Sustainable aviation fuels can help the aviation industry reduce the climate impacts of air travel. Effective policies must balance diverse climate, economic, and environmental considerations.
Balancing growth in the aviation industry with efforts to mitigate the risks of climate change is a complex challenge. Aviation is crucial for connecting global communities and supporting economic development, but the industry is also an important contributor to climate change. Aviation accounts for 3.5 percent of human-caused climate impacts. Emissions from air travel have doubled since the mid-1980s and potentially could triple by midcentury compared to 2005 levels, unless effective countermeasures are put in place to reduce emissions. And carbon dioxide emissions are only part of the problem. Other factors, such as contrails—clouds that are formed by aircraft during flight—also have substantial climate impacts that are potentially greater than the impacts of carbon dioxide.
The International Civil Aviation Organization, an agency of the United Nations that fosters collaboration among 193 member countries on issues related to aviation, has set an aspirational goal of achieving net-zero carbon emissions from global civil aviation by midcentury. Sustainable aviation fuels (SAFs) are expected to play a key role in this transition.
Available types of SAFs, which are derived from renewable sources or waste materials, can significantly reduce carbon dioxide emissions. These types of SAFs are compatible with today’s aircraft engines and viable for use in the near term; these fuels can also reduce contrails and improve air quality, because SAFs burn cleaner than traditional jet fuels. Other types of SAFs that produce even less carbon dioxide are technically feasible and expected to become available in the future.
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Despite these benefits, the production and use of SAFs remain low both in the United States and globally. While various policies have been adopted or proposed to support the deployment of SAFs, the increased emphasis on SAFs creates new questions for policymakers; for example, what principles should guide the evaluation of different policy options?
In this article, I explore four key considerations that policymakers who want to promote SAFs may want to address. I also identify existing knowledge gaps that additional research can help fill to further inform effective policy design. This blog post is the first in a two-part series on SAFs; the second article will identify specific research questions that could inform the design of effective policies for SAFs. This blog series aims to support policymakers and researchers in advancing the deployment of SAFs in the aviation industry.
Sustainable Aviation Fuels Today: Production and Policies
In the United States, around 24.5 million gallons of SAFs were produced in 2023—just 0.13 percent of the total amount of jet fuels consumed by US airline companies. Recent policies aim to boost production to at least 3 billion gallons per year by 2030 and 35 billion gallons per year by midcentury.
Achieving this increase requires addressing several challenges. One major challenge is the high cost of SAF production. In 2023, SAFs consistently traded at a premium compared to conventional jet fuels and often cost about two to three times more. This substantial price difference highlights the economic challenge of adopting SAFs without supportive policies. Moreover, SAFs face fierce competition for raw materials and space in biorefineries from renewable diesel, a lower-carbon alternative to conventional diesel that is used in on-road vehicles. This competition can limit the availability of raw materials for the production of SAFs, which creates a significant barrier to scaling up production. Land use change associated with the development of agricultural raw materials for SAFs has raised additional concerns; converting land to produce biofuel can lead to deforestation (a major cause of climate change) and loss of biodiversity.
Various policies have been adopted in the United States to try to reduce the cost of SAF production. The US Departments of Energy, Transportation, and Agriculture have launched a government-wide SAF Grand Challenge to improve production efficiency, expand the availability of raw materials, develop supporting infrastructure, and assess environmental impacts.
Other policies focus on increasing the production and use of SAFs. The Inflation Reduction Act, which became law in 2022, includes tax credits for SAF producers to help offset high production costs. The Renewable Fuel Standard program, which is run by the US Environmental Protection Agency, now provides incentives for expanding the production of SAFs. And the Low Carbon Fuel Standard in California sets an annually declining limit on the emissions associated with fuels that are sold in the state. Since 2019, SAFs have been categorized as “opt-in” fuels under this standard; SAF producers earn credits that they can sell to fuel suppliers, which in turn can use the credits to comply with the standard.
These domestic measures complement growing international efforts to increase the deployment of SAFs. The EU Emissions Trading System has capped emissions from flights within the European Economic Area since 2012. Airlines operating in Europe are required to monitor, report, and verify their carbon emissions and acquire a sufficient number of allowances to cover their emissions. The cap on emissions from the EU aviation sector declines annually, which induces airlines to switch to SAFs or reduce their emissions through other measures.
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The European Union and some other countries, such as the United Kingdom and Japan, are also mandating that SAFs be blended with conventional jet fuels. The European Union has set ambitious requirements for blending, starting with 2 percent SAFs by 2025 and gradually increasing to 70 percent by 2050. Airlines operating flights that depart from EU airports are also obligated to obtain 90 percent of their fuel from EU airports to discourage “tankering”—the practice of refueling outside the European Union and carrying excess fuel with the aim of avoiding high EU fuel costs.
At the global level, the Carbon Offsetting and Reduction Scheme for International Aviation is the first global, market-based measure to require airlines and other aircraft operators to limit carbon dioxide emissions from aviation. The scheme was created by the International Civil Aviation Organization, was adopted in 2016, and aims to put a cap on the net carbon dioxide emissions from international flights between participating countries. The offsetting requirement for participating airlines is calculated by multiplying the current emissions associated with an airline’s operations by a sector-wide growth factor, which represents the increase in total emissions from the aviation sector since a fixed baseline (85 percent of 2019 levels). Emissions reductions from SAFs then are subtracted from this offsetting requirement, and any remaining emissions must be offset through credits from other sectors of the economy. Member countries of the International Civil Aviation Organization have agreed to adopt laws that require their airlines to monitor, report, and verify carbon dioxide emissions from international flights in accordance with the program.
