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. Aviation impacts of Trump’s week-one slew of executive measures
US policy: Donald Trump this week signed sweeping executive orders after his return to the US presidency, including many with implications for climate technologies and industry decarbonisation. Of particular relevance to aviation is the executive order titled ‘Unleashing American Energy’ (accessible here), which aims to ensure that no Federal funding be employed “in a manner contrary” to its principles of encouraging fossil energy exploration and production and increased mineral extraction, among others. Section 7 of the act “terminates the Green New Deal,” requiring all federal agencies to “immediately pause the disbursement of funds” from Inflation Reduction Act (IRA) measures – a cornerstone regulation for federal SAF public investment and incentives – and the Infrastructure Investment and Jobs Act (IIJA). However, and rather confusingly for SAF stakeholders, it also aligns a pause on “processes, policies, and programmes for issuing grants, loans, contracts, or any other financial disbursements” consistently with its Section 2 priorities, none of which mention aviation nor seek to hamper biofuels directly. Biofuels are in fact described in Section 3 as a “domestic energy resource” that should not be “burdened” by federal agencies. As a result, the executive order could cause a temporary halt in the provision of loans and grants for SAF projects under the IRA, but may not necessarily spell the end of federal grants and loans. A clearer impact is the freezing of the 45Z Clean Fuels Production credit (tax credit of $1.25 to $1.75 per gallon of SAF) as the new federal rule had yet to take effect. Ishka has not found public industry reactions to these executive orders, with stakeholders possibly still digesting their ramifications. However, some market analysts believe the 45Z measure is unlikely to be wound down. Other federal funding now facing uncertainty includes allocations for clean hydrogen projects and direct air capture (DAC) – both of which are expected to play meaningful roles in aviation’s net zero goal. The order also rescinds previous executive orders signed during the Biden presidency, including Executive Order 14030 of May 20, 2021 (Climate-Related Financial Risk), which directed federal agencies to prioritise “accurate disclosure of climate-related financial risk” and prompted financial regulators to enhance climate-related disclosures.
On a related development, a day after Trump’s executive orders, a bipartisan group of senators reintroduced the “Farm to Fly Act” to accelerate the production of SAF by clarifying “deferral definitions” for SAF. The act has been welcomed by the SAF Coalition association, whose members include major SAF producers and airlines.
The Ishka View: There is nothing surprising about the executive orders signed by Trump in the first few hours of his presidency, nor is the immediate lack of clarity over their exact ramifications unusual, as much of his first presidency was characterised by similarly ambiguous moments. For aviation’s decarbonisation, the most immediate fear stoked by these executive orders is that an increase in fossil fuel investment could reduce liquidity for cleaner energies, including SAF. The country’s second withdrawal from the Paris Agreement also undermines international climate goals and could have ramifications on its embracement of CORSIA.
2. What companies in aviation could be impacted by the EU’s CSDDD from 2027?
ESG reporting: The EU’s Corporate Sustainability Dure Diligence Directive (CSDDD) entered into force in July 2024 with the goal to “foster sustainable and responsible corporate behaviour” in companies’ operations and across their global value chains. The core elements of this duty are identifying and addressing potential and actual adverse human rights and environmental impacts in the company’s own operations, their subsidiaries and, where related to their value chains, those of their business partners. The rule will apply from 2027 with full implementation due in 2029. The rules will apply to EU companies with over 1,000 employees and €450 million ($469 million) in global net turnover and non-EU companies with at least €450 million ($469 million) net turnover in the EU. In a bit to identify what companies will likely fall under that scope, Dutch NGO Centre for Research on Multinational Corporations (SOMO) on 21st January launched a CSDDD Datahub identifying nearly 7,000 companies across 4,282 corporate groups. Based on this data of 4,282 corporate groups, Ishka SAVi was able to identify 60 firms with links to aviation: 19 airlines, 12 airports, six OEMs and OEM suppliers, five freight forwarders, two aircraft leasing companies, and one air navigation services provider. There were also 15 holding companies partially or entirely operating in the aerospace or aviation sectors, spanning operations in airlines, airports, freight forwarding businesses, and OEMs or OEM suppliers. The full spreadsheet is available to download from SOMO’s website or here with Ishka’s additional classifications. Please note that while every effort has been made to ensure accuracy and relevance, it is possible that not all firms with activities in aviation or aerospace have been identified.
The Ishka View: SOMO’s CSDDD datahub serves as a valuable starting point for understanding the compliance requirements that aviation companies may face under the directive in the coming years. The directive mandates comprehensive due diligence across their supply chains. However, this analysis remains preliminary, and the aviation subset may evolve as additional corporate data emerges and EU revenue flows shift.
