Meeting Environmental Commitments: The Rise of Sustainable Aviation Fuel

Posted by Amrut Mahajani on July 3rd, 2023

The global Aviation Fuel Market is witnessing remarkable growth, projected to reach USD 696.2 billion by 2030, with a compound annual growth rate (CAGR) of 13.7% during the forecast period. This surge is primarily driven by the increasing demand for air travel, especially in developing countries. While the industry offers significant opportunities, it also faces challenges such as volatile crude oil prices and stringent environmental regulations. This article will delve into the drivers, restraints, opportunities, and challenges within the aviation fuel market, shedding light on key factors influencing its growth.

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Driver: Demand to Reduce Emissions

The aviation industry is committed to decoupling carbon emissions from traffic growth, and sustainable aviation fuel (SAF) plays a crucial role in achieving this goal. SAF can reduce CO2 emissions by up to 80% over the fuel's lifecycle compared to fossil jet fuel. It also contributes to the reduction of sulfur dioxide and particulate matter emissions. With the International Aviation Carbon Offsetting and Reduction Scheme (CORSIA) in place, SAF provides an eligible option for aircraft operators to meet their emissions reduction obligations. This creates an imperative for the development and adoption of advanced aviation biofuels.

Restraint: Price Difference Between SAF and Conventional Aviation Fuel

While SAF offers significant environmental benefits, its higher cost compared to conventional jet fuel presents a challenge. Sustainable jet fuel production can range from USD 0.9 to 2.4 per liter, approximately 3–9 times higher than conventional jet A-1 fuel priced at USD 0.3 per liter. Since fuel costs constitute a substantial portion of airlines' operating expenses, the price disparity becomes a barrier for airline operators to demand sustainable jet fuel. Additionally, limited technologies and infrastructure further contribute to the overall production cost of SAF.

Opportunity: Growing Need for Alternative Aviation Fuel by Airlines

The global demand to reduce greenhouse gas emissions and enhance environmental sustainability has led to the emergence of the SAF market. Stakeholders across the aviation fuel supply chain, including airlines, airports, fuel producers, and technology providers, have entered into off-take agreements and partnerships to promote the adoption of SAF. These agreements create growth prospects, widen the usability of SAF, and open up new opportunities in connected markets.

Challenge: High Investments for Approval and Certification of SAF

The strict technical certifications required for SAF utilization in aircraft engines present a challenge to the industry. The approval process, such as the OEM-led ASTM D4054, is expensive and time-consuming. Involvement from various stakeholders and the quantity of fuel required for testing parameters contribute to the high approval costs. Moreover, newer pathways for SAF production are still in the approval stages, adding to the overall expenses and time required.

Market Insights:

The conventional fuel segment holds the largest market share in 2022, driven by the increased air passenger traffic and the dependence of airlines on cost-effective jet fuel. While governments are pushing for sustainable aviation fuel adoption, the low cost of conventional jet fuel remains a primary factor for its dominance.

North America leads the aviation fuel market, with the largest aircraft fleet and a significant number of passengers annually. To reduce carbon footprints from air traffic, the US and Canada are focused on initiatives promoting sustainable aviation fuel. Supportive policies and decarbonization efforts position North America as a strong demand center for SAF. The region's key players, including Exxon Mobil Corporation, Chevron Corporation, and Valero Energy Corporation, have established their dominance in the market and are investing in sustainable aviation fuel technologies.

The global aviation fuel market presents promising opportunities for growth, driven by the increasing demand for air travel and the need to reduce emissions. Sustainable aviation fuel is crucial in achieving environmental sustainability goals, although its higher cost compared to conventional jet fuel poses challenges. The industry must address these challenges and invest in advanced technologies to make sustainable aviation fuel more competitive. As more stakeholders collaborate and the demand for environmentally friendly options grows, the aviation fuel market is set to witness intensified competition and further advancements in sustainable aviation fuel technologies.

This blog post is intended for informational purposes only and does not constitute professional advice. Don't hesitate to get in touch with our research team for more detailed and latest research by clicking: https://www.marketsandmarkets.com/speaktoanalystNew.asp?id=231148230