The aviation industry views sustainable aviation fuel (SAF) as crucial to meeting decarbonization goals, with recent deals including United Airlines partnering with Neste for SAF at Chicago O’Hare International Airport. South Korea aims for 1% SAF use by 2027, while the U.K. set a 10% SAF target by 2030.
SAF is a fuel alternative to kerosene derived from sources like used cooking oil or animal fat, with a lower carbon footprint. Airbus announced commitments to SAF at the Farnborough Air Show, focusing on developing methane-based fuels and investing in alcohol-to-jet fuel production.
Despite its potential, SAF faces criticism for potential environmental impacts and concerns about scalability. United Airlines, a major SAF user, highlights the challenge of meeting demand due to limited supply. The International Air Transport Association (IATA) aims for net-zero carbon emissions by 2050 but forecasts limited SAF production.
Investor questions linger around regulatory frameworks and funding for SAF, with obstacles like infrastructure creation and biomass sourcing. Private equity firms like Acorn Capital Management see a growing SAF market but stress the need for clear paths to convergence for investors to fully support the sector. HIF Global, a Porsche-backed SAF firm, remains optimistic about attracting investment with government support. A plant in Chile and one planned for development in Texas currently exist. Regulatory certainty has been slower than desired, but encouraging measures such as the European Union’s Renewable Energy Directive and Japan’s 2030 mandate for SAF are in place. In the U.S., the Biden administration’s Inflation Reduction Act in 2022 led to significant growth in SAF companies. United established a $225 million SAF venture fund with partners like Boeing and Google. Banks and investors require more durable policies before funding projects. SAF’s momentum is expected to continue despite potential changes in leadership. Higher costs are expected for SAF projects initially, but scaling up production will drive prices down. The cost of carbon emissions from fossil fuels may make SAF competitive in the short- to medium-term.