The aviation sector must overcome some major challenges in the coming decades if it’s to reach its 2050 net zero target. By then, the International Air Transport Association (IATA) estimates airlines will be carrying 10 billion passengers a year, more than double the pre-pandemic high of 4 billion in 2019. The industry is pinning its hopes largely on the development of sustainable aviation fuels (SAFs) to reach the net zero target, with IATA expecting such fuels to provide 65% of the sector’s carbon reductions by 2050.
China’s aviation market is second in size only to that of the US. According to analysis published by the International Council on Clean Transportation (ICCT), Chinese flights emitted 103 million tonnes of CO2 in 2019 – 13% of the global aviation total. Although aviation accounts for 1% of the country’s total emissions, its share is expected to grow as emissions from heavy industries, such as steel and cement making, fall in the next decade. A research paper published before the pandemic predicted that China’s civil aviation emissions will reach 516 million tonnes by 2050 – five times the 2019 amount.
China’s production of SAFs is just getting started. In late 2022, the Institute of Energy at Peking University published a report finding huge potential for sustainable fuel production in China, with significant feedstocks available, such as used cooking oil, forestry waste and food waste from cities. But there is no top-level policy to develop the sector nor functioning market to promote SAF production. Meanwhile, there are significant obstacles to investment and expansion of capacity, commercialisation of SAF production technologies, and reduction of costs.
What is sustainable aviation fuel?
SAFs are liquid fuels produced from sustainable feedstocks (biological or synthetic) that can replace fossil fuels in commercial aircraft. They can reduce emissions by 80% or more compared to conventional fossil fuels, depending on the technology and feedstock, and how the SAF is transported. Currently, SAFs are mixed with conventional fuels (usually at a ratio of no more than 50%), although there is no technical barrier to the exclusive use of SAFs. No major changes to airport infrastructure or aircraft are needed to enable fuel switching.
Standing-setting body the American Society for Testing and Materials International (ASTM) has approved nine SAF production processes. Existing and planned production in China uses the well-established hydroprocessed esters and fatty acids (HEFA) method, which refines animal and plant oils and recycled oils into an aviation fuel. This is how most of the world’s SAF is produced.
The Gasification/Fischer-Tropsch (G+FT) process has also been a focus of the world’s major fuel suppliers. The technology has been applied in large natural gas liquefaction and coal liquefaction facilities. Considering sustainability, using the process to produce SAF products requires that the raw materials should not be fossil fuels, but biomass, municipal solid waste or industrial waste.
However, the Power-to-Liquid (PtL) process has the greatest potential to reduce aviation emissions. Hydrogen is extracted from water by electrolysis and combined with carbon dioxide to produce hydrocarbons. The process can be powered by renewables and the carbon dioxide sourced from carbon capture technologies. In theory, this process could deliver 99–100% reductions in emissions across the fuel lifecycle, but it’s new and commercial-scale application is still far off.
The IATA has estimated that 449 billion litres (358 million tonnes) of SAFs will be needed to meet 65% of the sector’s fuel requirement in 2050. Production in 2020 was a mere 50,000 tonnes, just 0.01% of the 2050 target.
Although the target is ambitious, IATA admits the aviation industry won’t be able to completely eliminate emissions at source and will need to mitigate the rest using a variety of offsetting mechanisms. The International Civil Aviation Organization adopted the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) in 2016. Airlines will have to buy emissions reduction offsets from other sectors to compensate for any increase in their own emissions above the 2020 level. Alternatively, they can use lower carbon “CORSIA eligible” fuels.
However, the effectiveness of CORSIA has been heavily doubted, as there is no guarantee that the carbon credits purchased by airlines to offset their emissions would be of a high quality. An investigation in 2021 found that the forest protection carbon offsetting market used by airlines had a significant credibility problem, with experts warning the system is flawed and can produce credits with no climate benefit.
IATA envisages that as new technologies, including those to produce SAF, become widespread, the need for offsets will diminish. However, 65% of the net zero goal needs to be achieved by using 380 million tons of sustainable aviation fuel, while CORSIA does not have a solid plan to promote sustainable fuel. There are multiple challenges to scaling the production of SAFs.
One of the biggest barriers to SAF production is cost. According to the ICCT, the various processes cost two to six times as much as conventional jet fuel. Fuel costs account for 25–40% of airline operating costs, so switching to sustainable alternatives will have a significant impact. Airlines may prefer to offset carbon emissions rather than reduce them.
Besides, the airline industry is still recovering from the impact of Covid-19, which cut passenger numbers. In 2021, the Chinese aviation sector saw 440 million journeys made – up 5.5% on 2020, but still down 33% on 2019. Airlines are facing enormous pressure to survive, deterring investment and promotion in SAFs.
Environmental costs are also an issue. Sticking to the technical requirements of the ASTM alone does not ensure sustainability. SAFs need industry-recognised sustainability certification, such as that offered by the International Sustainability & Carbon Certification System or the Roundtable on Sustainable Biomaterials, which look at overall carbon emissions across the product lifecycle.
An ICCT report shows that production costs are lowest for the hydroprocessed esters and fatty acids (HEFA) route, but not all HEFA products actually cut emissions. Feedstocks can have a huge impact on emissions outcomes: fuel made from sugarcane or palm oil are more expensive than traditional jet fuels and produce more lifecycle greenhouse gas emissions, the report states. And the direct use of plant oils as feedstock can affect food security and cause changes in how land is used – potentially giving rise to deforestation and higher lifecycle emissions.
