OPIS Blog

Technological Trends and Innovations for Clean Fuels

The transportation sector is making substantial strides toward carbon neutrality by 2050, driven by groundbreaking innovations in clean fuels, including Carbon Capture and Storage (CCS) technologies aimed at reducing emissions, and the potential of hydrogen as a versatile energy source. One major advancement is Sustainable Aviation Fuel (SAF), which has the capacity to play a significant role in shaping the future of aviation, transforming how government agencies approach air mobility.

Currently, aviation accounts for a modest share of global greenhouse gas (GHG) emissions, contributing approximately 2.5% of the world’s carbon dioxide (CO2) emissions and 9%-12% of the U.S.’s transportation GHG emissions. Still, the aviation sector presents unique challenges for decarbonization. Although energy efficiency has improved since 1990 due to advancements in design and technology, the carbon intensity of fossil-based jet fuel has remained constant. Green hydrogen, produced by splitting water into hydrogen and oxygen using renewable electricity, presents a viable alternative. However, the technology to power jet engines with hydrogen is still under development, and storing hydrogen comes with its own challenges, making SAF the most practical solution for decarbonizing air travel in the near term.

In September 2021, U.S. federal government agencies unveiled the Sustainable Aviation Fuel Grand Challenge, which aims to scale up new technologies for producing SAF commercially. This initiative seeks to achieve a production goal of 3 billion gallons of domestic SAF annually by 2030, reducing life cycle GHG emissions by at least 50% compared to fossil-based jet fuels, and aims for 35 billion gallons annually of SAF production to meet 100% domestic demand by 2050.

SAF boasts lower carbon intensity than fossil-based jet fuel, paving the way for it to be a key contributor in reducing aviation GHG emissions. Life cycle GHG reductions attributed to SAF utilization can range from 50% to 80% compared to fossil jet fuel. In 2023, using SAF led to approximately 200,000 metric tons of carbon dioxide equivalent (MTCO2e) domestic GHG emission reductions, equivalent to CO2 emitted from 463,042 barrels of oil consumed (EPA’s Greenhouse Gas Equivalencies Calculator). Currently, SAF is approved for use in blends of up to 50% in commercial flights.

By the end of September 2024, SAF predominantly utilized the hydroprocessed esters and fatty acids (HEFA) process for fat, oil, and grease feedstocks. Domestic SAF consumption surged from 5 million gallons in 2021 to 26 million gallons in 2023, according to the SAF Grand Challenge: October 2021-September 2024 Progress Report. A total of 93 million gallons of SAF has been produced and imported through September 2024. (This data is based on U.S. Environmental Protection Agency (EPA) Renewable Identification Number (RIN) values.) However, there is relatively weak demand for SAF because of its higher prices and possible competition with Renewable Diesel (RD), which often shares production facilities and technologies with SAF.

Federal agencies estimate that by 2030, between 2.6 and 4.9 billion gallons of SAF could be produced annually if RD capacity is shifted to SAF. However, the transition has historically been limited due to the higher production costs of SAF, which makes it less economically viable. Many existing RD production facilities lack the infrastructure required to adapt for SAF production without substantial capital investment and modification. Additionally, most of these facilities lack fractionation equipment, which allows both RD and SAF to be produced from the same feedstock, as it is necessary to separate lighter jet fuel-like fractions (SAF) from the heavier RD components. As a result, the amount of SAF produced is usually limited to about 15% of the total RD output. Nevertheless, the growing demand for SAF is encouraging more RD plants to invest in the necessary technology, especially in light of potential government incentives for SAF production.

For facilities equipped with the necessary fractionation equipment, incentives from the Inflation Reduction Act of 2022 (IRA), such as the 45Z clean fuel production tax credit, could help make SAF more competitive in markets that also have low-carbon fuel programs. However further incentives are necessary to bring SAF prices in line with fossil-based jet fuel. At the OPIS 13th Annual Carbon and LCFS Workshop, it was noted during a panel discussion on RD and SAF that airlines often pay an additional $1-$2 per gallon for SAF, which could lead to higher airfare for consumers, potentially decreasing air travel demand significantly in the U.S., a scenario airlines want to avoid.

One reason for the additional production cost per gallon of SAF is that the sustainable fuel currently lacks the volume of incentives that RD is eligible for. Regulatory incentives like the federal Renewable Fuel Standard (RFS) and clean fuel programs in California, Oregon and Washington often incentivize RD production as opposed to SAF due to RD’s higher energy density. The RFS and state-level programs also add cost benefits to fossil-based diesel and not to fossil-based jet fuels, in many cases making RD production more profitable than SAF.

The IRA also provides federal funding for public-private partnerships to support the transition to clean energy. Initiatives include funding from agencies such as the U.S. Department of Agriculture (USDA) and the Federal Aviation Administration (FAA). The USDA has awarded $175 million to a total of four projects that address SAF feedstock production, availability and sustainability, and the FAA funded $3.7 million for projects focused on feedstock market evaluation, soybean oil market impact, fire remediation, and hydrogen production support. The FAA also awarded $244.5 million in Fueling Aviation’s Sustainable Transition (FAST) discretionary grants to support the build out of infrastructure projects related to SAF production, transportation, blending and storage; and $46.5 million in FAST grants to projects that develop and demonstrate new aviation technologies to improve fuel efficiency and reduce emissions.

President Trump issued an Executive Order titled “Unleashing American Energy” on January 20, 2025, directing federal agencies to “immediately pause the disbursement of funds” appropriated through the IRA and the Bipartisan Infrastructure Law. This pause is intended for federal agencies to “review their process, policies, and programs for issuing grants, loans, contracts, or any other financial disbursements of such appropriated funds for consistency with the law.” Federal agencies have 90 days to report back to the Office of Management and Budget and the head of the National Economic Council regarding how funds from the IRA and the Bipartisan Infrastructure Law align with the Trump Administration’s energy objectives. While the full ramifications of this Executive Order are still unfolding, it could potentially violate the Impoundment Control Act, which prohibits the executive branch from withholding funds for policy reasons, and may constitute a breach of federal contracts. Consequently, this action could expose the federal government to litigation and liability from funding recipients and could also be perceived as encroaching on Congress’ “power of the purse.”

Meanwhile, states such as California are looking for ways to increase SAF production and usage. A recent commitment between the California Air Resources Board (CARB) and Airlines for America (A4A) aims to increase SAF availability in the state to 200 million gallons by 2035, addressing about 40% of intrastate travel demand. This public-private partnership will also create a Sustainable Aviation Fuel Working Group to monitor progress annually and address any barriers.

The growing demand for sustainable aviation solutions, along with advancements in SAF production, positions SAF as the most robust market opportunity in biofuels today, likely sustaining forward momentum in the SAF market. For example, in April 2023, Shell and Delta signed a two-year agreement with the Los Angeles Internal Airport (LAX) to purchase 10 million gallons of SAF from Shell Aviation, with Delta planning to procure over 400 million gallons annually by the end of 2030 to meet its 10% SAF utilization target.

Ultimately, the journey toward SAF presents both challenges and opportunities. With concerted efforts from federal and state agencies, alongside involvement from the private sector, the foundation is being laid for a cleaner aviation future. As technological advancements continue and demand for sustainable solutions grows, SAF has the potential to play a pivotal role in decarbonizing air travel, shaping a more sustainable aviation industry for years to come.

Tags: Carbon