"The world is reeling from the climate crisis" - that is an alarming fact that is happening. Fulfilling the commitment at the United Nations Climate Change Conference (COP26), Vietnam has officially approved the National Strategy on Green Growth - towards the NetZero 2050 target.
For the aviation industry, this is a huge challenge if we look at the pace of the industry's growth over the years and the impact of its emissions. According to the "State of Sustainable Aviation" report by Simpliflying, if we do nothing, the current 2-3% emissions from the aviation industry will rapidly increase to 25% of total global carbon emissions by 2050. In fact, if the entire aviation industry were a country, it would be among the top 10 carbon polluters on the planet. According to worldwildlife.org, air travel is also currently the most carbon-intensive activity an individual can undertake. A passenger flying from New York to London and back emits more emissions than the average person in Paraguay does in an entire year. Therefore, the global aviation industry needs to start on a sustainable path now.
Currently, sustainable aviation fuel (SAF) is the only option available to decarbonize the aviation industry, while other technologies (such as hydrogen or electric aircraft) are many years away from commercialization.
SAF market growth rate
In its early stages, SAF development still faces many challenges: SAF is much more expensive than traditional jet fuel; SAF supply is very limited; and it is unclear how to source the raw materials and renewable energy needed to produce SAF. However, the SAF market has grown rapidly at a remarkable rate.
According to ResourceWise, the market has grown from $520 million in 2023 to an impressive $790 million (projected) by 2024. The annual growth of SAF of more than $250 million is a testament to the huge demand for sustainable solutions. Research and Markets predicts the SAF market will reach $3.92 billion by 2028. This represents a nearly fivefold increase from current sales in just four years.
Driving forces for the SAF "trend"
In the trend of greening the aviation industry, we have seen many airlines around the world adopting SAF. Airports have also provided various benefits and incentives for companies in the aviation industry to start transitioning to renewable alternatives. Organizations such as the International Air Transport Association (IATA), the American Society for Testing and Materials (ASTM) have made efforts to improve supply chain processes and popularize information about SAF. All of this will help reduce the cost of adoption while increasing the availability of this product on a global scale.
This growth in SAF is also being driven by tougher binding commitments from governments, environmental groups and the aviation industry itself. The International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) sets stringent targets to reduce aviation emissions, which is further driving the wider adoption of SAF by airlines. Governments have introduced policies mandating compliance with minimum SAF usage rates, such as in Europe (RefuelEU) and in Japan, Singapore and Indonesia. The US government is also providing policy support for SAF research and development.
In addition to establishing policy and regulatory frameworks, countries have taken different approaches to financing SAF market development efforts. Japan has established a Green Innovation Fund, allocating ¥114.5 billion to help develop SAF. Singapore has introduced a tax system to finance SAF adoption, spreading the costs across the aviation industry. In 2023, the Monetary Authority of Singapore (MAS) also launched the Singapore-Asia Taxonomy for Sustainable Finance, which aims to ensure that businesses working towards environmental goals receive appropriate financial support. In Europe, SAF development programs are funded through the Horizon Europe program (which funds research into sustainable aviation technologies) and the European Investment Bank (which provides loans and guarantees for SAF projects). In the US, in 2021, the Biden Administration announced the Sustainable Aviation Fuel Grand Challenge, setting an ambitious target of producing 3 billion gallons of SAF annually by 2030 and 35 billion gallons by 2050, and providing $4.3 billion in funding for SAF projects and producers.
Additionally, green bonds and sustainability-linked loans are gaining attention as ways to finance SAF projects. Some governments are considering loan guarantee programs to help reduce the risk of investing in SAF production facilities.
Existing companies as well as startups are investing heavily in the future of SAF.
Companies are taking a variety of approaches to participating in the SAF supply chain. According to Simpliflying’s Sustainable Aviation Fuel Powerlist 2023, there are now 100 companies operating and developing different solutions in the SAF supply chain. Some companies are focusing on developing and transferring manufacturing technology (such as Honeywell UOP, Topsoe, Velocys, etc.), while larger companies provide a complete solution from securing raw materials to manufacturing and supplying SAF to the aircraft wing (feedstock-to-wingtip approach) (such as Neste, SkyNRG, etc.).
Currently in Vietnam, there are airlines and suppliers pioneering the use of SAF fuel. Vietnam Airlines had the first flight using SAF fuel with flight number VN660, from Singapore to Hanoi on May 27, 2024. ThaiVietjet also had a flight using SAF from Phuket airport, Thailand to Da Nang on July 10, 2024. On the supplier side, Petrolimex Aviation Fuel Joint Stock Company (Petrolimex Aviation) is the first enterprise with a plan to import and supply SAF in Vietnam. In the near future, we can also expect that SAF will soon be supplied in the Vietnamese market and will be supplied and produced by Vietnamese companies.
It can be seen that, as more and more countries and businesses commit to achieving the goal of net zero emissions by 2050 (Net Zero 2050) and using renewable energy sources, the role of SAF in the fight against climate change will become extremely important. Thus, it can be said that SAF is an inevitable trend and the SAF market will increasingly develop as the world in general and the aviation industry in particular move towards a green and sustainable future.
References:
https://www.resourcewise.com/environmental-blog/analysis-saf-market-to-surge-five-fold-to-near-4-billion-by-2028
https://vneconomy.vn/phat-trien-thi-truong-hang-khong-ben-vung.htm
https://www.worldwildlife.org/initiatives/cutting-aviation-pollution#:~:text=Aviation%20is%20one%20of%20the,polluting%20nations%20on%20the%20planet.
https://simplifflying.com/reports/sustainable-aviation-outlook-report-2024/
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