Pioneering ESG analytics and reporting for aviation finance professionals

SAVi Report

Friday 26 April 2024 in Reporting & Compliance , SAVi Fives

SAVi Five: UK launches 2030 10% SAF mandate, AerCap’s fleet renewal gains pace, and more…

Eduardo Mariz
Senior Analyst at Ishka
Listen to the article

Five noteworthy aviation sustainability developments in the past seven days curated by the Ishka SAVi team.

Here are the new developments to keep in mind:

1. UK launches much-awaited 10% by 2030 SAF mandate – The UK’s Department for Transport (DfT) on 25th April revealed the final details of the long-awaited UK SAF mandate, which aims to ensure that 10% of all jet fuel in flights departing the UK comes from SAF by 2030. The mandate, which is still subject to parliamentary approval, is similar to the EU SAF mandate in that it sets annual targets for fuel suppliers to blend a proportion of SAF into their fuel supply (see details here). The overall SAF demand will be set at 2% of aviation fuel supplied in 2025, increasing to 10% in 2030 (higher than the EU’s 6%), 15% in 2035 and 22% in 2040 (lower than the EU’s 34%). Unlike the EU mandate, the UK introduces a cap on HEFA SAF which will be allowed to contribute 100% of SAF demand in 2025 and 2026, but this percentage will decrease to 71% in 2030 and 35% by 2040. A power to liquid (PtL, also known as e-SAF) obligation will be introduced from 2028 at 0.2% of total jet fuel demand and will reach 3.5% of total jet fuel demand in 2040 - this compares to 0.7% by 2030 and 8% by 2040 in the EU. The plan includes a review mechanism to help manage prices and minimise the impact on ticket fares for passengers. The government says it reserves the power “to change key limits within the mandate to block higher price rises in the case of SAF shortages.”

The buy-out prices for suppliers unable to secure SAF will be set at the equivalent of £4.70 ($5.88) and £5.00 ($6.26) per litre for the main and PtL obligations, respectively. For reference, the current price of jet fuel is around £0.67 per litre, according to IATA. Meanwhile, a consultation on a SAF Revenue Certainty Mechanism for UK SAF projects (to be introduced by the end of 2026) was also launched on 25th April and is accepting responses until 20th June. The government-funded UK Clearing House for SAF also officially launched on 25th April at the University of Sheffield with a mission to support the development, testing, and qualification of SAF in the UK.

The UK SAF mandate announcement has been welcomed by industry groups Fuels Industry UK, Sustainable Aviation, and Airlines UK. It has also received criticism from environmental groups, with both the Aviation Environment Federation (AEF) and Transport & Environment (T&E) alluding to scalability challenges of SAF waste feedstocks and a higher-than-expected HEFA SAF cap in the final mandate. Ishka notes that the steeper ramp-up to 2030 will prove challenging. In a related forewarning this week, the Lufthansa Group cautioned that “it is difficult to imagine that sufficient capacities [of SAF] will be available in the short term” to help meet SAF mandates, adding that “the necessary production ramp-up is more uncertain than ever.”

2. AerCap progresses towards 75% new-tech net book value by 2024 – The world’s largest aircraft lessor AerCap unveiled its 2023 ESG Report on 22nd April and with it its report card on how it’s progressing towards its 75% new technology fleet share (by net book value) objective. In 2023 the lessor purchased 80 new technology aircraft and sold 74 older technology aircraft, providing an approximate 25% gain in efficiency. For context, the lessor has a fleet of around 1,740 aircraft. Buying and trading of aircraft enabled the lessor to reach 70% new-technology fleet by net book value in 2023, just shy of its 2024 75% target. Page 16 of the report, also provides a good overview of the lessors’ fleet emissions intensity (Scope 3). According to the lessor’s calculations, in 2023 it managed to move to an intensity of 71.1 gCO2 per seat/km, down from annual intensity figures around 75 gCO2 per seat/km since 2018.

3. T&E: European LCCs reach new emission highs as growth outpaces legacy airlines – In a new research piece unveiled on 19th April, NGO Transport & Environment (T&E) revealed that European budget airlines Ryanair and Wizz Air polluted more than ever in 2023 (“far past their peak” in 2019). Growth in operations increased Ryanair’s emissions by 23% above 2019 levels, while Wizz Air’s grew 40% over the same time. A quarter of all flights in Europe in 2023 were operated by either Ryanair, Wizz or EasyJet, while the market share of legacy carriers (which still represent the bulk of emissions) decreased. The findings highlight the growing role of LCCs (which typically have better emissions intensity numbers than legacy carriers) in aviation emissions. T&E also published national insights into the UK, Germany, and France (the last two in German and French).

4. EU Parliament approves NZIA and TEN-T in last plenary session – In its last plenary session ahead of the June EU elections, the European Parliament approved a number of environmental pieces of legislation, including some with an impact on aviation. The Net Zero Industry Act (NZIA) was approved by 361 votes to 121 and includes a list of net-zero technologies whose manufacturing should be supported including SAF, hydrogen, and carbon capture and storage (CCS). Meanwhile, the TEN-T regulation (recently covered by Ishka SAVi) prescribes that major European airports (processing more than 12 million annual passengers) should be connected to long-distance railway network. The TEN-T regulation was adopted with 565 votes in favour, 37 votes against, and 29 abstentions. Both bills will now have to be formally adopted by Council to become law. On a related note to net-zero tech public investment in the EU, T&E on 23rd April published a Proposal for a Climate and Social Investment Plan which recommends the EU issues €850 billion in green bonds to bolster climate investments to up to a €1-trillion figure. Some of the funding would be aimed at scaling up clean technologies including clean hydrogen for aviation and shipping. The NGO suggests offering specific tools like contracts for difference (CfDs) to support the production of green hydrogen and derived e-fuels “on the condition of direct offtake by the aviation and shipping sectors.”

5. Twenty-three airlines now have contrail reduction initiatives – A niche area of climate impact mitigation until very recently, measures to minimise climate warming contrails are quickly entering the mainstream of aviation environmental measures by airlines. As of 22nd April, NGO Blue Lines, which aims to accelerate the implementation of contrails management worldwide, is tracking 23 airlines that are publicly participating in developing solutions for contrail management by collaborating with academic institutions, NGOs, or private companies on research and trials. This is an increase from 17 at the start of 2024.

Ishka is proud to be a Knowledge Partner of Aviation Carbon 2024. Registrations for Aviation Carbon 2024 will open in May.

Tags: AerCap, EU, Leasing, Non-CO2, Rail versus aviation, SAF incentives, SAF investment, SAF mandate, SAF policy, UK

Supporting you on the journey to Net Zero