Reaching net zero carbon emissions by 2050 will require collaboration throughout the aviation value chain and beyond. It will also necessitate government and relevant authorities setting stable policies that encourage the adoption of decarbonization technologies and initiatives.
On the face of it, says Marie Owens Thomsen, IATA’s SVP Sustainability and Chief Economist, fulfilling these conditions seems a distant prospect.
First and foremost, despite the accepted need for renewable energies, support for fossil fuels continues. “Fossil fuel is at the heart of our society and not just aviation,” she says. “We need to wean the world off fossil fuel. It will take a complete systems change that involves every country and every industry. We must bring people together, go across government departments, across borders, and across industries. The energy source is the problem and that is common to us all.”
And existing fossil fuel subsidies continues to skew investment decisions. Simply, it is too easy to make a profit in fossil fuel. “You can’t expect people to behave irrationally,” says Thomsen. “So, any good policy that is truly looking to achieve decarbonization will have to change the investment parameters.”
The year of elections
Compounding the problem is the fact that most countries have taken a step toward isolationism—a lingering effect of the pandemic worsened by the current geopolitical situation. This has pushed energy security and military spending higher up the agenda, leaving less money on the table for sustainable initiatives.
Also, as has been well documented, this is a huge year for elections with more than 70 countries and over 4 billion voters going to the polls. This includes such major markets as the European Union, India, Mexico, and the United States. It could spell unusual volatility ahead as it must be seen against a backdrop of an increasingly polarized environment, with gains potentially both on the far right and the far left.
“Policy upsets are definitely possible,” says Thomsen. “Differences are starker than before and that makes it difficult to make business decisions.”
Elections also highlight the core of the policy problem. Most countries have elections every few years, meaning politicians are continually chasing votes. This can mean that they run ahead of the science, for example setting mandates on sustainable aviation fuel (SAF) use when there is no—or a very limited—supply of that product. All that happens in such cases is that the price of SAF increases without a corresponding reduction in carbon emissions—characteristics of an ill-thought-out policy.
“We have a political system that suffers from short-termism while tasked with solving generational issues,” laments Thomsen.
Support for energy producers
Even good legislation has some devil in the detail. The US Inflation Reduction Act has done much to incentivize SAF production and uptake. Although it made $400 billion of lending available for SAF plants at preferential rates, to get a loan a company needs an up-and-running demonstration plant that has been successfully performing for 1,000 hours. The logic is that taxpayers’ money shouldn’t be exposed to a commercial risk.
But, of course, for a project to get to such a mature stage takes enormous time, money, and effort. The money is not flowing through the pipeline at the pace the industry needs.
“We are not asking for money for airlines,” stresses Thomsen. “We are asking for public support for energy producers to produce renewable energy. We need production to scale up fast. SAF production needs to increase 1000-fold from its 2023 level to meet the requirements predicted for net zero 2050.”
On a positive note, this is achievable. Wind and solar energy are now the cheapest forms of energy thanks to the (subsidized) investments made and the developments in technology.
It took approximately $150 billion per year to develop wind technology, which equates to IATA’s estimates for the investment needed for aviation’s decarbonization.
This is an affordable sum. The IEA suggests that an investment of about $400 billion per year in the oil industry will allow the world to meet its fossil fuel needs through 2050. As of 2023, some $800 billion is being invested, twice as much as experts suggest is necessary. “That puts the $150 billion for SAF in the proper perspective,” says Thomsen.
“And SAF is the big-ticket item for decarbonization,” she continues. “All roadmaps regarding aviation’s transition agree on this point. Airlines are signing agreements left, right and center, but this is an industry that will have maybe a 3% profit margin in 2024. It is fanciful to expect airlines de-risk the investments of the energy companies and the banks whose profit margins are 10 times higher.”
SAF must compete with other renewable energy products for refinery time. Today, SAF is about 3% of renewable fuel production while jet fuel is typically about 8% of refined oil production. It is estimated that refineries will need to devote about 25% of renewable fuel production to SAF for sufficient quantities to be produced to hit net zero.
“Again, it is possible,” says Thomsen. “If we electrified road transport, for example, which is well within our capabilities, that would free up enormous amounts of refinery space.”
She concludes that global leadership must free itself and take a holistic approach to sustainability.
“This is a systemic problem and can’t be left to a ministry of transport but rather must involve finance, energy, agriculture, and much more. It is a tremendous challenge, but it is also the most amazing opportunity. And an opportunity is how it should be viewed because that is the mindset that will get us to net zero by 2050.”
