The Path to Net Zero:
Paved with Good Intentions May/Jun 2023

May saw the publication from the UN’s World Meteorological Organization (WMO) of its annual Global Annual to Decadal Climate Update. For the first time, it said, it is more likely than not that global temperatures in the next few years will exceed 1.5°C above pre-industrial levels.

The main reason for the prognostication is that the Pacific El Niño Southern Oscillation is once again approaching a warming phase, the El Niño, having been in its cooling phase (La Niña) since 2020. The recent peak in global temperature anomalies, according to data from Berkeley Earth (see chart), was in 2016 when temperatures were 1.37°C above the average for 1850-1900. That was towards the end of an extended El Niño episode that lasted from 2014-2016.

El Niño can have a strong impact on world climate. Intriguingly, the largest temperature anomaly on the chart in the late 19th century reflects a record-breaking El Niño in 1877-88 combined with a strong positive Indian Ocean Dipole effect (a similar phenomenon on the other side of the world): these, it is said, led to widespread droughts in Asia, Brazil and Africa and an estimated 50 million human fatalities.

The WMO points out that this event does not necessarily mean that the world would cross the long-term warming threshold of 1.5°C above preindustrial levels set out in the 2015 Paris Agreement. But the threshold could be passed in any case. Figures from Berkeley Earth show that the ten-year moving average of global temperature rise has been accelerating by 0.02°C a year since 1980: if that trend continues, the world will hit the threshold by 2034, and touch 2.0°C global warming by 2060.

The 1.5°C threshold is critical. Warming above that level could trigger a cascade of tipping points generating positive feedback loops which would irreversibly alter the global climate system and further exacerbate global warming.

Global anthropogenic carbon emissions, having dipped by 5% during the Covid-19 pandemic in 2020, reached record levels in 2022 with an estimated 37.4 gigatonnes of CO₂ — 1% higher than 2019 and 65% higher than the level in 1990 at the time of the first report of the Intergovernmental Panel on Climate Change (IPCC).

Decarbonisation essential

Time seems to be running out on the global need to remove dependency on fossil fuels, and the world needs to decarbonise. To do so is going to be expensive. The UN estimates that the investment needed to achieve net-zero carbon emissions by 2025 will reach $125tr. A recent report from McKinsey suggests that capital spending on physical assets for energy and land-use systems would top $275tr between 2022 and 2050, or over $9tr a year, a 66% increase in annual investment costs from today’s levels.

Aviation is one of the most difficult sectors to decarbonise. As IATA succinctly puts it, the industry is constrained by three main factors which limit its options:

• Aircraft have long useful lives. They can remain in service for 30 years, and the renewal process can take decades.
• Aircraft have lengthy development times. Because of necessary strict certification requirements and safety standards the development of new aircraft incorporating the latest technology can take over 10 years. (Airbus is developing a hydrogen-powered zero-carbon fuel cell engine for a 100-seat aircraft that might be launched later this decade but not enter service until at least 2035).
• Aircraft use a lot of energy. Very few energy storage solutions can currently provide the power-to-weight ratio provided by fossil fuels to enable a tin can to carry hundreds of passengers with their luggage at 1,000km/h more than 10km above the ground.

In 2021, IATA adopted a resolution at its annual meeting committing its member airlines to achieving net-zero carbon emissions from their operations by 2050 (see Aviation Strategy, December 2021). The following year ICAO adopted a similar long term aspirational goal. At this year’s annual IATA meeting the organisation reiterated its commitment to the resolution and produced a series of documents highlighting the pathways required to meet the Fly Net-Zero ambition.

IATA also restates how expensive the process will be, suggesting that the investment needed to bring about aviation’s transition to net-zero by 2050 could touch $5tr, over $180bn a year (equivalent to a quarter of current airline annual revenues).

Aviation accounts for a modest 2-2.5% of global CO₂ emissions, but is expected to continue growing: without taking additional efforts annual CO₂ emissions from the industry could double to 2 gigatonnes by the middle of the century.

Sustainable Aviation Fuels

By far the largest contribution to the path to net-zero is expected to come from the use of Sustainable Aviation Fuels (SAF) — accounting for 62% of the planned mitigation of carbon emissions in 2050 and 80-90% of aviation fuel use.

A huge ramp-up of production of this contentious source of energy is required. SAF output in 2022 trebled to 300m litres — roughly equivalent to 0% of the industry’s total 350bn litre fuel consumption.

IATA estimates that there will be a need for 5,000-7,000 biorefineries to supply the industry’s needs, at an investment cost of $1.08-1.45trn (roughly equal to $12/gallon capacity) which it estimates equates to 6% of historical annual fossil fuel investments. At the moment SAF production costs a multiple of the jet fuel price: the premium to fossil fuels may come down over time, but the blended price will be passed on to the passenger through ticket prices.

