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Asia plays catch-up in race for sustainable aviation fuel

Written by Nikkei Asia Published on   5 mins read

Neste’s biofuel refinery in Singapore now has annual capacity of 1.26bn liters.

The Asia-Pacific region is catching up with Europe and North America in the search for ways to reduce airlines’ combined carbon footprint, as going easier on the environment has become an overriding priority for the global aviation industry.

Now Asian airlines will have an expanded biofuel refinery in Singapore that they can source from. Finnish biofuel producer Neste in May completed a EUR 1.6 billion (USD 1.7 billion) expansion of its biofuel refinery in the city-state and has started producing sustainable aviation fuel (SAF), a biofuel made from used cooking oil and waste animal fat.

SAF is considered to emit up to 80% less carbon dioxide over the fuel’s life cycle—including collecting feedstocks, refining and burning—than standard jet fuel. The market leader, already producing SAF in Europe, will have an annual capacity of 1 million tons (1.26 billion liters) in Singapore.

According to the International Air Transport Association (IATA), global SAF production in 2022 was slightly above 300 million liters. While Neste relies on cooking oil and animal fat, other SAF producers often make the fuel from agricultural wastes and municipal solid wastes.

“Singapore has world-class logistics connectivity enabling efficient transportation of the renewable raw materials as well as final products globally,” said Matti Lehmus, president and CEO of Neste.

Sami Jauhiainen, acting executive vice president for Neste’s renewable aviation business, told Nikkei Asia, “We source a lot of waste and residue materials across the Asia-Pacific region.” According to the nonprofit Air Transport Action Group (ATAG), Asia-Pacific has the highest availability of SAF feedstock in the world, with a relatively high percentage of industrial waste gases.

He explained that the refinery will also enhance raw material pretreatment capacity to process “materials that contain more impurities” and that it will expand the pool of materials available in the market.

The aviation industry, one of the globe’s biggest emitters of carbon dioxide, is facing an urgent need to transform its operations.

Kohei Yoshikawa, a director who works on the decarbonization team at All Nippon Airways (ANA), expressed a sense of crisis. “If we cannot comply with global environmental regulations,” he said, “we may not be able to fly airplanes in the future.”

In October 2021, the IATA approved a resolution to achieve net-zero carbon emissions from aircraft operations by 2050. The International Civil Aviation Organization (ICAO) adopted the same target the following year.

While the net zero goal is achievable through a combination of measures, the IATA is counting on SAF to carry the industry 65% of the way to its goal.

“Governments need to play ball,” Philip Goh, the IATA’s regional vice president for Asia-Pacific, said during a briefing at the association’s annual general meeting in early June, referring to the region’s relatively low production and adoption of SAF. The Asia-Pacific industry’s sustainability efforts lag behind those of Europe and North America.

European and U.S. governments are ahead in setting sustainability agendas. In 2021, the U.S. adopted a goal of supplying enough SAF to meet 100% of aviation fuel demand by 2050. The European Union has a regulation that the minimum share of SAF available at EU airports should be 34% in 2040 and 70% in 2050.

Major airlines have their own goals. American Airlines, Air France, and many others aim to replace 10% of their jet fuel with SAF by 2030. Ryanair seeks to fuel 12.5% of its flights with SAF by 2030.

Currently, SAF production facilities are concentrated in Europe and the U.S., giving European and U.S. airlines easier access to the stuff. Now Asian airlines can buy from Neste’s Singapore refinery.

A representative of ANA, Neste’s first airline customer in Asia, told Nikkei Asia, “Total annual supply will certainly increase, although it much depends on availability.”

ANA procures SAF from the Netherlands and refuels its aircraft at airports in Japan, a process involving long shipping times and high costs. “Procuring from Singapore will reduce shipping time and costs,” the ANA representative said.

“We will also be able to reduce emissions during the shipping process, which means a lot in reducing the overall carbon footprint,” the representative added. Neste’s other Asian customers such as Singapore Airlines and Malaysia Airlines are expected to similarly benefit.

“Asia-Pacific governments are catching up,” Jauhiainen pointed out. “This is what we really see happening. I think Japan is, in a sense, a front-runner.”

Japan’s Ministry of Economy, Trade and Industry (METI) recently announced that the government in 2030 will mandate 10% SAF use for international flights at Japanese airports, a regulation that will hold oil wholesalers accountable for meeting the threshold.

Airlines based in the region are seeking less-polluting options. Besides their deals with Neste, ANA and Japan Airlines (JAL) have landed deals with American SAF producer Raven. Tokyo-based trading house Itochu is also involved in the deal. The partners look to begin purchases in 2025.

Korean Air has signed a memorandum of understanding with Shell to purchase and supply SAF at major airports in Asia-Pacific and the Middle East for five years beginning in 2026.

On the production side, several initiatives are underway to promote the domestic making of SAF. Japanese biotech startup Euglena has developed an SAF called SUSTEO from a mixture of used cooking oil and fat extracted from the microalgae Euglena. As demand for used cooking oil is expected to grow, a Euglena representative said, “we are working on technological developments to increase the proportion of Euglena in the event of future shortages in cooking oil.”

ANA, Toshiba, Japanese oil major Idemitsu Kosan and three other companies are jointly researching SAF development. The partners are using electrolysis technology to convert carbon dioxide to carbon monoxide.

In Australia, the Qantas Group has teamed with Airbus and the Queensland government to invest in a local refinery being developed by bioenergy company Jet Zero Australia. American SAF maker LanzaJet is a partner.

Meanwhile, there are challenges to overcome before SAF can be widely used. According to the IATA, estimated global SAF production accounts for around 0.1% to 0.15% of total jet fuel demand. Among many producers, only a handful, including Neste and LanzaJet, can mass-produce the fuel. This has airlines scrambling to obtain scarce resources.

The IATA expects that reaching its 2050 net zero commitment will require annual production of 449 billion liters of fuel.

There’s another tall hurdle: SAF is expensive, typically two to five times as much as standard jet fuel.

Yasunori Kikuchi, an associate professor at the Institute for Future Initiatives, at the University of Tokyo, specializes in systems engineering for sustainability. “If the supply chain of raw materials is developed around the world,” he said, “costs could come down. Having said that, I don’t expect a rapid drop in costs.”

Some of the additional costs are passed on to passengers through higher airfares and cargo charges, while some are also borne by the airlines.

“We need to discuss more who should bear the extra costs and how much,” Kikuchi said. “If aviation is a socially essential infrastructure, there should be government support.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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