Sustainable Aviation Fuels (SAF) are at the forefront of the aviation industry’s transition to a more sustainable future. As a key technology to reduce aviation-related greenhouse gas emissions, SAF is central to achieving the global goal of net-zero by 2050. The production of SAF has already seen substantial growth, with an impressive 200% increase in 2022 alone.
The upward trajectory for SAF is set to continue and must do so in order to get in line with the goals. At the G20 Energy Transitions Ministerial Meeting in Brazil in October 2024, Juan Carlos Salazar, Secretary General of the International Civil Aviation Organization (ICAO), presented encouraging developments. SAF is now available at 125 airports worldwide, supported by over 330 production facilities. Currently, SAF is approved for blending with traditional jet fuel at rates of up to 50% in most production routes. To date, more than 40 countries and regions have either implemented or are developing policies supporting SAF. Over 50 billion liters of SAF have already been secured through offtake agreements, and more than 40 feedstocks are now recognized under ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).
Challenges in tapping the market potential of green aviation fuel
While the growth of SAF is promising, countries from the Global South in particular face challenges in embarking in that defossilisation effort. These challenges include limited government incentives, inconsistent policies and yet to be adopted regulatory frameworks across regions, as well as difficulties in accessing markets and investment. As a result, many nations in the Global South struggle to tap into the market potential of green aviation fuel. Today, airlines can only fuel their aircrafts with sustainable fuels at airports which offer these fuels at site. The environmental benefit is bought and accounted for with the physical fuel.
At the 2024 ICAO LTAG Stocktaking event on aviation CO2 emissions reductions, Torsten Schwab, Director of the PtX Hub, pointed out, that book and claim would allow countries from the Global South to gain access to a new global market for environmental benefits directly without building the infrastructure and trading mechanisms of traditional international supply chains with their many intermediaries. On the offtake side, airlines also gain direct access to SAF’s benefits.
In a book-and-claim system, the environmental benefits of SAF — such as reduced greenhouse gas emissions — are separated from the physical fuel itself. These benefits can then be transferred to another party through a dedicated registry. The buyer retains ownership of these environmental benefits without needing to physically possess the fuel, receiving an independently verified certificate to authenticate the claim.
Schwab believes that such a system would be transformative for countries from the Global South, particularly those endowed with abundant renewable energy resources and renewable carbon such as biogenic residues, both feedstocks for SAF production.
Book-and-Claim System for SAF
Leveraging Power-to-X finance
Another significant barrier to the widespread adoption of SAF is financing. Establishing SAF production facilities requires substantial upfront capital. The OECD estimates that USD 2 trillion will be needed globally by 2030 to scale up green hydrogen production, a key component for SAF. Securing this financing is particularly challenging for developers in countries from the Global South, who often face high interest rates due to lower credit ratings and a higher perceived financial risk.
Christoph Michel, an expert on financing green hydrogen projects at PtX Hub, has assessed how SAF projects in countries from the Global South can be accelerated. An orchestrated and collaborative approach with all relevant stakeholders is needed and allows to manage the financial resources needed. “We must break down the funding process into relevant stages and encourage investors to participate at different points in the project cycle,” Michel explains. Drawing from his experience in supporting SAF projects in the Global South, Michel estimates that early phases such as project conception and pre-feasibility require about 2% of the total capital, while the feasibility phase accounts for roughly 20%. The remaining funding is required from the point of final investment decision onward.
At the 2024 ICAO LTAG Stocktaking event, Michel advocated for a more structured, staged approach to financing SAF projects. “By actively de-risking every stage of project development, coupled with financial modeling, scenario analysis, and donor involvement, we can help project developers in the Global South attract investors with the right risk appetite to bring these projects to life. Also, the Finvest Hub of ICAO will further support the financing”.
In conclusion, while there are challenges to scaling up SAF in countries from the Global South, there is also significant potential. Through innovative trading models like book-and-claim and more strategic financing mechanisms, these countries can tap into the growing global SAF market, unlocking new opportunities for sustainable development and emissions reduction.
Read more about the path to 100% SAF on LinkedIn (PtX Hub)
