SAF: Aviation's Key to Decarbonization
The report "Sustainable Aviation Fuel in China – The Path to Carbon Neutrality for the Aviation Industry," compiled by Deloitte China, has been officially released (hereinafter referred to as the "Report"). The report elaborates on the importance of achieving net-zero emissions for the sustainable development of the aviation industry, outlines the path to carbon neutrality for the aviation sector in China and globally, and interprets the feasibility and effectiveness of Sustainable Aviation Fuel (SAF) in reducing aviation emissions from multiple perspectives.
The aviation industry contributes $3.5 trillion to global GDP (4.1%) and accounts for 3% of global carbon dioxide emissions. However, as other industries decarbonize, the proportion of carbon dioxide emissions from the aviation industry could reach 22% by 2050. The International Air Transport Association (IATA) predicts that the Asia-Pacific region will become the fastest-growing region for passenger traffic. In 2021, China's domestic aviation passenger market accounted for 18.9% of the global market.
Xie An, Director of Deloitte China's Sustainability and Climate Change Research Institute, stated that the aviation industry is recognized as a "hard-to-abate" sector, and Sustainable Aviation Fuel (SAF) is a commercial tool that can reduce the emission intensity of air travel in the near term. All SAF stakeholders, including raw material and fuel suppliers, airlines, aircraft manufacturers, logistics providers, investors, and regulatory agencies, are optimistic about decarbonization, but further action is needed. Sustainable Aviation Fuel (SAF) is a drop-in liquid fuel alternative that can reduce carbon emissions by up to 85% compared to traditional aviation fuel, depending on the raw materials and production processes used.
There are multiple ways to achieve decarbonization in the aviation industry, including improving fuel efficiency, using Sustainable Aviation Fuel (SAF), carbon offsetting, adopting new power systems such as batteries and hybrid engines, and utilizing hydrogen. Among these, the use of SAF is the primary decarbonization method for the next 30 years, as it can be directly applied to existing aircraft. Currently, SAF is produced from resources such as forestry residues, agricultural waste, used cooking oil, and municipal solid waste. The "sustainability" of SAF is characterized by raw materials that do not impact food crops or water supply, do not cause deforestation or soil degradation, and recycle carbon stored in biomass raw materials.
According to Deloitte's estimates, China's aviation industry must take significant steps to fulfill the International Air Transport Association's (IATA) commitment to achieving net-zero emissions by 2050, driving SAF production and demand to the necessary levels.
It is projected that by 2030, China's total aviation fuel consumption will reach 60.5 million tons, and by 2050, this figure is expected to reach 132.5 million tons.
If China's aviation industry aligns with IATA's SAF usage target (5.2%), China's SAF demand is expected to reach 3 million tons per year by 2030. With technological advancements and the progress of China's comprehensive decarbonization goals, China's SAF demand is projected to reach 86 million tons per year by 2050.
To drive such significant growth, the industry needs to take measures to reduce production costs and consolidate both domestic and international demand for SAF.
Robert Hansor, Director of Risk Advisory at Deloitte China, added that the aviation industry is closely linked to businesses and individuals. Aviation emissions account for a significant proportion of corporate Scope 3 greenhouse gas emissions, making them a challenge for corporate carbon reduction. Simply reducing business travel does not fundamentally solve the problem. Therefore, SAF plays a crucial role in the decarbonization of the aviation industry. China has ample supplies of SAF raw materials and great potential for sustainable development of SAF. However, the transformation of the aviation industry still requires collaboration across the entire value chain, supportive policies, and substantial investment of capital and time.