Challenges and Questions for Policymakers
Climate Impacts
Policymakers face several considerations when designing policies that promote SAFs. The first consideration is that the primary objective of SAF-related policies should be to mitigate the impact of aviation on the climate, rather than just provide economic benefits to suppliers of fuels and raw materials. So, prioritizing pathways, raw materials, and practices that significantly reduce climate impacts compared to conventional jet fuels is essential, even when the potential economic benefits of other choices seem more alluring.
However, adhering to these priorities is challenging due to a lack of consensus about the extent of the climate impacts of different types of SAFs. Hence, different policy strategies for SAFs have emerged in different regions. For instance, the European Union has excluded SAFs derived from crop-based raw materials such as corn, soy, and sugarcane from its SAF mandates, while the United States allows these SAFs to qualify for tax credits (though the credits are subject to specific criteria). This lack of consensus regarding the scope of policies related to SAFs may lead to the misdirection of policy efforts and expenditures and create uncertainty for investors about where to allocate funds.
A comprehensive approach to reducing emissions in the aviation sector also requires expanding policy efforts to address factors other than carbon dioxide, such as contrails, which are a significant contributor to the overall climate impact of the industry. Currently, policies primarily focus on reducing carbon dioxide emissions and often overlook these other factors. Quantifying the effects of contrails remains a challenge due to uncertainties about their formation; their evolution over time; their interactions with other clouds; and how variables like altitude, atmospheric conditions, and the timing of flights influence them. Some studies suggest that certain blends of SAFs may reduce the formation of contrails. However, further research is necessary to better understand the formation of contrails and quantify the effectiveness of different blends of SAFs in mitigating these emissions.
Alternative Uses of Raw Materials
Policymakers also need to be cognizant that the best opportunities for some raw materials to reduce climate impacts may lie outside the aviation sector. Because sectors compete for raw materials, maximizing climate benefits would require that resources be directed to sectors where the impact may be larger, alongside exploration of other options for increasing SAF production. Consider the so-called power-to-liquid technology, which creates SAF by combining “renewable” hydrogen (produced from water through a process that is powered by renewable energy) with “renewable” carbon dioxide (captured directly from the air). Hydrogen and captured carbon dioxide have alternative uses that may offer more substantial climate benefits if used elsewhere; for instance, carbon dioxide can be sequestered, and hydrogen can power fuel cells.
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Maximizing climate benefits also requires understanding trends in decarbonization for other sectors that are competing for the same raw materials. For example, waste materials, such as used cooking oil and animal fats, can be used for both SAFs and renewable diesel. The Renewable Fuel Standard currently favors renewable diesel over SAFs by offering stronger incentives for the production of renewable diesel. Meanwhile, policies like the credits for clean vehicles in the Inflation Reduction Act encourage the electrification of on-road transportation and provide alternative decarbonization pathways for the transportation sector. However, the viability of electrification across the range of medium- and heavy-duty vehicles still is being determined, so renewable diesel may continue to use waste materials that otherwise could be used to produce SAFs.
Which sector would deliver the most benefits to the climate by using these raw materials remains unclear. Policymakers need to compare the potential benefits and evaluate whether current policies effectively direct raw materials to the sectors that can provide the most benefits to the climate.
Policy Design
The third consideration is how policies can encourage the demand and supply of SAFs efficiently, effectively, and equitably. Addressing these three e’s raises several questions: How can the production of SAFs be made economically viable for firms? How can policies attract private investments and ensure long-term market stability and innovation without insulating producers from competition and risk? What strategies can drive technological innovation in the production of SAFs? How can airlines be given incentives to purchase SAFs without creating market distortions or unfair competitive advantages? How can airline customers be encouraged to reduce travel or choose lower-emission travel options?
International collaboration will also be important. Airlines operate globally, and policies in one region can impact operations in other regions. Given the high cost of SAFs, a mandate to purchase SAFs in certain regions might reduce voluntary demand for SAFs in other regions, as airlines prioritize buying SAFs where required. International coordination could help address the spillover effects of any policies, harmonize policies, and mitigate undue negative impacts on global aviation operations.
Broader Impacts
Finally, policymakers need to consider the broader costs and benefits of SAFs beyond the aviation industry. For instance, how does the use of agricultural raw materials in SAFs, such as corn, affect the production and prices of food? What are the environmental impacts of producing agricultural raw materials? For example, the palm-oil industry has been criticized for destroying habitats to grow oil palm trees. In addition, how do SAFs affect air quality throughout the duration of a flight?
Other considerations for policymakers include how different SAF-related policies may create jobs and benefit local economies. These issues often can involve complex considerations. For instance, trade-offs may exist between supporting farmers and mitigating climate impacts. Policymakers will need to balance these priorities.
Conclusion
Transitioning from conventional jet fuels to SAFs is important for achieving the net-zero target for the aviation sector that has been set by the International Civil Aviation Organization. Various US and global policies represent initial efforts toward achieving this target. A robust policy framework for promoting SAFs requires consideration of the climate impacts of different raw materials and policy pathways; alternative uses of resources beyond the aviation sector; the economic, social, and environmental effects of different policy designs; and other issues beyond the energy sector. Policymakers must balance multiple factors when creating effective policies for SAFs, underscoring the need for further research to strengthen policy efforts.
The second blog post in this series will explore key research areas that can guide more informed policy decisions related to SAFs.