SAF is a contentious issue because it is neither well understood nor well explained. At the moment a key method for its production is from hydrotreated vegetable oils (HVO) and hydroprocessed esters and fatty acids (HEFA): transforming “waste” fats into a kerosene equivalent. Other methods include alcohol-to-jet (ATJ) from waste fermentation, and pyrolitic conversion of CO₂ and hydrogen (syngas) through the Fischer-Tropsch process into liquid hydrocarbons. The key idea is that it is using carbon from a renewable source to burn and release into the atmosphere which can then be reabsorbed through photosynthesis into the food chain: a perfect circle and carbon neutrality.

Unfortunately, current SAF technology cannot produce the aromatics present in fossil fuel production that provide lubricating, sealant and anti-corrosive properties in pipes. The regulations require a particular proportion of these aromatics for a fuel source to qualify as jet kerosene, and SAF needs to be blended with conventional aviation fuel to achieve these levels. Although some aircraft have successfully tested 100% SAF flights, the safe proportion is deemed a 50% blend. Depending on the source of power used to create the biofuel, blended SAF flights could achieve no more than a 42% reduction in net life-cycle carbon emissions.

Technology in the aircraft will no doubt improve, and by the 2030s IATA in its road maps suggest that all new aircraft will be able to operate safely on tanks entirely consisting of biofuels. But, the ground infrastructure may cause problems: delivery from refinery to airport and, within airports, from fuel farm to wing may require significant investment for pure SAF deployment.

Pigs Can Fly

And then there are the feedstocks: the source of non fossil fuel carbon to transform into juice. Aviation here is competing with ground transport, a sector of the economy equally needing to decarbonise with a fuel requirement ten times that of air transport (albeit that ground transport is in the process of transitioning to battery powered propulsion). And bio-diesel to power trucks doesn’t have quite the same level of structural safety requirements to which airlines are subject, and its production may appear more profitable.

A recent report from Brussels-based Transport & Environment (T&E, a non-governmental organisation that lobbies and campaigns for zero-emission mobility) highlighted the dubious sustainability credentials of using used cooking oil and “waste” fats from animal carcases to generate biofuels in general, and SAF in particular. In Europe the use of animal fats (some of which according to a bizarre European rule can be double-counted for carbon reduction accreditation) to generate biodiesel has grown from 30,000 tonnes a year in 2006 to 1.4m tonnes in 2021. It is forecast almost to triple to 3.9m tonnes by 2030. There are only so many pigs you can slaughter to power the trucks to take the carcases to the refinery.

Regarding SAF, the group suggests that the HEFA process will only be able to provide a sustainable source of animal fats for 1.4% of the aviation industry’s requirement by 2050 — without taking into account that there is a need to reduce livestock farming to fit in with greenhouse gas emission reduction commitments.

The report highlights the group’s analysis that a 100% SAF flight between London and New York would require the equivalent of 8,800 pig carcases each way.

Then the publication of the report raised concerns in other industrial sectors.

Fats from animal carcases are not necessarily unwanted waste, and the anticipated high demand for their use in biofuel production may have unintended consequences. Some categories of fats are burnt by other industries to provide heat and power: their alternative might be fossil fuels.

Others, those deemed fit for human consumption, are used in the oleochemical industry for the production of soaps, cosmetics and candles; or by the pet food industry to make their products “more palatable”.

The cosmetics industry might be under pressure to source fats from less sustainable sources (such as palm oil — the cultivation of which generally requires land-use change and is seen to contribute to deforestation). Pet food suppliers, with fewer alternative replacements, will see significant price pressure.

Quoted by the BBC, Nicole Paley, deputy chief executive of UK Pet Food, the manufacturers' trade association said: “These are really valuable ingredients for us and they are hard to replace, and they’re put to good use already in a very sustainable way. So actually diverting these ingredients to biofuels... put us in competition with the aviation industry. And when it comes to the purse strings of the aviation sector, the pet food industry would find it really difficult to compete.”

Demand for used cooking oils for biofuel production is causing additional problems. The Times of London reported that French police as saying that theft of used cooking oil from outside restaurants has reached industrial levels. This followed the arrest of a gang suspected of stealing 385 tonnes of the stuff over a three month period, worth nearly €0.5m, shipping it abroad for conversion to biodiesel. The price of used cooking oil, it said, has risen ten-fold from €150/tonne in 2008.

Meanwhile, the Vegan Society of Canada has warned that many flights would no longer be “vegan certifiable”, encouraging airlines to specify that their sources of SAF do not contain animal products.

