The market development of aviation biofuel: Drivers and constraints

Highlights

• Aviation biofuel will improve fuel security and reduce greenhouse gas emissions.

• Despite numerous test flights, barriers to widespread biofuel use remain.

• A series of in-depth interviews reveal the drivers and constraints to uptake.

• Recommendations concerning biofuel sustainability criteria are offered.

Abstract

Aviation biofuel is technically viable and nearing the commercial stage. In the last ten years, biofuels have moved from relative obscurity to a point where certain types of fuel have become fully certified for commercial use in up to 50% blends with standard jet fuel and commercial partnerships between airlines and biofuel producers are being established. Yet despite numerous successful test flights, aviation biofuels have yet to become widely commercialised. Drawing on the findings of in-depth interviews with leading global aviation biofuel stakeholders undertaken between October and December 2011, this paper identifies and examines the perceived factors that are affecting the market development of biofuels for aviation. The paper illustrates that market development is being driven by the combined effects of rising jet fuel prices, the potential future impact of emissions legislation and concerns about fuel (in)security. However, commercialisation is being constrained by high production costs, limited availability of suitable feedstocks, uncertainty surrounding the definition of the sustainability criteria, and a perceived lack of both national and international political and policy support for aviation biofuel. The implications of these findings for commercial aviation and the future development of global market for aviation biofuel market are discussed.

Introduction

The need to develop commercially viable alternatives to traditional fossil-based liquid fuels for commercial aircraft is intensifying. The rising price of crude oil, potential new carbon emissions legislation, the negative environmental externality effects resulting from fossil-fuel consumption (including, but not limited to, atmospheric pollution and anthropogenic climate change), and growing global demand for air travel have collectively motivated research into sustainable fuel alternatives (Köhler et al., 2014, Nair and Paulose, 2014). Liquid biofuels are at the forefront of these developments as they have the potential to confer significant economic and environmental benefits and can be ‘dropped in’ to existing infrastructure. Worldwide, research and development into new types of alternative fuel has grown significantly during the last 10–20 years as a result of the use of mandates, tax breaks, subsidies and advantageous funding arrangements between biofuel producers and national governments (Panoutsou et al., 2013). This has resulted in commercial markets for liquid biofuels being established in Europe, North America, South America, Asia, Asia Pacific and Africa (Köhler et al., 2014).

Until recently, biofuels were predominantly used by the road transport sector as direct and more environmentally friendly substitutes for conventional petrol and diesel (see Freedman, 2014). Although the rail and maritime sectors have also begun to experiment with biofuels as a way to reduce the carbon intensity of their operations (Florentinus et al., 2012), some of the most dramatic developments have occurred within the commercial aviation sector. The aviation industry faces a unique and increasingly acute set of environmental and energy challenges and many airlines are currently pursuing biofuels as a means to reduce their oil dependency, lower their greenhouse gas emissions and improve their environmental performance. As the unprecedented high price of oil of $147USD a barrel in 2008 demonstrated, the air transport industry is particularly vulnerable to rising and volatile oil prices. Fuel constitutes a major component of an airline's operating cost. In the last 10 years, fuel costs have doubled to account for 28% of airline operating expenses in 2013 (PWC, 2013). As a result of the high oil price, a number of airlines worldwide were forced to declare bankruptcy during 2008 and hundreds of thousands of passengers had their travel plans disrupted. In addition to fuel price concerns, the air transport industry is also under increasing public and political pressure to address its environmental impacts (see Bows-Larkin and Anderson, 2013). In response, the industry is making a concerted effort to reduce greenhouse gas emissions (particularly of carbon dioxide) by investing in more fuel efficient technologies and environmentally friendly operating practices (Budd and Budd, 2013) as well as in alternative fuels sources to reduce emissions (Winchester et al., 2013a).

IATA has set a target for the global aviation industry to achieve carbon neutral growth by 2020 and reduce CO₂ emissions by 50% relative to 2005 levels by 2050 (IATA, 2009). In the US the Federal Aviation Administration (FAA) aims for 1 billion gallons of jet fuel to come from alternative renewable sources from 2018, representing 1.7% of predicted fuel consumption of US carriers (FAA, 2011, Winchester et al., 2013b). Moreover, alternative jet fuels can both qualify under the Renewable Fuels Standard in the US, and under the EU Renewable Energy Directive, although there is no specific mandate for jet fuel. Crucially, the industry has few short-term technological options at its disposal which would confer the required emissions reductions while simultaneously reducing oil dependency and protecting growth (Blakey et al., 2011, CCC, 2009). While some efficiency gains can be delivered through fleet renewal and enhanced air traffic management procedures such as continuous decent approaches and precision area navigation (P-RNAV) these measures will not, by themselves, be sufficient to deliver the drastic reductions in emissions which are required and additional interventions are required. At present, virtually all of the world's commercial aircraft are powered by engines that burn Jet A/A1 fuel and produce a range of pollution species as by-products of combustion and incomplete combustion. Although alternative propulsion technologies, such as hydrogen fuel cells and solar power, have been proposed and subjected to a degree of testing, and they are not yet certified for commercial use. Liquefied natural gas has also been produced as a future aviation fuel since it offers lower fuel burn and emissions and potential cost and availability benefits (Stephenson, 2012). One of the most attractive short-to-medium term options for the air transport industry is, however, to continue to operate existing engines and aircraft but use lower carbon fuels. As this will show, although certification for 50% blends of FT biofuels achieved in 2009 and HEFA fuels in 2011, many challenges to widespread commercialisation remain (IATA, 2013). The paper begins by reviewing the current state of aviation biofuel testing and research worldwide. This is followed by a description of the data collection method that was employed, an examination of the key findings, and a discussion surrounding their implications for commercial aviation and the continued development of aviation biofuels.