Sustainable Aviation Fuel Market

Market Overview

The global sustainable aviation fuel market size was valued at USD 340.23 million in 2022. It is estimated to grow at a CAGR of 61.02% during the forecast period (2023–2031).

The usage of sustainable aviation fuel results in a reduction in carbon emissions compared to the traditional jet fuel it replaces over the lifecycle of the fuel. Depending on the sustainable feedstock utilized, the production process, and the supply chain to the airport, sustainable aviation fuel offers a remarkable decrease in carbon emissions of up to 80% over the fuel lifespan compared to the conventional jet fuel it replaces. Any aircraft certified using the current jet fuel specification can use sustainable aviation fuel. Sustainable aviation fuel also plays a significant role in meeting the aviation industry's carbon reduction targets.

Highlights

• Biofuel dominates the fuel type segment
• Fixed wings dominate the aircraft type segment
• Commercial aviation dominates the platform segment
• North America is the highest shareholder in the global market

Market Dynamics

Global Sustainable Aviation Fuel Market Drivers:

Growing Efforts to Reduce Carbon Emission from Various Organizations and Governments

Many governments and industry associations worldwide are making efforts to reduce carbon emissions. These entities set targets to achieve lower- or zero-emission over the next few years. One hundred ninety-six countries agreed to change their development trajectories towards sustainability in the Paris Agreement in 2015. These nations planned to limit global warming to nearly 2°C above pre-industrial levels. In order to achieve these targets, global carbon dioxide emissions are required to be reduced by 45 percent by 2030 from 2010 levels and reach net-zero emissions by 2050.

Furthermore, more than 70 nations, 1,200 businesses, 1000 towns, 1000 schools, and 400 financial institutions have committed to taking strict, immediate action to cut global emissions in half by 2030. Sustainable aviation fuel is considered one of the significant elements in helping achieve these goals. SAF reduces emissions by up to 80% over its lifecycle. These factors are driving the market growth over the forecast period.

Increasing Number of Passengers Using Air Transportation

The number of passengers traveling by air has been only increasing. According to the International Civil Aviation Organization and World Air Transport Statistics, the number of passengers on scheduled services reached over 4.5 billion in 2019 from 4.2 billion in 2018, which is 3.6 percent higher. In contrast, the number of departures reached 38.3 million in 2019, a 1.7 percent increase. Moreover, the passenger traffic increased by 4.9 percent compared to the previous year, arriving at 8,686 billion revenue passenger kilometers.

Furthermore, the growth in passengers traveling by air leads to an increasing number of flights annually. As more passengers travel by air, the airlines are expanding their operations by increasing the aircraft fleet and raising the number of flights on specific routes. The ramped-up capacity of airlines augments the demand for aviation fuel. In addition, as sustainable aviation fuel is more efficient than conventional aviation fuel, it can fulfill the increased demand from airlines. Therefore, the growing number of passengers and the high efficiency of sustainable aviation fuel augment market growth.

Global Sustainable Aviation Fuel Market Restraint:

Higher Costs Associated

The cost of sustainable aviation fuels is one of the major concerns for the market. The price of sustainable aviation fuel is currently 4-5 times higher than conventional jet fuel. Thus, several airlines prefer to buy something other than sustainable aviation fuel in bulk. As a result, a very small quantity of sustainable aviation fuel is being produced worldwide. The prices of sustainable aviation fuel need to be reduced to scale it. Moreover, feedstock costs, yields, and plant capital recovery are significant factors that add to the overall cost of sustainable aviation fuel.

Additionally, fats, oils, and greases are used as feedstock for sustainable aviation fuel, which is currently unavailable in enough volume to meet sustainable aviation fuel demand. This, in turn, is increasing the prices of sustainable aviation fuel. Furthermore, when airlines blend sustainable aviation fuel with jet fuel, they pass along the relative cost to consumers, raising ticket prices. Blending 63% sustainable aviation fuel with A1 Jet Fuel, per the EU proposal, would increase ticket prices on a flight from Amsterdam to New York by about USD 120. This further discourages the airlines from using sustainable aviation fuel for their aircraft, hampering the market growth.

