Japan's trade and industry ministry (Meti) will put together a task force to discuss how to further promote the use of sustainable aviation fuel (SAF).
This comes as high prices remain a concern, reflecting a gap between refiners' costs and airlines' price requirements.
The price of domestically produced SAF, even with support to suppliers of the renewable jet fuel, is far from the level at which airlines can purchase without affecting their revenues and profits, a Meti official said.
It has become a big challenge to close the gap between the current price of SAF and the acceptable price for airlines, he added.
Meti held a meeting of its SAF deployment promotion committee on 25 June, at which its member industry groups and companies approved a plan to set up the task force under the committee.
The team will discuss how to cover the difference in prices and aims to report possible measures in December, the Meti official said.
The proposals will arrive as the country's refiners make final investment decisions on their SAF projects.
Meti awarded a public tender to four Japanese refiners — Eneos, Cosmo Oil, Idemitsu and Taiyo Oil — in February to receive financial assistance on their domestic SAF projects.
The refiners are expected to make decisions on investments in these projects this year or the next, the ministry added.
The ministry now seeks to make clear the direction of the country's SAF initiatives to help refiners with their upcoming investment decisions.
Construction costs are rising because of a personnel shortage, and it is hard to make investment decisions without a clearer idea about the strength of demand or a market design, the refining industry said in the meeting.
Meanwhile, the airline sector said that deploying high-priced SAF will hurt revenues. It is structurally difficult to sustain business at the current price level, the sector added.
"With a scheme design provided, it will be easier for us to make decisions," a SAF project member of a Japanese refiner told Argus.
"Without a well-designed scheme, domestic SAF cannot be widely used. Price gap coverage might be the best option, or a mandatory use of SAF might also be effective," he said.
But it does not seem likely that Meti will finalise the scheme design by December. "There's no need to fully decide everything by the end of this year," the Meti official said.
A large amount of domestic SAF will come into the market around 2028 or 2029, so the committee will work on details on the scheme and finalise it by then, he added.
Japan aims to replace 10pc of the jet fuel consumption by domestic airlines with SAF in 2030.
The country's SAF requirements, including foreign airlines' demand, will be around 1.7mn kl in 2030. Supply will be around 1.9mn kl in 2030, calculations by Meti and the land transport ministry as of January 2024 show.
