SAF - Answer for air cargo's net zero target by 2050

The aviation industry’s net-zero carbon emissions target is focused on delivering maximum reduction in emissions at source through the use of sustainable aviation fuels (SAF), innovative new propulsion technologies, and other efficiency improvements (such as improvements to air traffic navigation), according to the International Air Transport Association (IATA).

SAF volumes reached over 600 million litres in 2023, double the 300 million litres produced in 2022, says Brendan Sullivan, Global Head of Cargo, IATA. "SAF accounted for three percent of all renewable fuels produced with 97 percent of renewable fuel production going to other sectors.

"In 2024, SAF production is expected to triple to 1.875 billion litres, accounting for 0.53 percent of aviation’s fuel need, and six percent of renewable fuel capacity. The small percentage of SAF output as a proportion of overall renewable fuel is primarily due to the new capacity coming online in 2023 being allocated to other renewable fuels.

"IATA also takes note of the COP28 outcome, calling on nations to transition away from fossil fuels. This landmark agreement is an opportunity for the advancement of renewable fuels globally, including SAF."

"For 2024, we will gradually increase our SAF usage and expect the SAF volume should surpass the 2023 level. This depends not only on the demand from corporate customers but also on the supply side as SAF production is still very limited and is associated with higher costs."

Kuehne+Nagel secured the available cargo space on the world's first 100 percent SAF-powered transatlantic flight by Virgin Atlantic that successfully landed at New York after its departure from London Heathrow.

The SAF used to power the two Rolls-Royce Trent 1000 engines on the Boeing 787 Dreamliner is produced by hydroprocessed esters and fatty acids (HEFA) and synthetic aromatic kerosene (SAK) at an 88 percent HEFA and 12 percent SAK blend ratio. The Virgin Atlantic-led consortium, jointly funded by the U.K. Department for Transport, includes Rolls Royce, Boeing, University of Sheffield, Imperial College London and Rocky Mountain Institute.

"We’re very proud that we got the opportunity to represent the air cargo industry on the world’s first transatlantic 100 % SAF flight by a commercial airline," says Fabiano Piccinno, Global Head of Sustainability, Air Logistics, Kuehne+Nagel. "We actively engage in projects that encourage and promote the use of sustainable fuels within the logistics sector. Virgin Atlantic’s Flight100 was historical in many ways, and it represents the next step in sustainable aviation by demonstrating the potential of using SAF as a 100 % drop-in replacement for fossil fuel.

"The main takeaway is that this project proves that SAF is a safe drop-in replacement for conventional jet fuel. This means that flying without the use of fossil fuel is technically possible already today. However, there is not enough SAF to make this a reality on a large scale as SAF only represents 0.1 percent (according to IATA) of the global jet fuel volume today. The big challenge is therefore to scale up SAF production fast enough to reach the global targets. Industry and government need to come together to accelerate the build-up of new capacity accessing new sustainable feedstock and production pathways and to make SAF more accessible through investments, regulation and subsidies."

Neste is the world’s leading producer of SAF, and has been supplying SAF to airlines around the globe like Air France-KLM, Lufthansa, United Airlines, and cargo operators such as DHL Group, Cargolux and Amazon, adds Jonathan Wood, Vice President, Commercial Management and Business Development, Renewable Aviation Business, Neste. "With SAF production at the new production line of our Singapore refinery now ramping up, we expect SAF sales volumes to be significantly higher than in 2023. The exact volume available for sales depends on the progress of the ramp-up of SAF production and customer demand.

"Regarding the general market, IATA estimated that the SAF supply in 2023 was around 500,000 tonnes, and expects a growth to 1.5 million tonnes in 2024."

Cargolux Airlines and Norwegian Air Shuttle have committed to purchase SAF from Norsk e-Fuel, and the offtake agreements cover more than 140,000 tonnes of fuel supply. In addition, the two companies will provide strategic support for the development of two additional production facilities by 2030.

"In general, we see a lot of interest from the aviation industry," says Luisa Wagner, Manager, Communications & Corporate Development, Norsk e-Fuel. "Among the airlines, and specifically for e-fuels, there seems to be a divide between airlines that want direct access to the fuels through the producers and others that are more focused on the larger fuel suppliers. Independent of this, we have already secured offtake with two airlines (Norwegian and Cargolux). Both airlines are prime examples of voluntarily increasing their targets to reduce emissions faster than required by the EU. Together with ReFuelEU Aviation, this will indeed create a growing demand for SAF in the coming years that, according to recent reports, could be met by the market. However, this will require the active and determined support of government agencies as well as more early movers like our partners and investors who see the great potential of the e-fuel market."

