How the aviation industry can grow sustainable-fuel production

Sustainable aviation fuel can cut greenhouse gas emmissions in the aviation sector by half.

Sustainable aviation fuel (SAF) could reduce greenhouse gas emissions in the aviation sector by up to 50%, depending on the airline, according to a McKinsey analysis.

Despite its potential, the SAF industry remains underdeveloped, producing just 1.5 million metric tonnes in 2024—approximately 0.5% of the global jet fuel requirement, according to the International Air Transport Association. McKinsey anticipates growing demand for SAF due to increasing regulations and airlines’ sustainability commitments.

Airlines have pledged to significantly increase SAF usage, with projections of more than 20 million metric tonnes by 2030. However, creating supply pose a major challenge, United Airlines CEO Scott Kirby said.

SAF costs around three times more than traditional jet fuel, prompting airlines to pass on these costs to consumers via green premiums. Lufthansa, for example, introduced an environmental surcharge on flights departing from European Union countries.

McKinsey suggests several strategies to scale SAF production. One approach is offtake agreements, where airlines commit to purchasing fuel from SAF producers.

A notable example is the 980-million-litre deal between International Airlines Group and Twelve. Another strategy involves collaboration to pool demand, allowing multiple stakeholders, including airlines and corporate customers aiming to reduce their carbon footprint, to participate in SAF agreements.

Airlines can also make direct investments in SAF suppliers or projects. For instance, Norwegian Airlines and Cargolux have invested in Norsk’s e-fuel power-to-liquid plant in Norway. 

Additionally, SAF funds can help scale production by pooling resources from investors, airlines, airports, and corporate customers. These funds are generally small, typically less than $542.6m, and provide early-stage financing for SAF projects.