(Bloomberg) -- Sustainable aviation fuel is getting a huge boost from some of the world’s biggest companies.
BlackRock Inc., Block Inc., Samsara Inc. and Ripple are participating in the Sustainable Aviation Buyers Alliance and buying certificates as part of the group’s $200 million in clean jet fuel deals. The purchase will add sustainable aviation fuel (SAF) to Alaska Air Group Inc. passenger flights while offsetting the companies’ business travel emissions.
Aviation accounts for about 2% of global emissions, but it’s one of the hardest sectors to decarbonize. Airlines and startups are making efforts to increase fuel efficiency and scale electric and hydrogen-powered aircraft, but those are far from commercialization and, in the latter case, likely not feasible for long-haul flights. The best bet to cut emissions is SAF, which can be blended with traditional jet fuel without requiring any aircraft retrofits.
Clean jet fuel costs two to four times as much as fossil-based jet fuel, according to BloombergNEF. Still, demand far exceeds available supply and airlines are falling behind on their purchasing commitments. To cut costs and spur more production, companies with hard-to-reach net zero goals are purchasing SAF certificates. Buyers are allowed to count the carbon cuts tied to the certificate against their indirect or Scope 3 emissions while airlines gets to put it on their Scope 1 ledger — that is, emissions they’re directly responsible for.
It’s difficult for companies to reduce flying-related emissions, because “they’re not going to tell employees to stop traveling to customers or clients,” said Claire Kiely, head of marketplace carbon supply for sustainability platform Watershed, which facilitated the purchase. Instead, by participating in procurement programs like the Sustainable Aviation Buyers Alliance (SABA), companies can influence airlines and fuel producers to make the change.
The $200 million in SABA deals will buy about 50 million gallons of SAF. That will abate about half a million tons of carbon dioxide over the next five years, an amount equivalent to about 3,000 flights from New York to London.
Montana Renewables is producing the fuel going to Alaska Airlines. The company makes SAF from fat, oil and grease, a technique responsible for “practically all SAF produced,” according to BNEF. The global supply of waste oil, however, is limited and won’t be sufficient to meet demand. Startups are exploring other ways to make clean jet fuel, including making it using captured CO2 and electricity. That approach remains even more costly and produces a relative sliver of SAF today, though BNEF expects it and other approaches to gain traction later this decade.
Demand and offtake agreements like this one are important because they help SAF producers secure the financing necessary for growth, according to Kiely, who added these types of agreements helped jumpstart the clean power industry.
It can take a decade or more to get a SAF facility running, which is why it’s important to get a headstart now, said Diana Birkett Rakow, Alaska Air’s senior vice president of public affairs and sustainability. As the fifth-largest US airline, “we’re never going to have the biggest volume or the biggest offtake, so joining with others and having that collective impact, in addition to the individual efforts that we do, has always been a focus,” she said.
Alaska Airlines procures most of its SAF at California airports because state tax credits on top of federal incentives help bring down production costs. The company is also working to get SAF at Seattle and Portland’s airports, where state governments have recently passed similar legislation. SAF accounted for .07% of the airline’s total fuel supply last year, according to its sustainability report. This year, clean jet fuel makes up less than 1% of its total, Birkett Rakow said.
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