Airlines have sent major demand signals to the SAF production market:

*All SAF produced in 2022 was bought at an additional cost to the industry of around $500 million as SAF is priced at a significant premium over the price of jet fuel.

*There are increasing examples of airlines vertically integrating into the supply chain with some committing equity and risk capital into SAF projects.

*Airlines have entered into forward purchase agreements for SAF worth around a total of $45 billion, well in excess of today’s SAF availability.

Sullivan says: "IATA directly engages with the breadth of the SAF value chain, working to engage and collaborate with all those working toward the development of the ecosystem. From an airline perspective, IATA seeks to enhance airlines' resources, capabilities and connections in order to more proficiently procure, manage and deploy SAF - especially in a manner that is both cost effective, and equally as impactful for positive outcomes in both carbon abatement and environmental improvement. More broadly, IATA also engages with the likes of SAF producers, government bodies, financiers, technology developers, and many more, in order to be at the forefront of the sector's development, by seeking to closely understand, communicate and synergize roles among each stakeholder in order to progress the development of SAF."

Bowden of Cathay adds: "Our corporate SAF programme can help customers reduce their Scope 3 emissions on business travel and shipping cargo. The use of SAF also fulfils various carbon emissions disclosure requirements such as the Science Based Targets initiative (SBTi), to which some of our clients are committed.

"The programme also offers our cargo customers the opportunity to provide a green transportation solution for their own customers on airfreight. Customers in the airfreight world want to join our programme for a variety of reasons but the one that stands out most often is the realisation across the industry that we cannot achieve our objectives alone, and we have to work together through strategic partnerships and common goals to achieve the results we need.

"SAF is recognised as the most viable way to decarbonise aviation, and according to IATA’s research, SAF will contribute over 65 percent of the carbon reduction required for the aviation sector to reach net-zero emissions by 2050.

"The airfreight world is moving more slowly than the air passenger world when it comes to sustainability, and this is something we are trying to change. Carbon neutrality is a daunting goal given the challenges in securing SAF at affordable rates, and yet, if we do nothing, we achieve nothing. We realise that it is only by working together – embodied in the name of our sustainability drive, “Greener Together” - that we can create the mass movement that will help to lead the change that the airfreight industry needs. We welcome more partners to work together to build a more sustainable future."

Piccinno of K+N highlights another angle to the SAF story - the practice of book and claim. "It is a common practice to increase sustainable fuels adoption and optimise its sustainability by avoiding transport emissions. Kuehne+Nagel was among the first freight forwarders to start offering SAF to customers, and that early experience helped us to develop our practical, transparent, and credible Kuehne+Nagel SAF Certificate Programme that helps both our customers and ourselves to reduce our environmental impact. As we strongly believe in keeping the value chain intact in a book & claim system, we ensure that carriers play a key role as we only purchase through them and never directly from suppliers. This is sometimes called a direct book & claim as we strive to stay as close as possible to the actual transportation chain, thus making it a credible mechanism for emissions reductions and reducing the risk of it becoming an abstract certificate trading such as the carbon offsetting.

"Sustainability is a collaborative approach, and ambitious targets can only be achieved if we include all partners in the value chain and hold them accountable. When customers first hear about book & claim in the context of SAF, they are surprised that it is so difficult to get SAF into a specific aircraft for their shipments. But once the reasons behind it are explained, they mostly understand and support the mechanism. The increasing success, in terms of customers using SAF and quantities sold that we are experiencing, is proof that we have developed a competitive and credible product with high acceptance in the market.

"When it comes to the book and claim of SAF, the leading standards/guidelines are still lacking behind with publishing a clear recommendation on that topic. This vacuum of regulated environment leaves many stakeholders hesitating or in a wait-and-see position. However, there is no time to wait, and we need to act now. This is why we are committed to advancing this topic even if not everything has been defined by the standards. We see that it does have an impact in the real world. We can only hope that many other stakeholders, including a larger share of our customers, have the same mindset."