Other sources of feedstock are needed, and plant-based sources such as Jatropha oil and Camilina Sativa, grown on marginal land, and even algae have been used. But the cause has not been particularly helped by a recent briefing document published by the UK’s Royal Society, suggesting that demand for crop-based aviation biofuels would require up to 68% of the available agricultural land in the UK.

Willie Walsh, IATA’s Director General, was scathing of the report in his address to the airline association’s AGM this year. In particular he noted that the authors had based their analysis on the fuel burn performance data for flights between London and New York on a 737-300 (an aircraft that went out of production in 1999). “Now, I’ve flown the 737-300”, he said, “so I know a bit about it and what I know for certain is you cannot get the minimum of 21 tonnes of fuel that they estimated you would require into the fuel tanks that can only take a maximum of 16 tonnes. So, if we know that that section of the report is rubbish what confidence can we have in the rest of the document?”

Another contentious element of SAF is that currently there are so few production facilities that physical delivery is impossible: transporting SAF to a specific airport or flight could lead to higher greenhouse gas emissions. To counter this IATA is calling for a policy decision to establish global standards for a SAF book-and-claim system, and especially one that avoids double-counting.

On the principle that a gallon of fuel burnt in the USA is the same as 3.78 litres burnt in the EU or China it does not matter where SAF is bought or consumed. The sustainable fuel would go into the fuel system at an airport near the refinery, the body covering the fuel premium (“buying” the SAF) would be credited with the CO₂ mitigation no matter where they were. This is the accepted practice in renewable electricity generation. It even gives corporate entities the option to “purchase” any volume of SAF, including 100% of fuel needs, to satisfy their requirements for ESG credentials.

But it is also a beautifully confusing concept for the man in the street: he may be willing to pay a premium for a ticket on an airline that advertised its use of sustainable fuel, but he would not even know if such fuel were used on the flight he takes. The Canadian vegan would never be able to find out if the kerosene on their flight were porcine in origin.

The real problem though is that SAFs are hydrocarbons and, when burnt, release the same amount of CO₂ as do conventional fuels.

Green Hydrogen

Further down the path to fly net-zero, the use of hydrogen will play a part. IATA estimates that by 2050 maybe 10% of aviation’s fuel requirement will be satisfied by the use of green hydrogen. But this presents another series of problems.

Generating hydrogen by electrolysis takes a lot of energy — it may take 50kWh to generate 1kg of hydrogen which could produce 33kWh (an energy efficiency of 67%). But it takes up a lot of space: 1kg of H₂ needs a container with a volume of 11m³. To cool it to 20°K and compress to manageable liquid quantities requires the use of another third of that output energy, reducing the energy efficiency to 50%. To qualify as “green” hydrogen and a zero-carbon fuel, the power used to generate it has to come from renewable sources.

IATA suggests that by 2050 the industry will have a need for 100m tonnes of hydrogen — equivalent to the total hydrogen production worldwide in 2023. The majority of that need will be used to create liquid hydrocarbon fuel: only around 10% is expected to be used to power zero-carbon aircraft.

According to the organisation’s aircraft technology road map, it anticipates that regional turbo-props and commuter aircraft retrofitted with hydrogen fuel cell power plants may first enter service in the late 2020s, but that it will be at least 2035 before we see the entry into service of a clean sheet short- to medium-haul H₂ powered “jet”. Widebody H₂ combustion aircraft may be possible in the 2040s.

As well as the technical difficulties of storing and delivering hydrogen on board an aircraft. airports will need to find the space and build the facilities for in-plane delivery, and there is a strong need for the development of the supply chain to get the hydrogen to the airports. T&E estimates the total cost of the transition in Europe to H₂ aircraft will amount to €300bn by 2050 — allocating, somewhat speciously, three quarters of this cost to hydrogen generation and liquefaction. By then it argues that hydrogen aircraft could be cheaper to operate — but, unhelpfully, only if demand (particularly business travel) is restricted and jet kerosene is taxed.

Sticks... ?

One thing seems certain: the cost of flying will rise as the industry transitions towards net-zero; this cost will be passed on to ticket prices; and, the passenger will pay. Less certain is how much this may dampen demand growth.

Europe has introduced a structural change to its controversial cap-and-trade emissions trading scheme (ETS). Since 2012, airlines had been granted free grandfathered carbon rights (based on their production of RTKs in 2010). In 2019 these free allocations accounted for about 50% of the sector’s CO₂ exposure under the scheme. Under the new “Fit for 55” package (aiming to reduce emissions by at least 55% by 2030) it will progressively phase out free carbon allowances to aircraft operators between 2024 and 2026. From 2027 there will be no free allowances. The Commission will also reduce the emissions “cap” by 4.2% annually instead of the current 2.2%.

