Renewable Aviation Fuel Market

Market Overview

The global renewable aviation fuel market size was valued at USD 2,944.15 million in 2022. It is estimated to reach USD 14,5371.63 million by 2031, growing at a CAGR of 54.23% during the forecast period (2023–2031). Factors like supportive policies, rising emission concerns and CO2 emissions from commercial aviation stimulate market growth.

Sustainable aviation fuel (SAF), commonly referred to as renewable aviation fuel (RAF), is an eco-friendly replacement for fossil aircraft fuels. SAF is derived from renewable resources such as biological waste lipids, agricultural residues, and non-fossil CO2. RAF is a so-called drop-in fuel that can be blended with fossil aviation fuel without requiring any infrastructure or equipment modifications. The first flight, which used blended biofuel, began in 2008, and over 370,000 flights have taken to the skies using RAF since 2016.

RAFs are manufactured using techniques approved for decreasing emissions in the aviation industry by the American Society for Testing and Materials (ASTM). The aviation industry is one of the largest carbon emitters, and this carbon emitted at higher altitudes is potentially more harmful than sea level emissions. The sector is constantly pushing to reduce its emissions, and advanced biofuels are a viable option that is a 'drop-in' solution, i.e., it can be used by the existing infrastructure.

Market Dynamics

Global Renewable Aviation Fuel Market Drivers

Supportive Policies and Rising Emission Concerns

Government initiatives helped develop renewable aviation fuel in major markets. Due to growing concerns about aviation emissions, several major countries are considering regulations to assist the development of sustainable renewable fuels. In order to reduce major emission levels and attaining net-zero emissions in 2050 requires enormous technological difficulties and government backing for renewable aviation fuels like sustainable aviation fuels (SAF). In addition, it releases 80 percent less CO2 than kerosene during its lifetime. Therefore, renewable aviation fuel demand will rise in the coming years.

In 2016, the International Civil Aviation Organization (ICAO) announced initiating the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). According to CORSIA, the aviation industry will achieve carbon-neutral growth in the future. The obligation of CORSIA had already started; from January 2019, the operators were obligated to report their annual emissions. During 2021-2026, flights between states willing to volunteer for the program will be subjected to offsetting requirements. However, 81 states have expressed a readiness to join the program (collectively represent more than 75% of the aviation market), which is anticipated to be a big driver for the aviation fuel business.

CO2 Emissions from Commercial Aviation

Twenty-three nations representing over 40% of global commercial aviation, including the United States, Canada, and most of the European Union, announced forming the International Aviation Climate Ambition Coalition (IACAC). The IACAC declaration commits the participating countries to work together to reduce aviation's climate impact to a level consistent with limiting the global average temperature increase to 1.5 degrees Celsius. According to the IACAC declaration, sustainable aviation fuels should reduce life-cycle carbon emissions, and SAF production and development should contribute to achieving the UN Sustainable Development Goals (SDGs).

On the other hand, aircraft companies are focusing on shifting toward aviation biofuels. For instance, as of 2021, a leading aerospace manufacturer, Airbus aircraft, was authorized to fly with up to a 50% mix of sustainable aviation fuel (SAF) combined with kerosene. Additionally, it is planning to achieve certification for 100% on all its airplanes by the end of this decade. Therefore, aggressive targets, supportive government policies, and rising emission concerns will drive the renewable market throughout the forecast period.

Global Renewable Aviation Fuel Market Restraint

Slower Development of the Technology and High Cost of Renewable Aviation Fuels

Renewable aviation fuels (RAF), like Sustainable aviation fuel (SAF), are substantially more expensive than jet fossil fuels but are gaining popularity in the aviation industry. This cost premium is a primary barrier to its wider use. According to the International Energy Agency (IEA), even the most commercially viable SAFs are substantially more expensive than oil-derived jet kerosene, with current breakeven at oil prices above USD 100 per barrel. In addition, biojet fuels are significantly more expensive, generally two to seven times more than fossil-derived jet fuel. The competitiveness of SAF depends on its production cost relative to fossil jet kerosene. Moreover, the SAF is still developing and less viable than Jet kerosene fuels. Such factors restrict the renewable aviation fuel market growth.

