Achieving sustainable aviation will require new kinds of collaboration
by Simon Talling-Smith.
This article was originally published as a guest white paper in Ishka Global. To view the version on the Ishka website, please click here.
Sustainability in aviation is a complex and difficult problem to solve. Today, the aviation industry accounts for ~2.5% of global CO2 emissions and if you include non-CO2 effects, that figure rises even further to somewhere between 4% and 6%. Under current projections, aviation’s percentage of global emissions looks set to rise further. There are two main reasons for this. Firstly, there will be more aircraft, as the number of people flying continues to grow, with IATA projecting that global passenger numbers could double over the next 20 years driven especially by growth in markets such as Asia-Pacific. Secondly, other emitters (e.g., energy companies) are moving towards carbon neutrality more quickly than aviation. So, the trend is going in the wrong direction, and major action is required – and quickly.
One of the reasons the problem is so hard to resolve is the fragmented nature of the industry itself. Emissions are produced or influenced by a myriad of players and stakeholders across a complex ecosystem. This includes over 640 airlines operating scheduled passenger services[1], as well as some additional charter and cargo operators. In addition to the airlines themselves there are many other players whose actions, products, and policies contribute to emissions in some way. These include airports, regulatory bodies, aircraft manufacturers, and several others.
Some of these players are making real efforts to be more sustainable – and we have seen important commitments, plans and initiatives introduced by many companies. However, collectively the industry is falling far short of what is required. Industry projections predict 2% annual growth in emissions without additional mitigating actions or initiatives[2], and seem on track to surpass their 2019 peak, perhaps as early as this year. It is likely that only a proportion of emissions from kerosene-powered aircraft can be reduced through efficiency gains and incremental improvements. The rest will need to come from new technologies and innovation.
Sustainable Aviation Fuel (SAF) is the industry’s leading and most tangible solution to reduce emissions but projected to fulfil only around 0.5% of fuel volumes this year. Looking to the future, second- and third-generation SAFs hold a lot of promise. These advanced fuels could be derived from algae, various non-food biomass sources or synthesized from captured carbon, offering more sustainable and scalable solutions. Although still under development, these technologies could provide substantial reductions in aviation emissions. However, the scaling of SAF for widespread use will require substantial investment on many fronts. For example, costs for building commercial-scale SAF production plants can be in the region of $600 million to $800 million, with very significant up-front costs before any SAF is even produced[3].
Furthermore, SAF is far from a silver bullet solution. It will undoubtedly play an important role, but there are other initiatives that can also help accelerate decarbonisation. There are promising technologies and projects that could reduce emissions through improving fuel efficiency. Some have very long lead times, such as new aircraft designs. But there is much that could also be done in the nearer term. For example, coatings and retrofittable modifications to reduce drag, improvements in navigation, and weight reduction through deploying new materials for Unit Load Devices (ULDs) and seats.
To date, there has been very limited investment in R&D, the scaling of SAF production, and the wider range of initiatives that could lead to the radical shifts we need beyond the current incremental improvements. As a result, if the industry continues on its current path, we are likely decades away from the meaningful adoption of low emissions propulsion technologies for large, long-haul aircraft.
So, how do we fix the unfixable?
As commercial aviation attempts to tackle this thorny problem, it becomes clear that Individual airlines are not very well structured to address the problem by themselves. By their nature, most are in competition with each other. But if one airline manages to capture a large proportion of the available SAF supply, it is great for that individual airline’s targets, but it doesn’t make any difference to the overall problem. There still isn’t enough SAF to achieve sustainable aviation overall.
Airlines tend to run on relatively small profit margins, and are often working to short-term targets, dealing with shareholder pressure, quarterly results, etc. This limits their scope to invest by themselves for the medium and long-term at the scale that is necessary to have a transformative impact. Understandably, many of the investments and initiatives to date have been focused on individual airlines reaching their own SAF targets. While not insignificant, the initial individual efforts of the airlines represent small drops in the ocean of funding that is required. The scale of funding required is much bigger.
There are also industry bodies such as IATA. They play a very important role in lobbying for regulatory change, setting targets and benchmarks, and setting standards for carbon accounting. But IATA cannot direct or allocate investments. As a non-profit organisation it is counter to their constitution to engage in investment activity.
Somehow, we need a way to drive industry-wide change. The entire ecosystem must step up and individual players must find a way to align sufficiently around the greater prize of sustainable aviation in the long term, whilst maintaining their independence and competitive spirit.
It is worth exploring if industry-focused investment funds could play a role. At face value the proposition certainly seems attractive - an independent player with deep industry knowledge would be able to direct investment across multiple asset classes (e.g., venture capital, private equity, public equity, and infrastructure). Airlines could contribute funding, accelerating their sustainable future and also get a return on their investment. Independent funds can make the right investment decisions taking a long-term view focused on 2050 targets, without being subject to the quarterly pressures of airlines themselves.
This approach has great potential but even in the most optimistic scenarios, it would still only be part of the solution. The scale of the problem requires enormous investment in developing and scaling new technologies – and this will require many other investors to contribute. However, there is also the potential to achieve a network effect. An investment fund run with aviation expertise at the fore, and funded by industry players, sends a signal to other investors when they invest. It provides a strong endorsement of the initiatives and technologies that the industry is betting on and acts as an important indicator to other investors (e.g., in infrastructure and sovereign wealth funds). This could accelerate the development of promising technologies way beyond the impact of the fund’s own investment.
Despite the significant challenges ahead for aviation, the industry stands at the cusp of a transformative era. Achieving sustainable aviation is not only essential for the environment but is critical to ensure the industry's future. The potential benefits extend way beyond regulatory compliance. Achieving sustainable aviation ensures that the myriad economic and cultural advantages that flying has enabled can also be enjoyed by future generations. By acting collectively and decisively today, we are safeguarding the freedom to explore, innovate, and connect tomorrow.
