Mind the (Carbon) Gap: with sustainable aviation fuels, what will it take, who’s gonna pay?

February 26, 2017 |

BD TS 022717 Carbon gap sm

So there’s this gap, say researchers at Utrecht University in their report on aviation biofuels, between the emission goals that airlines have set themselves (call this, carbon-neutral growth), and what is going to be achieved through operational efficiency.

Totaling 232 million tonnes of CO2 over the period 2020-2030.

Let’s put that in perspective, that’s the weight of half the world’s population. That’s a lot of gas. I’ll say that’s a gap.

The Utrecht Report says that the gap could be substantially reduced with the advent of aviation biofuels at scale. But no one, er, wants to, um, pay for it.

How much would real remediation cost? According to the research team’s Strategic Action scenario (which takes into account the use of carbon offsets as well as achieving operational efficiencies), €10.8B, and that’s a lot of scratch.

On the other hand, think of it this way. Passengers flew 1.370 trillion passenger-kilometers in the EU in 2014, according to the Eurostats reporting arm (get all that data here). Over a 10 year period, they would be expected to fly 14.86 trillion kilometers (if the industry grows at the same 8.5% rate it did between 2005 and 2014).

Mind the Carbon gap

So, closing the gap comes down to an extra cost of €0.0007 per passenger-kilometer.

Why are we even talking about this?  It’s not even a rounding error. You’d have to fly 1400 kilometers to rack up an extra Euro in cost.

Why can’t there simply be an agreement that this is a very cost-effective way to reduce carbon, and organize a €10B tax credit payable to airlines according to their use of sustainable aviation fuels?

The Report’s Strategic Action scenario

“By introducing a sub-target for lignocellulosic biofuels, the Strategic Action scenario presents a growth trajectory which gradually introduces lignocellulosic biofuels while phasing out food-based biofuels (particularly biodiesel). Almost half of RJF supply is produced from lignocellulosic feedstocks through a varied technology portfolio (i.e. Fischer-Tropsch, pyrolysis, Hydrothermal Liquefaction and Alcohol-to-Jet), thus providing a more scalable and potentially cheaper alternative to RJF production from waste oils. Moreover, imports are significantly reduced; particularly palm oil and food-based ethanol. More investments are directed to building production capacity, hence supporting the development of a more EU-focused advanced biofuels industry, including the macro-economic benefits that may accompany such development.

“Significant funds are required to achieve large-scale deployment RJF. In all scenarios, a price premium on RJF exists and is likely to remain beyond 2030 (irrespective of feedstock-technology combination), unless fossil jet fuel prices increase strongly or production costs reduce drastically. The total expenses of the introduction of RJF in the EU in the Strategic Action scenario were quantified to be 10.4 billion € (Figure 2). These funds only cover the price differential between RJF and fossil jet fuel, thus excluding the research and development funds required for technology development. The corresponding price premium over fossil jet fuel (762 €/t RJF) and emission mitigation cost (242 €/t CO2 avoided), averaged over 2020-2030, are relatively high compared to other mitigation options. However, the cost per passenger departing from an EU airport (0.9-4.1 €/passenger, depending whether all flights or only domestic flights are targeted) is modest and presents only a small supplement to the cost of carbon offsets (0.4-1.5 €/passenger) over this time period.

The Report’s math

“A price premium on RJF is likely to remain beyond 2030. A structural financing mechanism is therefore cardinal to establish a stable end market and stimulate the deployment of RJF. Due to the relatively high price premium over fossil jet fuel (762 €/t RJF) and emission mitigation cost (242 €/t CO2 avoided), a level playing field with other bioenergy sectors on the basis of these indicators (in e.g. the Renewable Energy Directive or EU Emission Trading System) will likely be inadequate to stimulate RJF uptake. Supplementary measures, such as guaranteed feed-in tariffs, are therefore necessary. Using public investments for such measures may be justified on the grounds of potential environmental and macro-economic benefits of RJF deployment (e.g. emission reduction, health impact, employment, energy security). Alternatively, fund raising may be coupled to the expenses for carbon offsets at a global (CORSIA), EU (EU-ETS), national or airport/airline level. A modest surcharge of a 0.9-4.1 €/passenger (roughly twice the cost of carbon offsets), aggregated in a ‘RJF deployment fund’, is estimated to be sufficient to support 5% RJF deployment in 2030. “

The Report’s scenarios

“The deployment scenarios vary in the share of carbon offsets and RJF deployment used to cover the Emission Gap (Figure 1). The Business as Usual scenario departs from the current absence of incentives for RJF. As such, RJF deployment relies on investments by airlines or external co-funding (assumed 0.01% of annual jet fuel expenditures). In the Delayed Action scenario and Strategic Action scenario, the RJF share increases exponentially from 0.5% in 2021 to 5% in 2030 (3.4 Mt RJF). In contrast with the Delayed Action scenario, the Strategic Action scenario contains a sub-target for lignocellulosic biofuels of 4% of total fuel use in road and aviation sector in 2030 (equivalent to 13 Mt biofuel). The Full RJF adoption scenario assumes that RJF covers the entire Emission Gap (i.e. no carbon offsetting is used). In this scenario, RJF volumes grow from 1.3 Mt in 2021 to 14 Mt by 2030 (20% of total jet fuel use).

“In the Business as Usual scenario only 13 kt of RJF will be produced by 2030 due to the absence of an external incentive. This effectively means that the aviation sector will meet its carbon-neutral growth target until 2030 using carbon offsets. As a result, it will most likely fail to meet further emission reductions after 2030, since the required technological options have not been developed while the amount of available carbon offsets may rapidly deplete after 2030.

“In contrast, model results show that the Full RJF Adoption scenario requires an extremely high rate of feedstock mobilization (particularly lignocellulosic biomass) and capacity deployment; lignocellulosic biofuel production capacity increases from nearly zero to 26 Mt/yr over the course of 15 years. It takes multiple decades to introduce new technologies, deploy production capacity and mobilize sufficient feedstock. As even more substantial RJF volume growth is required after 2030 to reach the industry’s target in 2050, it is cardinal to have a long-term vision with a prominent role for early action such that significant volume growth can be achieved towards the middle of this century.

“The Delayed Action scenario uses carbon offsets to buy time to gradually integrate RJF in the feedstock-technology portfolio. In this scenario, HEFA RJF represents nearly 90% of the total RJF supply in 2030. This does not only instigate a shift of waste oils from the road to the aviation sector, but also creates a lock-in effect on the longer term, as the potential of sustainable oil feedstocks is limited while alternative technologies remain undeveloped. Such a system could give rise to major scale-up difficulties in the period beyond 2030.”

The Bottom Line

The Report is very clear on one conclusion. Absent an aggressive introduction of renewable fuels, airlines will miss their carbon targets and badly. The other conclusion is simple math that hopes for parity priced fuels at global scale should be slim. However, the costs of supporting an introduction of these fuels, amortized over all the flying that will take place in the coming decade, details that we are arguing over a laughably small cost that passengers would be unlikely to notice, or taxpayers either.

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