Global Renewable Aviation Fuel Market Opportunities

Growth in Air Passenger Traffic

The growth in the aviation sector is mainly pushed by the rising number of air passengers globally because of the cheaper airfare in recent times, developing economic conditions, and rising disposable income. During the COVID-19 pandemic, the imposed lockdown and strict travel restrictions severely impacted commercial airline passengers. In 2020, commercial airline passengers slumped by approximately 60% to 1.8 billion from 4.5 billion in 2019. Simultaneously, commercial airlines' revenue significantly fell by over 55%.

Additionally, the situation in the aviation sector has started recovering with the development and distribution of vaccines, the removal of government-imposed travel restrictions, and the opening of borders. According to the International Air Transport Association (IATA), in 2021, the overall traveler numbers were 47% of 2019 levels. It is anticipated to increase to 83% in 2022, 94% in 2023, 103% in 2024, and 111% in 2025. Therefore, the recovery and growth of the air passenger traffic scenario are expected to increase and continue during the forecast period, creating opportunities for renewable aviation fuel market growth.

Regional Analysis

Based on region, the global renewable aviation fuel market is bifurcated into North America, Europe, Asia-Pacific, South America, and the Middle East and Africa.

North America Dominates the Global Market

North America is the most significant global renewable fuel market shareholder and is anticipated to exhibit a CAGR of 57.84% during the forecast period. The region is one of the most extensive markets for the aviation sector and renewable aviation fuel. In 2020, more than 397 million people were transported via aviation in North America, making up around 22.2% of the world's traffic. Nations like the United States and Canada accounted for most of the air passenger count in 2020. In addition, the fuel economy of American Airlines increased by more than 130% between 1978 and 2020, saving close to 5 billion metric tons of carbon dioxide. Airlines for America (A4A) estimates that the nation's carriers operate about 28,000 flights daily worldwide in the pre-pandemic period. In 2020 and 2021, most North American airline businesses reported significant financial losses. However, a recovery in air travel is anticipated in 2022. Further, given the sharp rise in crude oil prices, demand for renewable aviation fuel is anticipated over the forecast period.

Europe is estimated to exhibit a CAGR of 52.18% over the forecast period. It is one of the leading regions in biofuel production technologies, with many production plants under operation. Bio-based aviation fuel production capacity in the region depends on a small number of plants, accounting for a maximum potential output of approximately 3 million metric tons annually. The region's aviation industry voluntarily committed to significant aspirational goals and identified bio-based aviation fuels as a potential means to improve its environmental performance. In addition, the European Commission (EC), in coordination with Airbus, leading European airlines, such as Lufthansa, Air France, and British Airways, and key biofuel fuel producers, such as Neste and Biomass Technology Group, launched an initiative in 2011 called the European Advanced Biofuels Flight Path, to speed up the commercialization of aviation biofuels in Europe, thereby driving the regional market growth.

Asia-Pacific accounted for 37% of global air passenger traffic in 2019, increasing by 3.75% compared to 2018. Flights within the Asia-Pacific emitted the most passenger transportation-related CO2, accounting for around 26% of the global total in 2019. Major Asian-Pacific airlines are trying to reduce emissions by incorporating biofuel blends in aviation fuel in major countries. Despite the ongoing efforts by the airline operators and respective government authorities, the consumption of renewable aviation fuel in the region is relatively low. However, there has been an effective movement in planning, testing, and commercializing renewable aviation fuel in the region since 2021. For instance, in February 2022, Shell PLC announced the initiation of a sustainable aviation fuel supply to Singapore. Further, Shell PLC has upgraded its facility in Singapore to blend the fuel and is strategizing on its supply chain to blend fuel to other countries in Asia. All these reasons drive the regional market growth.

In South America, the development of renewable aviation fuel is still nascent compared to other major regions such as Europe and North America. In South America, Brazil is expected to pioneer the development of renewable fuels from sugarcane, which is expected to replace traditional jet fuel. Although no specific federal policies exist for sustainable aviation fuel (SAF), initiatives are in place at the state level. Over the years, many organizations, such as the Boeing Company, have been working aggressively to initiate the supply of sustainable aviation biofuels while reducing carbon emissions in Brazil. Such factors are anticipated to propel the need for renewable aviation fuel in South America during the forecast period.

In the Middle East and Africa, commercial-scale bio-jet fuel ventures are still in the implementation and nascent stages. Several regional organizations have been undertaking research activities to commercialize sustainable aviation fuels in the commercial and defense sectors. Numerous initiatives taken by governing bodies in the Middle East and African region, coupled with extensive investments from various multinational companies for the development of sustainable aviation fuel in the region, are expected to boost the development and deployment of renewable aviation fuel in the region during the forecast period.

