CF EMEA: SAF prices point to need for government incentives

As the market demand for sustainable aviation fuel (SAF) continues to rise, the premium on sustainable fuel options emphasizes the need for government incentives surrounding subsidized research, production and adoption of SAF in order to make the fuel alternative more accessible. Panelists weighed in on SAF during a live session on sustainability at today’s Cargo Facts EMEA virtual event. "There is an increased cost that does diminish the ready demand for SAF in general, [and] if SAF was available at price parity to jet [fuel], everybody would want it [and] there would essentially be limitless demand,” Sean Newsum, director of environmental sustainability strategy and global enterprise sustainability at Boeing, said during the panel. “But that’s not the reality of the world we live in, so I think what you see is that the cost of cost premium itself is metering the demand side, so that you’re somewhat in balance, but also enough excess demand is there that it is spurring the supply side and new production capability.” [caption id="attachment_95853" align="alignright" width="544"] Panelists from Kuehne + Nagel, Air France-KLM Cargo and Boeing joined session 5 at Cargo Facts EMEA 2021[/caption] Increased efforts to improve airfreight’s carbon footprint during the past year include various sustainability initiatives, industry digitalization, the International Air Cargo Association’s first ever industry sustainability report and greater investment in SAF, highlighting industry interest around decarbonizing aviation operations. Newsum noted that the price premium on SAF has declined during the past decade, and currently sits at roughly double the price of jet fuel. “A decade ago, we were talking [about SAF] in 10-times terms, and so that’s tremendous progress,” said Newsum. “It’ll take a while to get that two times down to one, but that’s where government incentives can really come into play.” Fellow panelist Marcel Fujike, global head of products and services at Kuehne + Nagel, agreed, stating that governments must push and incentivize the use or exploration of new technologies to produce SAF, especially power-to-liquid fuel, and using surplus bioenergy to produce jet fuel alternatives. California, for instance, has both federal and state incentives that have enabled increased SAF usage in the state in the last several years, and Newsum said similar government programs are needed in other places to encourage the production and use of SAF by making it more affordable for operators. While many carriers and freight forwarders have been investing and implementing the use of SAF , available SAF levels are far below replacement level for traditional fuel, hindering adoption. “It’s not just about the incentives to the end user and to the producer, but it’s also providing the finance support for the construction of new facilities, new capacity that’s necessary,” said Newsum. “The capital markets have the money to provide that, but it’s still risky investments for them, so to the extent that governments can help de-risk that investment, that can also help scale up the future production of sustainable aviation fuel.” Aside from SAF, carriers have been adopting other sustainable processes throughout the air cargo supply chain in an effort to reduce emissions. This includes the development of drones or airships intended to replace traditional aircraft on certain routes or lanes, as well as the digitalization of the airfreight and logistics industry. “We still produce too much paper, I think on average each shipment that we are sending via KLM or any other carrier still has 2 kilos of paper accompanying them, because you never know what happens,” said Fujike. “So, if you calculate this alone, at Kuehne terms, I think it's another 5,000 tonnes, we are bringing up in the air for nothing, let's put it away.” Looking ahead to the remainder of 2021, panelists said they hope to continue investing in sustainable fuel alternatives and increase SAF production to encourage industry accessibility and focus on industry digitalization to decrease the amount of paper and wood used in daily operations and shipments. "We’re continuing to do the fundamental technology development today so that the next generation of airplanes will be as fuel efficient, as energy efficient, as possible, and can utilize renewable forms of energy, whether those be sustainable aviation fuels or electric or hydrogen,” said Newsum. “Whether it's optimizing the fuel load and the cargo load … there’s tons of innovation and efficiency to be gained on an ongoing basis to both reduce the cost of operation and reduce carbon emissions.”

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