Sustainable Aviation Fuel Market is Set to Witness Significant Growth Due to Stringent Emission Norms

Sustainable Aviation Fuel Market

Sustainable aviation fuel, also known as biofuel, refers to jet fuel produced from sustainable feedstocks such as grease, vegetable oils and animal fats. It is mandated to reduce the environmental impact of aviation, with a life cycle carbon footprint up to 80% lower than conventional jet fuel. Governments across regions are adopting policies and targets to promote sustainable aviation fuel uptake among airlines. For instance, the EU aims to reach 2 million tons of sustainable fuel per year by 2030.

The global sustainable aviation fuel market is estimated to be valued at US$ 2.37 Bn in 2024 and is expected to exhibit a CAGR of 11% over the forecast period 2024 to 2031.

Key Takeaways

Key players operating in the sustainable aviation fuel are Eisai Co., Ltd., Novartis AG, AbbVie Inc. (Allergan Plc.), Adamas Pharmaceuticals, Inc., H. Lundbeck A/S, Biogen, AC Immune, F. Hoffmann La Roche Ltd., Daiichi Sankyo Company, Limited, Johnson & Johnson Services, Inc., TauRx Pharmaceuticals Ltd. The market provides opportunities for technology providers and fuel producers to advance the use of alternative feedstocks like municipal solid waste and capture technologies like pyrolysis to increase production capacity. Airline companies have goals to replace petroleum-based jet fuel with more sustainable options in parts of their fleet to achieve carbon neutrality by 2050. Many have partnered with fuel producers and signed offtake agreements to purchase sustainable aviation fuel for operations.

Major global airlines and airport operators are signing partnerships to expand production and usage of Sustainable Aviation Fuel Market Demand across regions. For example, American Airlines and British Airways partnered with Neste to supply sustainable aviation fuel at airports in the US and the Netherlands. Airports like Los Angeles International Airport and Amsterdam Airport Schiphol constructed dedicated hydrant infrastructure to supply biojet at scale. Such initiatives will accelerate the deployment of alternative fuels.

Market Drivers

Stringent emission regulations like Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) by ICAO are the key drivers as they mandate airlines to monitor and report CO2 emissions from 2020. To comply with long-term climate goals, replacing conventional jet fuel with lower carbon alternatives is crucial. Growing awareness about environmental impact of aviation emissions is also prompting global airlines to switch to sustainable fuels. Investment from governments through incentives and tax exemptions encourage local production of aviation biofuels.

Market Restraints

Higher production costs relative to fossil jet fuel is a major challenge as sustainable aviation fuel costs two to five times more than conventional fuel presently. Limited commercial scale production also restricts large-scale supply. Introducing new fuel supply chains requires collaboration between multiple stakeholders. Feedstock availability depends on agricultural production and competition with other biofuel demand sectors may affect stable supply. Overcoming these economic and infrastructure barriers is important for the sustained growth of this industry.

Segment Analysis

The sustainable aviation fuel market is dominated by the hydrotreated esters and fatty acids (HEFA) sub-segment. HEFA aviation fuels are produced through hydroprocessing of vegetable oils, animal fats, and used cooking oil. This process results in a hydrocarbon mix that is chemically identical to petroleum-derived jet fuel and can be used as a drop-in substitute with no need for aircraft modifications. HEFA has been widely adopted by the sustainable aviation fuel industry given its compatibility with existing fuel infrastructure and jet engines. Going forward, availability of cheap feedstock and technological advancements may allow for development of other production pathways like alcohol-to-jet (ATJ) and Fischer-Tropsch (FT) which could challenge the dominance of HEFA.

Global Analysis

Regionally, North America accounts for the largest share in the sustainable aviation fuel market currently. This can be attributed to the growing research in the region along with supportive government policies and initiatives to increase adoption of sustainable fuels in the aviation industry. For instance, the US government has set a voluntary goal of supplying 3 billion gallons of sustainable aviation fuel per year by 2030. Europe is also emerging as a major market driven by stringent environmental regulations and efforts by EU nations and fuel suppliers to expand the availability of sustainable aviation alternatives. However, the Asia Pacific region is expected to witness the highest growth during the forecast period due to rising demand for air travel from densely populated countries like China and India along with initiatives to reduce aviation's carbon footprint.

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