Global Sustainable Aviation Fuel Market Opportunities:

Government Initiatives to Promote the Adoption of Sustainable Aviation Fuel 

Several governments worldwide are formulating new regulations to promote the use of sustainable aviation fuel to reduce greenhouse gas emissions and achieve emission targets. For instance, the U.S. government introduced the Sustainable Aviation Fuel Act, which encourages sustainable aviation fuel development, distribution, and use. The bill provides allocated funding of USD 1 billion over five years for projects in the U.S. to produce, transport, blend, and store sustainable aviation fuel.

Similarly, the European Commission adopted the Sustainable and Smart Mobility Strategy in December 2020 to boost the acceptance of sustainable aviation fuels. Sustainable aviation fuels can help achieve the increased E.U. climate target for 2030 and the EU'sEU's climate neutrality objective. The E.U. also revised the Energy Taxation Directive that introduces minimum tax rates for sustainable aviation fuel to encourage its use. Such initiatives by the government are likely to offer growth opportunities to the players in the sustainable aviation fuel market.

Regional Analysis

North America Dominates the Global Market

Based on region, the global sustainable aviation fuel market is bifurcated into North America, Europe, Asia-Pacific, and RoW.

North America is the most significant shareholder in the global market and is projected to grow at a CAGR of 60.94% over the forecast period. The demand from developed countries such as the U.S. and Canada drives North America's sustainable aviation fuel market. These countries have some of the largest aviation industries in the world. North America is home to some of the leading airlines in the world. Aviation companies such as American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines are all headquartered in North America and have a strong regional presence. In addition, the presence of these companies in North America augments the region's demand for sustainable aviation fuel.

Additionally, the national and local governments in North America support the adoption of sustainable aviation fuel through various initiatives. For instance, the Biden administration has set a target of replacing all conventional jet fuel with sustainable aviation fuel by 2050, with a plan to boost sustainable aviation fuel production to 3 billion gallons annually by 2030. In contrast, San Francisco International Airport worked with the Commercial Aviation Alternative Fuels Initiative (CAAFI) to facilitate significant sustainable aviation fuel offtake agreements between airlines and producers.

Europe is anticipated to grow at a CAGR of 59.88% over the forecast period. The growth in Europe's market is driven by the higher passenger traffic flying to and from Europe. In addition, Europe is one of the world's major tourist destinations, and many tourists visit yearly. According to the World Air Transport Statistics by International Air Transport Association, Europe accounted for about 23.7% of the total scheduled passenger and cargo traffic in the world in 2021. Moreover, Europe is attributed to over 21 percent of global international scheduled passenger traffic and 2.3 percent of domestic scheduled passenger traffic. In addition, there is an increase in flights to and from Europe due to high passenger volume. This contributes to the expansion of the European market. Europe is also home to some of the leading tourist destinations in the world. Countries such as France, Italy, Spain, Austria, and many others have some of the most popular tourist spots in the world. In addition, many tourists visiting Europe travel by air, driving the aviation industry in the region. This further augments the demand for sustainable aviation fuel in Europe.

Asia-Pacific is expected to grow significantly over the forecast period. The demand for air cargo transport across the region primarily drives the market in the Asia-Pacific. Countries such as China, Taiwan, Thailand, and Vietnam are significant exporters, supplying goods worldwide. Leading passenger and cargo airlines can be found throughout the Asia-Pacific. Airlines with considerable regional presence in the Asia Pacific include China Southern Airlines, China Eastern Airlines, Air China, Korean Air, and Cathay Pacific Airways. In addition, the presence of these companies in Asia-Pacific augments the region's demand for sustainable aviation fuel. Major airlines in the Asia-Pacific are increasing their intake of sustainable aviation fuel. For instance, All Nippon Airways agreed with Neste to procure sustainable aviation fuel. Similarly, using biofuels, Cathay Pacific implemented the Carbon Offsetting and Reduction Scheme for International Aviation. Such efforts by airlines are anticipated to boost the growth of the sustainable aviation fuel market in the Asia-Pacific.

RoW comprises Latin America and the Middle East and Africa regions. The demand from countries in the Middle East majorly drives the market in RoW. Countries such as UAE and Qatar have some of the largest aviation industries in the world. According to the World Air Transport Statistics by the International Air Transport Association, the Middle East accounted for about 10% of the total scheduled passenger and cargo traffic in the world in 2021. In comparison, Latin America accounted for about 4.3% of the total scheduled passenger and cargo traffic worldwide in 2021. The Middle East is a hub for some of the leading airlines in the world. In addition, aviation companies such as Emirates, Qatar Airways, and Turkish Airlines are all headquartered in the Middle East and have a solid regional presence. The presence of these companies in the Middle East augments the region's demand for sustainable aviation fuel.

