2. Finance takes to the skies

Such funding from corporate actors, or a collection of willing enterprises, could also be accumulated in a new type of investment fund, not unlike the Oil and Gas Climate Initiative. Through co-investment, the high risks associated with new refineries and related infrastructure can be lowered, and there can be greater confidence the SAF will be used once produced (referred to as "off-take agreements" in the industry). The more plants that are built, the cheaper the production process and fuel product becomes. The resulting SAF from new refineries may only be used several years after the initial investment, but the capital pooled in the investment fund could provide the initial push necessary to get the industry to 2% (or even higher) use of SAF by 2025. As was shown in the case of solar energy, this would be an important benchmark that raises the prospect for reaching price parity with conventional fuel and achieving a complete energy transition of the industry over the longer term.

Financial institutions could play a direct role themselves. The World Economic Forum's community of CEO Climate Leaders has made great strides in reducing the carbon footprints of their businesses in order to help meet the Paris Climate Goals. Some of the CEOs represent banks that have taken active steps towards ceasing to provide funding for coal-fired power stations and other heavily polluting assets. More recently, stakeholders in the shipping industry have launched the Poseidon Principles, which sees 11 major banks commit to lending portfolios and practices that incentivise the transition to a decarbonised shipping industry. A similar approach in the airline industry could result in beneficial financing terms for operators that commit to progressive adoption of SAF.

3. Supply

If buyers' clubs have the potential to provide significant momentum through a demand-led approach, opportunities exist for supply-led stimulation as well. One option is for airport operators, in collaboration with their carriers, to make landing rights and lowered associated fees an incentive for driving sustainability. Airports faced with the need to expand in order to accommodate growing demand are under huge pressure to limit their environmental footprint or undertake net-zero growth. The beauty of blended biofuels means that airports could gradually ramp up the percentage of SAF provided to airlines, raising it slowly as global supply increases. That percentage could increase to double digits by the 2030s.

In addition, smart regulatory choices designed to make production and sale of SAF more attractive could help level the playing field with traditional petroleum-based fuels. In emerging economies, like India and Brazil, where there is an abundance of appropriate feed stocks, inexpensive solar and wind resources or land available for refineries, such incentives could serve to encourage investment into new supply chains and scale SAF production in the near to medium term.

The well-sequenced combination of nuanced demand- and supply-led innovations, alongside the emergence of new or improved technologies, presents the aviation industry with a much-needed opportunity to protect its social license to operate and grow in an age of increased awareness around carbon emissions. There is no time to lose.

Reprinted with permission of the World Economic Forum. Read the original article.

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