Aviation is one of the hard-to-abate industries when it comes to decarbonization. COVID-induced lockdowns and the recession that closely followed slashed global aviation demand by 42% in 2020 compared to 2019. This also resulted in the lowest CO2 emissions from the aviation industry in over two decades dropping from about a billion tons of CO2 in 2019 to a little over half a billion tons of CO2 in 2020.
As the world slowly returns to a normal, travel is rising and there has been a steady growth in global aviation demand. COVID-related lockdowns did not impact cargo air transport as much as they did passenger air travel. We expect rising population and living standards and economic and infrastructure growth to drive aviation demand over the long term.
By 2050, ADI Analytics projects a more than four-fold increase in global aviation demand, potentially leading to nearly 1.4 billion tons of CO2 emissions under a business-as-usual scenario. However, increasing awareness and concern about aviation’s environmental impact are driving significant change. This shift is spurring new policies, commitments, and investments focused on decarbonizing the industry. Exhibit 1 shows projected global aviation demand growth.
Exhibit 1: Global aviation demand growth through 2050 in revenue passenger miles
In accordance with the Paris Agreement, the International Air Transport Association (IATA) aims to reduce net CO2 emissions from the aviation industry by 50% of 2005 levels in 2050. There are several ways to decarbonize aviation. These include improving aircraft efficiency, adopting alternative fuels like sustainable aviation fuel (SAF), hydrogen, and electric batteries, and implementing carbon capture at refineries. SAF is a drop-in fuel that’s compatible with conventional jet fuel. It’s also the easiest option for adoption in the short and medium terms.
Disruptive technologies like hydrogen and batteries require significant technological advancements. These may also limit short-haul flights in the long term. Europe and North America are currently leading efforts to drive Sustainable Aviation Fuel (SAF) use and capacity growth. The rest of the world is gradually catching up to develop a global value chain. Exhibit 2 below shows regions where a clear mandate has been announced versus where discussions have begun.
Exhibit 2: Countries promoting SAF adoption via regulations
Inconsistent regulations across the world are creating challenges for airlines, most of which operate globally. Further commitments made by global organizations such as the IATA, International Civil Aviation Organization (ICAO), and Air Transport Action Group (ATAG) are driving their members to also make commitments towards cutting CO2 emissions from their operations. Airlines worldwide that have committed to decarbonization expect to drive SAF adoption. Exhibit 3 summarizes a list of some of the leading airlines and their commitments.
Exhibit 3: Decarbonization initiatives by leading airlines
In addition to commitments, several airlines have also entered into agreements to invest in commercial SAF production or research to bring down costs of producing SAF. Exhibit 4 below shows some of the leading airlines that have partnered with SAF producers.
Exhibit 4: Efforts by airlines towards SAF production and commercialization
Many large refiners and oil and gas majors have become involved in SAF production and technology development. For instance, Phillips 66, ENI, TotalEnergies, and BP are producing growing volumes of SAF. Additionally, majors are also tying up with SAF producers to cost effectively scale up capacity. Based on regulations, commitments, and capacity announcements, global SAF demand is expected to grow at ~29% annually through 2050. Exhibit 5 shows estimated SAF demand growth globally.
Exhibit 5: Estimated global SAF demand through 2050 in million barrels per day
Factors like growing aviation demand and decarbonization efforts are set to propel global Sustainable Aviation Fuel (SAF) demand. This growth will also be significantly influenced by SAF producers and refiners, an increasing supply, techno-economic advancements, and the availability of feedstock. We will discuss these topics in part II of the blog.
ADI recently published a multi-client study, “The future of jet and sustainable aviation fuel”. This study offers a comprehensive look at jet fuel through 2050, covering demand and supply forecasts, regional scenarios, and key drivers. It also examines decarbonization efforts, sustainable aviation fuel technologies, and the economic implications for suppliers and users.
Contact us for an updated view on SAF commitments by airlines, off-take agreements, and partnerships for commercialization.
– Panuswee Dwivedi
About ADI Analytics
ADI is a prestigious, boutique consulting firm specializing in oil and gas, energy transition, and chemicals since 2009. We bring deep expertise in a broad range of markets where we support Fortune 500, mid-sized and early-stage companies, and investors with consulting services, research reports, and data and analytics, with the goal of delivering actionable outcomes to help our clients achieve tangible results.
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