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Airlines get lift from corporate allies in shift to sustainable fuels

Several airlines told POLITICO that they want to use more SAF, especially as corporate customers increasingly ask about reducing the carbon footprint of employee travel. But the industry can’t afford to go it alone, because each gallon is two to four times more expensive than conventional fuels, and the pandemic severely cut into their bottom lines. Airlines say they won’t make a real dent in their emissions without help from the federal government.

“SAF is too expensive at this stage, and there are no national mandates to blend it into the fuel supply,” said Christoph Wolff, global head of mobility at the World Economic Forum. “So airlines don’t buy it and few producers make it.”

That’s where companies outside of aviation come in. As more and more of them pledge to hit science-based climate targets, white collar industries like consulting, finance and tech are realizing that their largest source of emissions is employee travel, Wolff said. Plus, both the aviation industry and its customers are conscious of the elitist perception of flying. Wolff pointed to climate activist Greta Thunberg’s fly-shaming campaign in 2019, when she crossed the Atlantic Ocean by boat.

“It’s an equity issue because many people never fly,” he said.

The purchasing agreements are an innovative way to help scale a nascent climate solution in a hard-to-decarbonize industry, where both airlines and their customers want to avoid the increasing costs of pollution amid stricter climate laws. While proponents are still developing a way to verify that the sustainable fuel agreements are a net-benefit for the planet, they argue that the deals could be a model for other industries.

But the effort is being met with skepticism from some environmental groups, who view it as a messaging campaign for airlines and corporations looking to improve their image.

“My concern is that it’s going to become an accounting exercise rather than finding ways to genuinely decarbonize the industry,” said Clare Lakewood, legal director of the Center for Biological Diversity’s Climate Law Institute.

Further, there isn’t enough public information about the ingredients in SAF, she said, expressing worry about the potential use of palm oil or other ingredients linked to deforestation, which exacerbates climate change.

“Some biofuels can actually be more polluting than using fossil fuels,” Lakewood said.

Wolff said the Clean Skies for Tomorrow Coalition that he leads at WEF is working to address those concerns. The coalition is developing an environmental certificate for SAF so companies can credibly claim they reduced emissions by helping an airline buy more of the fuel. That way, those climate benefits are only accounted for once and are in addition to what airlines were already planning on purchasing.

The Clean Skies initiative is partnering with a new buyers’ club launched April 20, called the Sustainable Aviation Buyers Alliance, spearheaded by the Environmental Defense Fund and Rocky Mountain Institute. Seven companies — Netflix, JPMorgan Chase, Deloitte, Microsoft, Boeing, Boston Consulting Group and Salesforce — signed on and more are expected to join.

All the companies have their own climate goals, such as Microsoft, which pledged to remove more carbon from the environment than it emits by 2030, both within its own operations and among its suppliers. To achieve that goal, Microsoft has to cut in half emissions from its supply chain, known as scope 3, which represent the bulk of the company’s emissions and include business travel and building materials.

The joint efforts will essentially create an entirely new carbon accounting scheme, where a company can tackle its emissions by covering the costs of what an airline can’t pay for SAF itself, said Ned Harvey, former managing director of RMI’s aviation and climate intelligence programs.

“We have a real economy developing around carbon, but no one has written the rules,” Harvey said. “So we’re trying to do that in a small corner of the world called aviation.”

The buyers’ alliance didn’t announce a target for how much SAF the companies will buy collectively, but RMI is hoping they will agree to a 2 billion gallon goal by 2025.

That amount of fuel doesn’t exist on the market yet and the environmental certificates verifying actual carbon reductions aren’t live, making it challenging for companies to set specific pledges.

“For executives, they are thinking, ‘If I’m going to spend hundreds of millions, I could lose my job if this is not legitimate,’” Harvey said.

Wolff said the Clean Skies initiative aims to have a system ready before COP26, the UN-led global climate summit in November.

Still, the corporate commitments alone won’t be enough to tip the scale in favor of SAF. Even though new sustainable aviation fuel plants are being constructed, WEF in November estimated they will only yield 1 percent of projected jet fuel demand globally by 2030, or about 1 billion gallons.

Since then, Neste, the top producer of SAF, announced expansions in Europe and Singapore that will allow it to make about half a billion gallons a year by 2024. Neste says its fuel produces 75 percent fewer emissions than traditional jet fuel, which is verified by an independent third-party.

Global aviation groups want to boost the market through the Council on Sustainable Aviation Fuels Accountability, a newly formed effort that aims to transparently track how much SAF is being bought and sold. This will reduce the likelihood that emissions reductions are “double-counted.” Without that kind of accounting, public confidence in SAF could be undermined, the council said in an April 15 statement announcing its formation.

Currently, major U.S.-based companies like United Airlines, American Airlines, Alaska Airlines and JetBlue have direct contracts with SAF suppliers, but there is increased interest in “more complex transactions to purchase sustainable aviation fuel,” said Nancy Young, Airlines for America’s vice president of environmental affairs. Airlines for America, which represents most major U.S. airlines, is a CoSAFA member.

The industry expects to finish SAF accounting standards within a year, Young said, adding that regulatory oversight isn’t needed.

But A4A, which has a goal to make 2 billion gallons of SAF available to U.S. airlines by 2030, does want the government to subsidize the costs of the fuel. A4A asked the Biden administration to include a blender’s tax credit of up to $2 per gallon in his infrastructure package. The policy was included in a tax plan the Treasury Department released late last month.

Absent the tax benefits, the sustainable fuels industry won’t take off at the needed scale, said Lauren Riley, United’s head of environmental affairs and sustainability.

“We need the government to signal that they want to commercialize SAF,” she said.

United has pledged to become carbon neutral by 2050 without buying offsets that rely on paying to plant trees or protect forests. In April, the airline said its partnership with corporate customers would help it buy 3.4 million more gallons of SAF this year, more than triple the amount of previous years. But United consumes about 4 billion gallons of jet fuel annually, meaning SAF will still account for less than 1 percent.

Most of the SAF powering U.S. planes today heads to California, where a low-carbon fuel standard and cap-and-trade program has made it cost-competitive. The European Union is also considering a blending mandate for SAF. Airlines aren’t advocating for those policies at the national level, however.

California Rep. Julia Brownley introduced legislation in February that would set the blenders credit between $1.50 and $1.75, as well as establish a net-zero target and a low-carbon fuel standard for the aviation industry. Illinois Rep. Brad Schneider co-sponsored Brownley’s bill but is also drafting a separate, narrower proposal on the blenders tax credit.

“The big challenge is there isn’t very much of it, and it’s hugely expensive,” said Jill Blickstein, managing director and head of environmental, social and governance at American Airlines, which has pledged to buy 9 million gallons of SAF over the next three years to help achieve its net-zero by 2050 goal. “So how do you boost demand and at the same time bring prices down?”

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