Segmental Analysis

The global sustainable aviation fuel market is divided by fuel type, aircraft type, and platform.

Based on fuel type, the global market is bifurcated into biofuel, hydrogen fuel, and power to liquid-fuel. 

The biofuel segment is the highest contributor to the market share and is estimated to grow at a CAGR of 61.47% during the forecast period. Biofuels are made from corn grain, oil seeds, algae, agricultural residues, forestry residues, municipal solid waste, and others. The main types of biofuels used in the aviation industry are Hydrogenated Vegetable Oil, Hydro-processed esters and fatty acids (HEFA or HEFA-SPK), Synthesis gas Fischer-Tropsch synthesized paraffinic kerosene (FT-SPK), and others. In addition, the demand for bio jet fuels is expected to skyrocket as they are easier and cheaper to produce than other sustainable aviation fuels, can also be made on a large scale, and are easier to blend with conventional aviation fuels.

Hydrogen fuel delivers zero emissions from aircraft, whereas other aviation fuel types greatly lower the greenhouse gases released by an airplane. Furthermore, hydrogen provides high energy density as compared to other sustainable fuels. The use of hydrogen fuel in aircraft is strategically essential but complex in implementation. Many companies and startups worldwide are working on hydrogen fuel cells and liquid hydrogen fuel to power aircraft.

Based on aircraft type, the global market is bifurcated into fixed wings, rotorcraft, and others. 

The fixed wings segment owns the highest market share and is estimated to grow at a CAGR of 61.53% during the forecast period. Fixed-wing aircraft are propeller-driven or jet-engine-powered, with wings that do not move. Fixed-wing aircraft are generally much more efficient than rotary aircraft because there is a difference in their lifting. Fixed-wing aircraft uses an engine to keep the plane moving forward. The airflow over the wings generates lift. Sustainable aviation fuels, utilized mainly by fixed-wing aircraft, can lessen the environmental effects of aircraft operations.

The rotorcraft industry and operators have begun taking steps toward using sustainable aviation fuels to meet global emissions targets. For instance, Bell is the first rotorcraft customer to receive sustainable aviation fuel supply from global aviation fuel supplier Avfuel Corporation. While helicopter operations may not be under the decarbonization spotlight that much of the commercial airline industry is, in part because of the role they play in keeping society safe through law enforcement, air ambulance, and search-and-rescue activities, helicopter operators are beginning to face government and regulatory pressure to meet emission targets, thereby driving the segment’s growth.

Based on the platform, the global market is segmented into commercial aviation, military aviation, business and general aviation, and unmanned aerial vehicle. 

Commercial aviation is the highest contributor to the market and is anticipated to grow at a CAGR of 61.77% over the forecast period. Jet A1 and Jet A are the primary grades of aviation fuels used in the commercial industry. Jet A is the most common form of jet fuel used by commercial aviation in the United States, while Jet A-1 predominates in the rest of the world. Several airlines, including United and Japan Airlines, use sustainable aviation fuel on a portion of commercial flights. In addition, around 403,384 commercial flights have been operated using sustainable aviation fuel since 2011. United Airlines operated the world's first passenger flight using 100% sustainable aviation fuel.

Business Jets are also adopting sustainable aviation fuels, with 23 aircraft flying to EBACE 2019 on sustainable aviation fuel blends. The business aviation community has long been dedicated to reducing greenhouse gas (GHG) emissions from aircraft, with a proven record of advances in carbon reduction. In response to the pandemic, the business aviation sector is intensifying its efforts to use sustainable aviation fuels (SAF) and take other steps to fulfill its bold climate pledges. The sustainable aviation fuel market is accelerating faster, helped by business and commercial aviation commitments as air travel rebounds and sustainability becomes a more urgent global priority.

Recent Developments

• February 2023- Frederic Combes, vice president of Airbus India and South Asia, stated that Airbus is willing to establish an ecosystem that promotes Sustainable Aviation Fuel (SAF) to decarbonize the aviation industry.

• February 2023- Boeing agreed to purchase 5.6 million gallons (21.2 million liters) of blended sustainable aviation fuel (SAF) from Neste, the world's largest SAF producer, to support its U.S. commercial operations through 2023. These contracts significantly increase the company's sustainable aviation fuel acquisitions over the prior year.