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Are conditions right for biojet to take flight over the next five years?

Five conditions will help dictate whether biojet takes flight over the next five years:

  • Aviation fuels must be proven safe and technically sound, and the airline industry must have confidence in them.
  • Costs need to be acceptable to consumers and airlines.
  • Governments need to implement clear regulatory and supportive policies, such as low-carbon fuel standards, mandates, R&D funding, standards development and incentives.
  • Biojet producers need to finance, permit and build planned facilities.
  • Fuel feedstocks need to be sustainable.

With these conditions in mind, we expect biojet demand to range from 2 to 6 billion litres by 2026 in our main and accelerated cases respectively. Biojet production is around 0.1 billion litres today. Existing biojet pathways are safe and commercial, costs seem acceptable at proposed blend rates, and the biofuels industry can satisfy demand even in an accelerated case. While biojet is ready, policies are not, or at least not yet. How high biofuel demand increases most depends on a handful of policy discussions in the United States, Europe and potentially China. Given the low absolute volumes proposed, even in our accelerated case, feedstock sustainability is unlikely to prove a constraint over the next five years. However, production plans depend heavily on edible oils and certain wastes and residues for which there is limited supply and considerable competition. Commercialising new feedstock supplies and production pathways is critical to medium- and long-term expansion of biojet. 

Biojet already meets the condition that fuels be safe and technically sound. There are seven certified biojet fuels for use in commercial flights, with blending ratios up to 50% depending on the technology in question and compatibility with existing fuelling infrastructure (IEA Bioenergy, 2021). Hydroprocessed esters and fatty acids (HEFA), the most produced biojet, is approved for up to 50% blending with kerosene. Major airlines and aircraft and engine manufacturers, as well as many airports, have experience with biojet and are publicly committed to commercialising sustainable aviation fuels (SAFs) more broadly via the Clean Skies for Tomorrow Coalition.

The work of international organisations such as ICAO and IATA, as well as industry groups bringing together engine manufacturers, airlines, fuel providers and airports, has been critical to understanding the role of SAFs in reducing emissions and solving challenges related to standards, logistics, investment, policy design and building public confidence. SAFs include fuels made from biological sources, such as biojet, and renewable non-biological sources, such as power-to-liquids. Industry and governments need to evaluate and certify new fuels and share learnings across the industry, but successes to date are sufficient to support significant SAF expansion, as considered in this forecast. 

While biojet is considerably more expensive than fossil jet fuel, additional costs at 2% blending rates are unlikely to pose a major challenge to biojet expansion in our forecast. For instance, a Paris to New York one-way flight using 2% blended biojet would cost 0.4% more, or only USD 1.80.1 The European Commission’s ReFuelEU proposal targets a 2% blend in 2025. This cost difference drops further to USD 1.40 if fossil jet fuel is exposed to a USD 50/tonne CO2 price. As production expands, the biofuels industry also expects biojet costs to decline nearly 10% over the next decade via learning by doing and through economies of scale according to the Clean Skies for Tomorrow Coalition. For instance, large dedicated SAF production facilities or the repurposing of existing refineries offer opportunities for cost reductions.

HEFA producers will need to keep costs in check, however. Biojet market prices have soared to an average of USD 1.80/litre over the past year because of commodity price increases. On the path to net zero, blending will also need to climb to the double digits by 2030 according to the IEA Net Zero by 2050 Scenario.

Fossil jet and biojet fuel production cost ranges, 2010-2030

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Policies under discussion in the United States and Europe would expand biofuel demand by a factor of five in 2026 compared with existing policies. Current mandates, financial support and airline offtake agreements for SAFs are likely to drive biojet demand to 2 billion litres by 2026, up from 0.1 billion litres in 2021. This growth includes SAF mandates in countries such as Norway and Sweden, and existing polices in the United States. Airlines are also directly contracting for the purchase of SAFs via offtake agreements for 16 billion litres over the next 20 years (ICAO 2021b). Averaged over 20 years, offtake agreements are equivalent to 0.8 billion litres of demand per year, eight times 2021 demand. Policies and offtake agreements are not necessarily additive, however. An airline that has already committed to purchase SAFs in a country that then adopts a SAF mandate can use its commitments to satisfy the policy, for example. Nevertheless existing policies are helpful and necessary to demonstrate commercial production and streamline policy design. However, growth could be five times higher if all the measures currently under consideration were to come to fruition.

