Willie Walsh, IATA’s Director General, emphasized the paradox: "While it is encouraging that SAF production is expected to double to 2 million tonnes in 2025, that is just 0.7% of aviation’s total fuel needs. And even that relatively small amount will add US$4.4 billion globally to the fuel bill. The pace of progress in ramping up production and gaining efficiencies to reduce costs must accelerate."
Mandates Drive Up Prices, Adding Billions to Airline Costs
A major point of contention highlighted by IATA, currently holding its annual conference in New Delhi, is the "unacceptable" cost inflation triggered by European and UK regulations. These mandates require a 2% SAF blend from 2025, leading to a doubling of SAF costs for European airlines due to significant compliance fees levied on producers.
Of the anticipated 2 million tonnes of global SAF production in 2025, an estimated one million tonnes will be purchased to meet the European mandate alone. This volume, at current market prices, is valued at US1.2 billion. However, compliance fees are projected to add an staggering US1.7 billion to this expenditure. IATA argues that this additional sum could have been strategically invested to abate an "additional 3.5 million tonnes of carbon emissions," suggesting a misallocation of resources.
In total, IATA estimates that Europe's SAF mandates have made the alternative fuel five times more expensive than conventional jet fuel. "This highlights the problem with the implementation of mandates before there are sufficient market conditions and before safeguards are in place against unreasonable market practices that raise the cost of decarbonisation," Walsh asserted.
He further urged Europe to reassess its strategy, stating, "Raising the cost of the energy transition that is already estimated to be a staggering US$4.7 trillion should not be the aim or the result of decarbonisation policies. Europe needs to realise that its approach is not working and find another way."
IATA's Call to Action for Governments
To truly foster the growth and accessibility of sustainable aviation fuels, IATA has put forth clear recommendations for governments worldwide. The association believes that a fundamental shift in energy policy is required:
- Redirect Fossil Fuel Subsidies: Governments currently grant approximately US$1 trillion in subsidies to fossil fuel producers. IATA advocates for redirecting a portion of these subsidies towards renewable energy producers, thereby leveling the playing field and eliminating a competitive disadvantage for SAF suppliers.
- Comprehensive Renewable Energy Strategy: Governments should develop a holistic approach to energy policy that prioritizes a significant increase in overall renewable energy production. Crucially, within this increased capacity, a dedicated and appropriate portion of clean energy must be specifically allocated for SAF production.