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To reach net-zero by 2050, airlines will lean on offsets while SAF scales up: panel


Offsets to comprise 20% of 2050 net-zero goals

Increased demand underscores importance of quality

  • Author
  • Brandon Mulder
  • Editor
  • Gary Gentile
  • Commodity
  • Agriculture Energy Transition Oil

As the global supply of sustainable aviation fuels grows, carbon offsets are poised to account for nearly 20% of the airline industry's 2050 net-zero goals, which will inevitably put demand pressure on high-quality offsets, industry experts said during a Sept. 6 panel.

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Replacing conventional jet fuel with sustainable aviation fuel is projected to be the primary lever airlines will use for reaching net-zero industry wide by 2050. According to the International Air Transport Association, SAF will contribute to 65% of the industry's decarbonization pathway. New technologies will contribute to 13% of emissions reductions, while infrastructure and operation efficiencies will account for 3%.

That leaves 19% to be filled by offsets, IATA numbers show, representing about 21 gigatons of CO2. And as post-pandemic airline travel is expected to increase through the decades – from two billion passengers per year globally today to 10 billion by 2050 – the scale of demand for both SAF and offsets will be significant, experts said during a Sept. 6 webinar hosted by Xpansiv, a global exchange platform for environmental commodities.

SAF feedstocks that are "available today may not answer for all of aviation's needs in the future," said United Airlines Senior Manager of Environment, Sustainability and Climate Rohini Sengupta during the webinar. "Today we have SAF that's made of fats, oils and greases. There's not enough supply of that particular feedstock category to answer for that 65%."

Scaling US supply of SAF was given a boost upon the passage of the Inflation Reduction Act, which created a standalone blending credit for SAF between $1.25-$1.75/gal, making SAF credits more valuable than that of other renewable fuels.

But until SAF supply is in a position to meet the needs of the industry, offsetting will be key to decarbonizing the sector in the near and medium-term. According to IATA, airlines will rely on offsets to decarbonize 97% of its operations in 2025. By 2050, that percentage is expected to drop to 8%.

"The industry plan for net-zero foresees a rapid decline in the use of offsets as in-sector solutions take over," a June 2022 IATA report says. "If it proves impossible to completely eliminate emissions at source, however, the industry is committed to mitigating the remaining emissions using offsetting mechanisms, including carbon capture technologies."

Credibility concerns

But offset credits and the markets that drive them are often criticized for their various shortcomings, in particular reliability of offsets' environmental quality.

"If we lose any credibility, that's going to be a real chink in the armor, and our ability to meet those goals [will be undercut] if those are not considered trustworthy," said Heather Sheffer, environmental policy lead for the aircraft builder Boeing.

Credibility concerns underscore the importance of criteria within the Carbon Offsetting and Reduction Scheme for International Aviation program, or CORSIA. Some of those criteria include ensuring that CO2 reduction or removal is additional to business-as-usual activity, measuring greenhouse gas reductions against a baseline using certain protocols and, among others, following procedures that avoid double counting.

According to S&P Global Commodity Insights price assessments, CORSIA-eligible carbon credits were priced at $3.95/mt CO2e, down from a November 2021 high of around $8.70/mt CO2e.

"Boeing sees our role as continuing to stand up that [carbon] market, being an investor and carefully selecting quality offsets in supporting those projects, both for our own emissions and for the industry," Sheffer said.

However, at this early stage in the industry's decarbonization trajectory, many companies still have much work to do in terms of understanding the complexity of the carbon market, said Michael Schneider, IATA assistant director for aviation environment.

"Most airlines have experience with fuel procurements, but maybe not necessarily with carbon offsets – it's a different type of animal," Schneider said. "Often it's not even clear within the organization who's actually taking charge of this. ... That's the first question airlines are asking themselves – 'Who's going to be doing this'?"