The European Union revised its Renewable Energy Directive in 2018 to phase out palm oil by 2030, along with most first-generation food-based biofuels. In response to the economic fallout from the EU’s move, top palm oil producers Indonesia and Malaysia have pushed for increasing exports to India and China. In 2022, China’s state-owned companies invested 6 billion Malaysian Ringgit (around US$1.35 billion) to produce hydro treated vegetable oil and sustainable aviation fuel in Malaysia.
Incomplete industrial chains
The report from Peking University’s Institute of Energy estimates that China can currently produce 150,000 tonnes of SAF via the HEFA route every year. But the country consumed 26.47 million tonnes of aviation fuel in 2021. The supply of SAFs is nowhere near adequate if airlines are to cut their emissions as planned.
However, it is not easy to produce SAF. Sinopec Zhenhai Refining & Chemical Company (Zhenhai Refining) was the first in China to look seriously at developing and producing SAFs. It first produced one in June 2022 and its equipment can process 100,000 tonnes of used cooking oil every year. Huang Aibin, Zhenhai Refining’s technical chief, said that production costs remain high, feedstock supplies are unstable, and demand is variable.
The best feedstock for the HEFA process, in terms of sustainability, is used cooking oil. The fuel produced is lower cost and meets sustainability requirements. There are no issues with competition for food supplies or water, and there are no deforestation or biodiversity issues.
China’s larger and more advanced factories generally pre-process used cooking oil and then export it to the EU. A previous China Dialogue article explained that the high costs of transportation and processing mean that biodiesel made from used cooking oil costs more than standard diesel. If the government does not subsidise it, there is no incentive for fuel makers to buy it. That’s why apart from some limited applications as a fuel or feedstock in industry, most of China’s biodiesel is exported to the EU.
Chinese companies that produce biodiesel (especially HVO, hydrotreated vegetable oil, also known as second-generation biodiesel) can also transition to SAF production. The report estimated that the country’s total production capacity will reach 2.05 million tons by 2025 if China’s existing and planned production capacity for HVO is retrofitted to produce SAF, combined with the existing SAF capacity. By then, total SAF supply will account for 4.5% of China’s total aviation fuel consumption.
However, China exempts biodiesel that conforms to national standards from consumption taxes and grants a refund of 70% of value-added tax to encourage biodiesel producers. By contrast, no targeted support measures have been instituted in the SAF industry. Companies lack incentives to transition to SAF production.
According to Huang Aibin, used cooking oil is expensive to transport, which makes local utilisation more attractive. Sinopec is planning to set up regional plants, but further investment will depend on market demand: “The equipment only becomes profitable when we are getting regular ongoing orders from the airlines.”
And while the Civil Aviation Administration of China (CAAC) has set a target for cumulative consumption of SAFs of 50,000 tonnes by 2025, there is no sign yet of how the airlines plan to achieve this. As the report says: “China’s airlines are mostly state-owned and will only act on SAFs in response to central government policies and plans.”
To date, Air China, China Eastern and Hainan Airlines have carried out test flights using a blend of conventional fuel and SAFs. But these have not led to their use on commercial flights. Hong Kong’s Cathay Pacific has been more proactive, saying 10% of its aviation fuel will be sustainable by 2030.
Nikola Xing, head of climate action for the airline, said at the launch of the Peking University report that the premium which airlines pay for SAFs could be partially passed on to customers – in particular, big corporate customers signed up to the Science Based Targets initiative. The SBTi helps companies set carbon targets and then monitors performance. As its aviation guidance shows, commercial travel is the biggest source of emissions for financial and professional services firms. The guide suggests cutting down on travel, using alternative modes of transportation, such as high-speed rail, and taking flights using sustainable fuel. Companies may be willing to pay extra for greener flights.
SAF policy needed
The aviation sector needs urgent policy interventions to establish a market for SAFs, and incentivise investment in SAF production at scale and the commercialisation of processes such as non-waste oil derived SAFs.
In the EU and US, governments have set specific blending mandates. For example, the ReFuelEU Aviation Initiative is expected to require all flights taking off from EU airports to use a certain percentage of SAF: 2% in 2025, rising to 5% in 2030 and 63% in 2050. A new SAF policy from the Biden Administration will support producers with the aim of raising output to at least 3 billion gallons a year (about 4 million tonnes) by 2030.
In China, there are no comprehensive top-level policies to support SAFs. Dr Yang Fuqiang, a research fellow at Peking University’s Institute of Energy, told China Dialogue that the Civil Aviation Administration of China (CAAC) should set a requirement – even if it is just that 1% of aviation fuel be sustainable – to get the industry moving. That could be gradually increased to further cut emissions. He suggests the extra costs could be accounted for by increasing the price of tickets on popular routes or for business-class travel.
Considering the limited supply of feedstocks, the overall production capacity of the HEFA route cannot meet the demand. In contrast, The G+FT process uses agricultural and forestry waste, municipal solid waste, and industrial waste as raw materials, while the PtL process hardly needs to worry about raw material issues. They are expected to grow in the long term, due to their cheap and diverse raw materials.
Yang added that in the long-term the PtL route has huge potential and is free of feedstock concerns, and China has plenty of natural resources to develop renewable energy. With policy support, economies of scale and technological advances, PtL costs could be reduced significantly, making this pathway the best solution for cutting aviation emissions.
He also expects the aviation industry to be included in China’s national emissions trading system (ETS), incentivising airlines to reduce emissions by switching to low-carbon sustainable fuels. In 2011, China’s regional carbon emission trading systems were launched in seven provinces and cities, among which Shanghai is the only one to have included the aviation sector. The national ETS, which entered into force in 2021, so far only includes the power sector. A document issued by the National Development and Reform Commission in 2016 proposed that the first phase of the national ETS will cover key emission industries such as aviation. However, the Chinese government has not yet announced the implementation specific measures of the above plan.