The EU ETS would still apply to intra-EEA flights (as well as flights to the UK and Switzerland), exempting those flights from CORSIA offsetting requirements. (For details of the ICAO-led Carbon Offset and Reduction Scheme for International Aviation programme see Aviation Strategy, June 2019). Other international flights would be subject to CORSIA.

Europe had originally tried to include all flights within its aviation ETS — having somewhat surprisingly forgotten its obligations under the Chicago convention. However, the Commission has signalled that if it be dissatisfied with the outcomes from CORSIA it would extend the ETS to all flights into and out of the EU from 2026.

But the price of carbon has been rising. Between 2013 and 2017, according to Eurocontrol, the cost to airlines of carbon allowances (acquired from state auctioning or from the market) averaged €6 per tonne of CO₂. In 2019 this had jumped to €25. In recent trading the cost of carbon had approached €100/tonne.

This is going to be expensive, and a particular driver of costs for the short-haul point-to-point operators in Europe. Recent analysis from Bernstein suggests that carbon costs from the ETS for the airlines under their coverage will rise ten-fold from €500m in 2019 to €5bn in 2027 (assuming €100/tCO₂), potentially making it the fourth largest cost item for LCCs after fuel, airport/handling and staff costs.

To mitigate this cost increase, the analyst concludes, would require a near 8% increase in average revenue per passenger. Is this really the end of the era for cheap flights?

Separately, Sustainable Aviation, a UK based industry lobby group, recently published its 2023 Net Zero Carbon Road Map. Their analysis and forecasts of the additional costs to UK aviation from decarbonisation measures (see chart) would add some £6.5bn to airlines' costs by 2050. This, they somewhat speciously say, would have the impact of saving 9.6 million tonnes of CO₂ (compared with total emissions in 2019 of just under 40mt) by reducing demand. On their figures passenger demand in 2050 (measured in terminal passengers) could be 14% lower because of these additional costs than they would otherwise have been. This translates into a 0.5% reduction in the compound growth over the period to a mere 1.5%pa.

The group’s comments highlight the politically attractive idea (particularly in Europe) that heaping more costs on air travel, such as through fuel and purchase taxes, is needed in order to dampen demand.

A second element of the EU’s “Fit for 55” programme, called ReFuelEU, imposes mandates on the provision of SAF requiring fuel suppliers to blend an increasing proportion into jet fuel provided at EU airports. Starting at 2% in 2025, 5% in 2030 and rising in stages to 63% by 2050. In addition the provision of synthetic fuels will have to rise from 2030 to reach 28% by 2050. To avoid “tankering”, airlines will have to ensure that the annual amount of fuel uploaded at EU airports is at least 90% of the fuel required for the flights operated. Furthermore, the EU has changed its Energy Taxation Directive, removing all fossil-fuel subsidies and tax exemptions for jet fuel on intra-EU passenger flights. Over the ten years from 2023 the tax will increase gradually to the full rate of €10.75/gigajoule — which possible equates to €535/tonne.

... or Carrots?

In contrast, the USA has pursued a more encouraging process. Launched in 2021, the Biden-Harris administration unveiled its “Sustainable Aviation Fuel Grand Challenge”. Its goals are to produce 3bn gallons of SAF per year by 2030 (in 2019 the US industry burned through a total of 18.3bn gallons) and reduce aviation emissions 20% in the same timeframe. New and existing funding supporting SAF production will total $4.3 billion. The long range target is to have all US aviation fuel demand in 2050 supplied by sustainable fuel.

Rather than taxing jet kerosine to stifle demand, the administration is providing “blenders tax-credits” to producers to help lower the cost of providing sustainable fuel. The tax-credits start at $1.50/gallon for SAF that reduces carbon intensity by 50% compared to conventional fuel. The credit scales up to $2.00/gallon as the carbon reduction reaches 100%. This credit will help reduce the costs of SAF, making it more competitive with conventional jet fuel, and would level the playing field for sustainable aviation fuel competing with renewable diesel for feedstock and refinery capacity.

On top of that there are federal strategies to fund research to develop feedstocks, production processes and supply chain logistics; and it aims to provide loan guarantees for commercial scale SAF projects.

Oh, and the available choices for federal employees' travel options will depend on airlines' sustainability strategies.

Because of the scarcity of SAF, airlines themselves have been forging commitments with refiners. The number of offtake agreements showed a major increase among the world’s airlines from 2021, according to data from ICAO. These agreements are forward purchase commitments on an annual or multi-year basis. In 2022 the number of agreements totaled 42, up from 23 the year before. Prior to that the largest number was six in 2016. In total ICAO shows there are forward commitment for 42bn litres. In the rankings, United tops the list with multi-year agreements for 10bn litres of SAF — it and the other two US majors each get through around 12-13bn litres of jet fuel in an average year.