SAF is a broad-based segment of biofuels used to power aircraft that has similar properties to conventional jet fuel, but with a smaller carbon footprint. Depending on the feedstock and technologies used to produce it, SAF can reduce lifecycle greenhouse gas (GHG) emissions dramatically compared to conventional jet fuel.
SAF’s lower carbon intensity therefore makes it an important solution for reducing GHGs in the energy-intensive transportation sector.
Below, we will answer several additional questions related to this emerging market sector.
The transportation sector is one of the largest contributors to GHG. Transportation accounted for the largest portion (27%) of total US GHG emissions in 2020, followed by electricity.
Cars, trucks, commercial aircraft, and railroads, among other sources, all contribute to transportation sector GHG emissions.
The aviation sector is under specific scrutiny for emissions reductions because it is extremely GHG intensive for the product sold:
Currently, there are roughly 300 million gallons of SAF used worldwide. To put that number in perspective compared to demand for other popular fuels, the US alone currently use ~23 billion gallons of aviation fuel per year.
In addition, the US uses roughly:
Environmental scientists, including scientists at the National Council on Air and Stream Improvements (NCASI), recognize the difference between biogenic and non-biogenic sources of energy – including aviation fuels. Combusting fossil (non-biogenic or below ground) sources of carbon (coal, oil, natural gas) adds to the carbon dioxide content of the atmosphere because these resources are “captured” and released from within the earth.
Combusting renewable (biogenic or above ground) sources of carbon, however, adds little to no net carbon dioxide to the atmosphere when considered over the long-term.
In the case of woody biomass as a feedstock for SAF, for instance, as long as forest inventories are not being depleted, this biogenic carbon is reabsorbed by new plant life as it grows. It is a renewable and therefore a “sustainable” cyclical process.
There are a number of readily available and renewable resources that can be used to produce SAF, including:
An estimated 1 billion dry tons of biomass can be collected sustainably each year in the United States. This is enough to produce 50–60 billion gallons of low-carbon biofuels that can be utilized across all transportation sectors.
Looking at two biogenic waste streams as an example, the US produces corn on about 90 million acres of land per year. The crop generates 3-4 tons per acre of corn stover (waste), which can be used to produce biofuel.
Forest biomass can be harvested from roughly 300 million acres while generating 1-2 tons per acre of residue material that can be used as a feedstock.
The average worldwide price of jet fuel is about $3.70 per gallon—roughly 65% higher than a year ago according to the International Air Transport Association (IATA).
Low-carbon SAF is approximately 2-4 times more expensive to manufacture than conventional jet fuels. For most airlines, fuel accounts for about 20 - 30% of operational costs. Therefore, current SAF prices add significant cost for airlines.
As SAFs continue to gain prominence with increasing regulation on carbon fuels, these prices will likely become competitive to traditional fuel sources. Over time, they may even become cheaper to buy and implement than fossil fuels.
The most noteworthy development in the IRA allows for an income tax credit for blending SAF into regular jet fuels in US airports. This enables airlines to claim tax credits parallel to the other road transportation fuel companies, users, and blenders of fuels.
To achieve this, the bill includes two important incentives for SAF producers:
While these are attractive options, there are some potential disadvantages with each credit. The first credit will be available in 2023 and expires at the end of 2024. The fuel must be produced in the USA and not imported.
The second credit takes effect in 2025 and expires at the end of 2027, which doesn’t provide much time to get a successful project off the ground.
Several airlines have signed agreements to purchase SAF in large quantities. Recent notable announcements include United, Alaska and Southwest.
Although terms of the announcements are generally not published, our analysis suggests that SAF must eventually to be cost-competitive with fossil fuel adjusted for carbon costs. Non-aviation companies are also piloting SAF purchase agreements to reduce their emissions: Deloitte has purchased 630,000 gallons worth of SAF commitments, for example.
In many markets, the largest single source of renewable energy is found in sustainable biomass, which is a cornerstone of many low-carbon energy transitions. For the last decade, forest resources in the US South have helped to meet the European Union’s renewable and climate goals that include:
This heavily forested region exported over 7 million metric tons of sustainable woody biomass to the EU and UK in 2021. It has the capacity to sustainably increase its production to 35 million metric tons.
There are five important principles to help understand what constitutes sustainable biomass, how it supports forest growth in the US South, and how it can contribute to achieving meaningful climate goals.
ResourceWise will continue to monitor SAF and how it connects to all relevant commodity markets. This developing industry will continue to play an increasingly important role in global energy as it increases its adoption, usage and development.
Learn more about how the experts at ResourceWise can help your business navigate these changing markets.