3. UK govt signals support for airport expansion despite climate concerns
Airport expansion: The UK government’s finance minister Rachel Reeves signalled in comments this week that the Labour-led government of Prime Minister Keir Starmer would make economic growth its “no. 1 mission” amid a looming decision on airport expansions. According to several reports, the government would be preparing to announce its backing for a third runway at Heathrow – arguably the world’s most contentious airport expansion project. If it goes ahead, the move could deepen party divisions, antagonise environmental groups, and run counter to the recommendations against airport expansion by the UK’s Climate Change Committee (CCC). According to a government analysis seen by The Guardian, emissions resulting from increased departures from Heathrow Airport would aim to be mitigated by increased SAF usage, adding up to costs of £37.80 ($46.60) per ticket by 2040. The report noted that Reeves is understood to have told cabinet colleagues that “boosting the amount” of SAF would offset emissions, potentially implying it could be above the UK’s SAF mandate. Environmental NGOs including investor-focused Climate Catalyst and EU Taxonomy legal challenger Opportunity Green have since last December reiterated their opposition to UK airport expansion. NGOs are concerned that airport expansion would challenge the CCC’s guidance, lead to weak economic growth relative to its environmental impacts, and over-rely on uncertain future SAF volumes. Decisions on Gatwick’s and Luton’s expansion are due on 27th February and 3rd April respectively and, according to the BBC, Reeves could make an announcement on airports next week. In related news, Heathrow Airport earlier this month increased its SAF incentive scheme targeting 3% SAF blending in 2024 with £86 million ($102 million) available to support airline SAF purchases.
4. SAF investments: Energy majors move back, others move forward
SAF investment: In notable recent SAF investments some energy majors have appeared to scale down their SAF investment as other parties in the space grew more involved. Among those taking a step back, Finnish energy company St1 has reportedly paused work on a Swedish e-SAF project in development with Vattenfall, citing a current lack of demand. Earlier this month, BP was reported to have stood down contractors working a renewable fuels project in Australia due to produce SAF. Companies moving forward with new SAF investments include IAG, who announced it has invested in tyre-to-fuel company Wastefront, which plans to produce SAF with a life cycle carbon emission savings of over 80% versus fossil fuels. Meanwhile, aviation sustainability fund SkiesFifty (previously known as Clear Sky) and Frontline BioEnergy this week announced a partnership to advance the commercialization of waste-to-energy technology, targeting the production of SAF. Together, they will establish a new company, which they will jointly own and invest in. With this joint venture, SkiesFifty expands its activities beyond catalytic investment in sustainable aviation, to also take on the role of a developer and advisor. Finally, Boeing announced a partnership with Norsk e-Fuel, one of Europe’s first industrial-scale Power-to-Liquids (PtL) facilities.
5. EU sust fin advisory body advises the creation of sectoral transition pathways
ESG reporting: The EU’s Platform on Sustainable Finance (PSF) on 23rd January published a new report on corporate Transition Plans with recommendations for the European Commission to enhance current policies. One of those recommendations (see page 49 for a complete list) is for the Commission to develop sectoral transition pathways for high-emitting sectors at the EU-level, complete with technology roadmaps. While the PSF does not specify which sectors should be covered, aviation is often counted as a high-emitting sector. The PSF recommends the Commission provide “guidance for selecting scenarios” that can be used for credible science-based corporate target setting and transition planning. It also calls for developing a set of criteria for qualifying targets as “credible and science-based.” It further recommends that EU sectoral pathways should be designed using a consistent approach that integrates existing policy tools (e.g., ETS, Taxonomy, CBAM) and sectoral policies (e.g., industrial or transport policy) to provide “coherent signals” to the market. The report also mentions that this “alignment” would support the integration of “activity and asset-level data” such as ETS data “into company-level targets, particularly for high-emitting sectors.” Given the broad cross-sectoral nature of these recommendations, it is difficult to extract concise expectations for how – if followed by the Commission – they could impact aviation stakeholders. However, given the PSF’s successful track record pioneering sustainable finance policy ideas (including the EU Taxonomy’s aviation criteria), these recommendations could eventually translate into regulated outcomes. A webinar is scheduled to take place on 27th January 2025 where the PSF will present the report.
On a ‘sixth’ and final note, IATA this week announced its intention to hold regular procurement events for CORSIA Eligible Emissions Units (EEUs) in 2025 after the positive experience of its Guyana EEU Procurement Event. Eleven airlines purchased EEUs during that event for $21.70 per tonne of CO2 as part of a fixed-price auction/offering. Look out next week for a new Ishka SAVi briefing unpacking CORSIA Phase I and its potential cost implications.
