Background

The importance of Sustainable Aviation Fuels (SAF) is being increasingly recognised as the aviation industry faces the challenge of significantly reducing its CO2 emissions in order to meet global climate change targets.

Forecasts predict that air traffic will continue to grow until 2050, accompanied by an increase in CO2 emissions from conventional aviation fuels. This development is at odds with international climate goals, in particular the Paris Agreement, which aims to limit global warming to 1.5 degrees Celsius above pre-industrial levels. The EU's 'Fit for 55' programme aims to reduce CO2 emissions by 55% from 1990 levels by 2030 and achieve climate neutrality by 2050. The International Civil Aviation Organisation (ICAO) has also set a target of net-zero CO2 emissions from international aviation by 2050.

What is SAF

SAFs are sustainable fuels produced from renewable sources rather than fossil fuels. There are various production methods for SAFs, including the use of biogenic feedstocks such as used cooking oils (biofuel) or the synthesis of hydrogen and CO2 using renewable energy (synthetic fuels). This enables SAF to reduce CO2 emissions by up to 80% and offers both short and long term solutions compared to electric or hydrogen powered aircraft. In addition, SAF can be blended with conventional aviation fuels without restriction, facilitating integration with existing aircraft technologies.

Despite the positive characteristics of SAF, there are several barriers to their wider adoption. SAF are currently two to five times more expensive than fossil fuels. In addition, the availability of SAF is still very limited. Globally, SAF accounted for only 0.1% of aviation fuel.

The problem for SAF suppliers is the high cost of production due to low demand caused by high costs and insufficient investment. In order to increase the production of SAF in an economically viable way, long-term planning security is needed regarding sales by airlines. Legislation plays a key role in this context.

SAF-Regulation (EU) 2023/2405

The Regulation (EU) 2023/2405, also known as the “Aviation Fuel Regulation”, aims to address the challenges and opportunities arising from the growing demand for air travel and the associated CO2 emissions compared to defined climate targets.

1. Drop-In And Fuelling Obligation

The Regulation imposes a fueling obligation on airlines. They must meet at least 90% of their annual fuel requirements at airports within the Union, Article 5 of the Regulation. There is currently no standard regulation requiring the use of SAF, which means that fuel prices vary widely from country to country. The refueling obligation prevents airlines from using the practice of “tankering” (refueling outside the EU) to take advantage of cheaper fuel prices due to price differentials between countries. Such practices do not lead to a real reduction in CO2 emissions, but to a shift in emissions.

Article 4 in conjunction with Annex 1 of the Regulation provides for a drop-in obligation. According to this, the minimum share of 2% SAF in 2025 is to be increased to a minimum share of 70% SAF in 2050. It also stipulates that at least 35% of the SAF must be synthetic aviation fuel by 2050.

2. Certification Of SAF

Should the demand for SAF increase, the production of SAF would have to be increased, which could lead to a raw material problem. Instead of recycling used raw materials, there is a risk that feed and food raw materials will be used for production. This would lead to an indirect land use change. This risk is addressed in Article 4(5) of the Regulation, which states that SAF produced from feed and food raw materials are not eligible.

3. Fueling Infrastructure

The Regulation also sets out rules for the necessary infrastructure. Airport operators are required to provide the necessary facilities for the integration of SAF, Article 6 of the Regulation. This includes ensuring sufficient availability of SAF at EU airports to allow fair competition between airlines and to avoid market distortions. It should be noted that, due to the simplicity of a drop-in fuel, there will be no significant changes to the fueling infrastructure.

4. Sanctioning Mechanism

The Regulation gives expression and enforcement power to the sanctioning mechanism it imposes. In the event of non-compliance with the mandatory provisions of the Ordinance, the parties involved will be sanctioned, Article 12 of the Regulation. These fines are then invested in environmental projects.

5. Review Clause

Article 17 of the Regulation requires the Commission to submit a report to the European Parliament and the Council on the application of the Regulation by 1 January 2027 and every four years thereafter. This report will include a detailed assessment of developments and impacts. If problems arise, the rules will have to be adapted and amended, which fundamentally undermines planning certainty for all parties involved.

Conclusion

In summary, EU Regulation 2023/2405 and similar initiatives around the world are important steps towards decarbonizing the aviation industry. Despite existing challenges in terms of cost, availability and infrastructure, SAFs offer a promising solution for reducing CO2 emissions from aviation. A close dialogue between regulators, airlines, SAF suppliers and investors will be crucial to accelerate the adoption of SAF and ensure a sustainable future for aviation.

Co author: Maximilian Sacha