Annual SAF demand range over the main and accelerated cases compared with capacity potential, 2020-2026

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When accounting for proposed policies, demand swells to near 6 billion litres per year, similar to renewable diesels growth over the last five years. The EU and US policy proposals will have a significant influence on biojet demand prospects. The ReFuelEU proposal would see a 2% blending target for SAF across the bloc by 2025 for any flight leaving an EU airport (European Commission, 2020). The United States is proposing a tax credit for SAFs and plans to start rulemaking for post-2022 targets in its RFS in December 2021. These measures may help the United States achieve its Sustainable Aviation Challenge, which sets a goal for the aviation industry to use 11 billion litres of SAF 2030. Both EU and US policy proposals incentivise GHG intensity reductions.

There are some important uncertainties too. The Chinese government is aiming for peak CO2 emissions before 2030 and, as in other countries, SAF is one of the few options to reduce airline emissions in the near term. A 1% blending target by 2025 in China alone would increase demand by four times global production in 2021. Indonesia also has a 5% SAF mandate on the books, although it is not enforced. Brazil, a biofuels powerhouse, could also turn its sights on biojet, although there are no proposals beyond existing policies. Some governments are also requiring a specific role for non-biojet SAFs such as electrofuels. The ReFuelEU proposal includes a 0.7% target for synthetic fuels by 2030 and Germany is exploring a SAF mandate specifically for renewable fuels from non-biogenic origins with a 1% target by 2028. Renewable non-biogenic fuels are not included in this analysis given the likely small values by 2026. 

Planned projects are more than sufficient to meet existing policy commitments, but significant additional capacity must be added if proposed policies are implemented. Projects in advanced stages of development account for just over 3 billion litres of biojet capacity. Nearly half of this proposed capacity is in Europe, with the remaining split nearly equally between the United States and Singapore. This capacity is well beyond the 2 billion litres likely to be needed under existing policies.

If governments implement all proposed policies, then planned projects would supply 60% of demand. Other projects that have been proposed, at the early proposal stages or lacking financial commitment, could add a further billion litres per year of capacity. However, this still leaves a near 2 billion litre gap. Biojet to fill that gap could come from new plants or optimising existing and planned renewable diesel plants to produce biojet. This would require optimising around 15% of 2026 renewable diesel capacity for biojet production, well within the realm of possibility. There are other options too, such as new dedicated SAF production beyond what is currently on the books, from existing technology pathways or new. Production is therefore not a constraint for the level of deployment considered in this analysis. 

Planned biofuel policies in the United States and Europe include sustainability requirements, but new fuel pathways and feedstock treatment technologies must be commercialised to sustain future growth. Biojet must be produced using sustainable feedstocks to avoid the risk of negative impacts on biodiversity, freshwater systems, and food prices and availability. The IEA Net Zero Scenario found that to sustain growth, new biofuel production, including SAFs, can and must increasingly be from wastes, residues and woody energy crops grown on marginal land and cropland not suitable for food production. The Clean Skies Coalition sees a limited role for used cooking oil and residue fats, which it estimates could supply only a maximum of 5% of aviation fuel demand in 2030, and excludes edible oil seeds as an acceptable feedstock. The ReFuelEU proposal also recommends excluding feed and food crop-based fuels. Edible oil crops, and wastes and residues (primarily from used cooking oil and animal wastes) are the main feedstocks for proposed biojet facilities.

Since forecast volumes to 2026 remain relatively small and biojet plants could accept oils from other feedstocks in the future, feedstocks and sustainability constraints do not yet pose a major constraint. However, feedstock constraints for used cooking oil, animal fats and edible oil crops are likely to apply at some point if biojet is to expand at the scale envisaged in the IEA Net Zero Scenario, either as a cost issue or unacceptable impacts on sustainability measures. In the medium and long term, biojet will need to be produced overwhelmingly from wastes, residues (beyond used cooking oil and animal wastes) and crops that do not compete with arable land.

Governments will also need to include GHG performance criteria as part of SAF support. This is already the case in proposed and existing policies in Europe and the United States, examples that other countries considering SAF support could learn from.

Biojet is ready to take off if governments are willing to establish the right policy environment. Long-term growth, however, depends on commercialising technologies and new feedstocks that do not compete with edible crops and use wastes and residues beyond animal fats and used cooking oil. 

References
  1. Biojet prices for the above calculation are based on average production costs not accounting for the recent increase in commodity prices.