn USG. But SAF still makes up a small, but growing,
sliver of fuel use. Suppliers in the EU blended nearly 3pc into jet fuel last
year , surpassing the bloc's 2pc mandate in its first year. In the US, SAF
accounts for roughly 1pc of jet fuel supply, although the US EIA expects that to
soon reach about 2pc. Global production this year is set to exceed 790mn USG, up
by 26pc on the year, according to the International Air Transport Association.
The story is similar in shipping. Globally, ships of at least 5,000 gross
tonnage used more than 223mn t of fuel oil in 2024, about 92.5pc of which came
from heavy fuel oil, light fuel oil or diesel, according to International
Maritime Organization (IMO) data. Only about 0.8pc came from "other" fuels,
despite biofuels jumping to more than 1.2mn t from less than 400,000t in 2023.
But the slow pace of fleet turnover, and the need for more engines that can use
alternatives, means that the course the industry plots over the next few years
could determine whether it can meet the IMO's goal of net zero emissions by
2050, according to a recent report from the Global Centre for Maritime
Decarbonisation (GCMD). Cost calculations Cost remains a major hurdle to greater
SAF use in aviation and shipping. SAF can reduce emissions under the
International Civil Aviation Organisation's Carbon Offsetting and Reduction
Scheme for International Aviation (Corsia) system, which seeks to offset any
growth in aviation CO2 above 85pc of 2019 levels. But using Corsia carbon
offsets currently costs significantly less. Argus assessed Corsia phase 1
credits at $12.45/t this week, compared with an abatement cost as high as $310/t
for the US west coast. In other parts of the world , the cost of abating 1t of
CO2 equivalent in emissions by using SAF instead of jet fuel is even higher. In
shipping, GCMD says strong global policy is needed to change the economics of
sustainable fuels, as national and sub-national efforts will fall short. At the
top of the list is the IMO-proposed carbon pricing system, the adoption of which
was delayed last year in the face of US opposition. IMO pledged to try again
this year. The agency will meet next month to consider next steps toward
achieving its greenhouse gas emissions goals. "Achieving a price signal of this
magnitude will be challenging, but without it, the economics are unlikely to
support the transition to new fuels at scale," the GCMD said. Send comments and
request more information at feedback@argusmedia.com Copyright © 2026. Argus
Media group . All rights reserved.