Segmental Analysis

The global renewable aviation fuel market is segmented by technology and application.

Based on technology, the global renewable market is bifurcated into fischer-tropsch (FT), hydroprocessed esters and fatty acids (HEFA), and synthesized iso-paraffinic (SIP) and alcohol-to-jet (AJT). 

The HEFA segment dominates the global market and is projected to exhibit a CAGR of 53.70% over the forecast period. In 2011, the American Society for Testing and Materials (ASTM) accredited hydroprocessed esters and fatty acids (HEFA) technology for producing bio-jet fuel. HEFA uses oleo-chemical feedstock for renewable fuel production, such as oil and fats. Many commercial-scale facilities worldwide produce HEFA biojet, which currently makes up a sizeable portion of the commercial volumes of bio-jet fuels. However, the process also produces renewable diesel (HEFA-diesel), with a larger market reach and a higher selling price. As a result, producers are concentrating on HEFA-diesel rather than HEFA-jet.

For instance, in September 2021, the Shell Energy and Chemicals Park Rotterdam, the Netherlands, will soon be home to a hydro-processed esters and fatty acids (HEFA) factory with an annual capacity of 820,000 tons. The plant will rank among the biggest in Europe when it is finished producing waste-derived renewable diesel and sustainable aviation fuel (SAF). Therefore, such investments in the SAF projects will likely increase the HEFA technology during the forecast period.

The Fischer-Tropsch (FT) technology uses high-temperature conditions to treat biomass, such as wood waste and municipal solid waste (MSW), to produce synthesis gas, which is used to generate synthetic hydrocarbon. Although the FT technology was the first to be certified, the commercial volumes of bio-jet fuel from biomass using this technology are low because of several challenges, including fuel clean-up, catalyst contamination, and economies of scale. However, FT technology is currently witnessing significant developments in the market.

For example, in February 2022, Sasol stated that it would use existing Fischer-Tropsch equipment at its Secunda facility in Mpumalanga to generate sustainable aviation fuel (SAF) using green hydrogen feedstock. In January 2022, Johnson Matthey unveiled HyCOgenTM, a revolutionary device that turns collected carbon dioxide (CO2) and green hydrogen into sustainable aviation fuel using FT technology (SAF). Therefore, during the forecast period, there will likely be greater demand for FT technology due to such developments in renewable aviation fuel.

Based on application, the global renewable aviation fuel market is segmented into flexible commercial and defense. 

The commercial segment owns the global market and is estimated to exhibit a CAGR of 55.80% during the forecast period. Commercial aviation entails the operation of scheduled and non-scheduled aircraft, which transports passengers or cargo for a fee. The commercial sector is one of the greatest aviation fuel consumers. It accounts for a quarter of an airline operator's total operating expenses, and the International Civil Aviation Organization (ICAO) predicts that the number of airline passengers will reach 10 billion by 2040. In 2021, approximately 2.27 billion individuals traveled by aircraft, a decrease of 45.5% from the previous year. This was primarily due to the COVID-19 outbreak, leading to travel restrictions and lockdowns. However, the demand for domestic travel and cargo movements and the growth of low-cost carriers across the globe are acting as major drivers for the revival of the aviation fuel market.

The defense industry utilizes a substantial quantity of aviation fuel. For example, the US Air Force utilizes approximately 4,8 billion gallons of aviation fuel per year, which accounts for approximately 81% of the Air Force's total energy budget. Approximately one-third of that amount is allocated to the Navy. Therefore, as the budget increases for the defense sector, the air force fleet is expected to increase, positively affecting the aviation fuel market. Moreover, the military sector seeks to improve the environmental performance of its aircraft fleets and reduce environmental emissions. Biofuels are viewed as a means to maintain reliable fuel sources, reduce price volatility, and support the nation's environmental initiatives.

Recent Developments

• May 2023- Oleo-X, a leading pioneer and supplier of premium renewable fuel feedstocks, launched its world-class renewable diesel (“RD”) and sustainable aviation fuel (“SAF”) feedstock merchant processing facility.
• February 2023- Airbus SE and Qantas Airlines Ltd announced the first USD 200 million fund investment in Australia's sustainable aviation fuel (SAF) market within a month.