The International Air Transport Association has set an ambitious goal for its members: transporting a billion passengers on flights using biofuel by 2025. The goal is a demonstration of IATA’s efforts to help cut carbon dioxide emissions. The aviation industry is a major source of these, after all.
Hypothetically, the increased use of biofuels in planes could eat into oil companies’ income from jet fuel and this could be a cause for concern. In reality, however, the prospects of biofuel being used on a large enough scale to noticeably dent Big Oil’s income are remote.
For starters, biofuel is costlier than regular jet fuel. IATA itself admits that this is a problem, with chief executive and managing director Alexandre de Juniac saying “We want 1 billion passengers to have flown on a SAF-blend flight by 2025. That won’t be easy to achieve. We need governments to set a framework to incentivize production of SAF and ensure it is as attractive to produce as automotive biofuels.”
It actually will need to become much more attractive to produce and to sell if the billion-passenger goal is to be achieved. At the current rate of biofuel uptake in the aviation industry, IATA’s own estimates see half a billion passengers flying on “biofueled” flights by 2025 – just half the target.
The authority lists several ways in which the target could be hit, however. Among these are higher subsidies for aviation biofuels, easier access to financing for biofuel producers, and devising policies that support the wider adoption of biofuels. This is nothing too original: just measures that have proved efficient in the past across industries. Related: Is $65 The Ceiling For WTI?
Efficient they may be, but this doesn’t eliminate the challenges. It’s one thing to discuss subsidies and to encourage them, but implementing them is another thing: the money has to come from somewhere. With the cost of biofuels still higher than jet fuel, this somewhere might mean higher taxes. Remember, IATA is talking about subsidies that are higher than the subsidies for fossil fuels.
Loan guarantees and capital grants for biofuel producers are also excellent ideas as long as the industry gets the banks on board with it. Banks are skeptical these days but who knows, maybe they could be convinced that biofuel is the future of aviation. After all, the billion-passengers target is part of a plan to book carbon-neutral growth from 2020 onwards and reduce net carbon emissions by 50 percent from 2005.
Biofuels are indeed essential for reducing the carbon emissions of the aerospace industry. At the moment, the average level of CO2 emissions varies between 114 g of CO2 equivalent per km for long-haul flights and 260 g of CO2 equivalent per km for short-haul flights. Biofuels can cut this by as much as 80 percent, IATA says. It’s certainly worth supporting biofuel adoption, then, at least from an environmental point of view.
It’s the economic aspect that will be challenging. Biofuel producers will need to focus on bringing costs down as much as possible. Governments will need to step in with incentives and probably regulation. The outcome will likely be higher flight fares and more Big Oil activity in biofuels. The shift to renewables goes on.
By Irina Slav for Oilprice.com
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