"Supporting policies are crucial for SAF market growth as these create the demand certainty needed to attract investments into new production capacity. We have seen an increasing demand from airlines but also from cargo and corporate end customers adopting SAF as a means of reducing the emissions from their business travel and transport. We also see a lot of SAF production project announcements, which is encouraging. However, because SAF is more costly to make compared with fossil jet fuel, market growth will be driven by regulations."

Is SAF too costly?
The SAF premium (the cost of SAF minus the cost of regular jet fuel) is around 3-8 times higher than traditional jet fuel, says Bowden of Cathay.

Outlook
"We estimate that SAF could contribute around 65 percent of the reduction in emissions needed by aviation to reach net-zero in 2050," IATA says in its update. "This will require a massive increase in production in order to meet demand. The largest acceleration is expected in the 2030s as policy support becomes global, SAF becomes competitive with fossil kerosene and credible offsets become scarcer."

While we have a long way to go – we see that more and more customers are inquiring about SAF, and that sustainability is on the agenda for most companies, adds Piccinno of Kuehne+Nagel. "Maturity is still varying a lot between the regions - Europe and North America has been the frontrunners in this regard but it’s starting to pick up in Asia as well.

"Our Vision 2030 is to become the most trusted supply chain partner supporting a sustainable future. We are committed to SBTi to reduce emissions and address climate change. The path to a zero-carbon future includes visibility, avoidance, and CO2e reduction. Visibility helps us map the CO2e footprint along each step of the supply chain and our digital platforms (such as seaexplorer and myKN) enable our customers to optimise routings and select services with lowest CO2e emissions to reduce climate impact.

"The same is true when it comes to avoiding and reducing emissions. We continuously leverage data analysis and implement training programmes to expand the environmental knowledge within our teams so that they can make informed decisions in regards to route optimisations and/or modal switch solutions. We also help our customers to reduce their emissions by procuring and allocating sustainable fuels.

"In 2023, we purchased over 26 million litres of SAF. When it comes to air freight, it is no secret that SAF will be the most important part to reach our targets as alternative propulsion technologies, such as electric or hydrogen aircrafts, are not expected to be available on a large scale and especially not for long-haul in the foreseeable future.

"We need to make air transportation more energy efficient as well, meaning that the same cargo can be transported with less fuel. This includes operational efficiencies as well as more fuel-efficient aircrafts. As those emissions are produced with our carriers, we have set-up a carrier engagement programme to support them in jointly advancing sustainability initiatives. One of the most important factors for us is to make sustainability solutions accessible, simple, and attractive to our customers for them to be able to profit from that and that we can follow this pathway together.

"We cannot stress enough how important that collaboration is when it comes to sustainability. Sustainability is a common goal, and we need to collaborate and challenge the carriers while we also expect like-minded customers to do the same with us. Unfortunately, many sustainability solutions come at an additional cost, and we expect committed customers to understand that and show the willingness to carry part of the load which some pioneers are already doing today."

Neste has already invested into expanding its SAF production capability, adds Wood. "Our total global SAF production capability will reach 1.5 million tonnes per annum in 2024 after the completed expansion of our Singapore refinery and ongoing modification of our refinery in Rotterdam, the Netherlands. The expansion of our Rotterdam refinery will further increase our SAF production capability to 2.2 million tonnes per annum in 2026.

"Achieving net zero carbon emissions requires cooperation across the aviation ecosystem. All stakeholders need to take responsibility for reducing emissions, whether they are an airline, a cargo operator, a business with air travel or transport activities and even an individual traveller. We need to act now and SAF provides a solution that is available today."

Norsk e-Fuel is currently working on a portfolio of three plants by 2030 with a total annual production volume of 250 million litres of which more than 75 percent would be dedicated to the aviation industry, says Wagner.

"There will be no single solution to achieving net zero. Different approaches and assumptions are being formulated but SAF plays a central role in all of them. Depending on the methodology, it is assumed that SAF will be required to achieve 43-65 percent of the GHG emission reductions for aviation by 2050. In addition, operational optimisation to reduce fuel demand and battery electric and hydrogen aircraft for long and medium range aviation are incremental parts of the net zero equation. The advantage of SAF and e-fuels, in particular, is that they can replace conventional fuels in existing aircraft and infrastructure already today."