The latest news and trends in sustainable aviation from IBA's ESG Consulting team
Environmental, Social, and Governance (ESG) issues are now seen as a key risk to investments in aviation, and authorities across the world are demanding more transparency and stricter reporting standards. It’s never been more important to understand the pathways to net-zero emissions, and their real term impacts on all key players across the industry. Each month, IBA’s ESG Consulting team will be sharing key insights and the latest news from the growing world of sustainable aviation.
Two briefing papers, both considering the feasibility of low-carbon aviation fuels in the UK context, emphasised the challenges facing fuel producers in meeting the government’s 10% SAF mandate by 2030. The options studied included both drop-in and non-drop-in fuels: bio-feedstock and power-to-liquid SAF, as well as hydrogen and ammonia. The research, although conducted separately, found parallels in the challenges presented by required resources and infrastructure changes, life cycle carbon, non-CO2 impacts, and the cost gap to Jet-A.
Whilst the findings expose the key areas to develop for each pathway, unsurprisingly they could not provide clarity on which option is the most viable in the UK. Having spent time discussing with stakeholders at Imperial’s paper release, IBA emphasises the value in academic research in guiding policymakers. The UK's 10% SAF 2030 production mandate will be heavily reliant on biofuels, currently the only scalable pathway, so this improved understanding of life cycle scenarios will prove invaluable to ensuring the impact of fuel solutions only moves the needle in a positive direction. Although the outcomes of these briefing papers suggest that it will not be a smooth path to low-carbon flying, it was encouraging to see the collaborative and evidence-based nature of the industry.
As part of it’s ambitious ‘Jet Zero 2050’ targets, the UK government believes zero emission aircraft will be established and operating small sectors by 2030 (and that the first large aircraft will enter service by 2035). To meet these fast-approaching timelines the government has invested £113M in projects across the UK to develop hydrogen and electric aircraft, whilst also boosting the supply of green jobs. Funding will be split between Rolls Royce’s liquid hydrogen gas turbine and Vertical Aerospace’s prototype propulsion battery system for eVTOLs. Despite widespread uncertainty in the industry over whether zero-emission aircraft technology will be operational prior to 2050 net zero targets, this is a clear signal that the government remain confident of the place of zero emission aircraft in the UK's pathway. It also indicates their preferred technology is hydrogen, as over £80M of the funding will go to Rolls Royce. It remains to be seen if an aircraft could ever deliver a truly zero-emission flight due to the scale of transition required in renewable energy and airport infrastructure. That said, we are encouraged by the diverse nature of the government’s commitments when considered alongside the SAF mandate and UK ETS.
The EU carbon price (whereby allowances are traded under the EU ETS) reached an all-time high of €101 a tonne in February 2023. This triple digit milestone could prove a significant psychological catalyst in incentivising companies to invest more seriously in carbon mitigation. The EU carbon price has risen fivefold since 2020, but prices have been accelerating since tighter restrictions were introduced in December 2022. Those December revisions included a 62% emission reduction target for 2030 compared to 2005 levels - an increase from the 43% reduction under existing legislation.
Whilst a growing number of countries either have established or planned carbon pricing schemes, the global non-uniformity of a carbon price allows for the risk of polluting businesses to flee to ‘polluting havens’, and a global uniform carbon price is an unlikely prospect. Therefore, to maximise the efficiency of the EU ETS, we advocate for the use of sustainable mass air transport and the EU ETS offering increased support for commercial airlines to reduce their emissions. Additionally, whilst CORSIA will be implemented in parallel to the EU ETS, IBA recognise carbon offsetting is an essential pathway to net-zero, but it should not be used as a ‘business-as-usual’ diversion. It is imperative that organisations sufficiently invest in mitigating their in-house emissions to achieve 2030 targets.
Our team can support you with advice on sustainable finance, ESG ratings, ESG strategy and understanding emerging technologies. Our expert insight is supported by cutting-edge insights from our award-winning IBA NetZero platform.