Aviation stakeholders have urged the European Commission to improve its sustainable aviation fuel (SAF) incentives in light of the measures included in the US Inflation Reduction Act (IRA), which one airline chief executive described as a global “game-changer”.
The act was signed into law in August last year and includes significant incentives and subsidies for SAF production in the USA, at a time when the global airline sector is desperate to see more – affordable – SAF on the open market.
Speaking during a panel session at the Airlines for Europe (A4E) Aviation Summit on 29 March, the chief executive of decarbonisation solutions provider Topsoe, Roeland Baan, described the IRA as “the elephant in the room” when it comes to discussing the EU’s SAF polices.
“There is absolutely no doubt that a year ago Europe was far ahead when it came to synthetic fuels, green fuels, technologies, etcetera compared to the rest of the world,” Baan says. “The IRA has changed that in one go.”
His view is that because of the nascent nature of the global SAF industry, “as the money flows to the US, with it goes all the other limited resources”, including feedstocks, raw materials and knowledge covering a range of biofuels and synthetic fuels.
As a consequence, while he does not doubt that the SAF sector will expand to meet global industry targets, Baan’s belief is “the development of SAF in Europe has been put back by a decade”.
“It will happen but if I look at our own plans and those of our customers, with whom we were looking at building stuff in Europe, that is delayed and the focus is doing it in the US,” he says of the market dynamics since the IRA was introduced.
“I’m not sure the Commission really understands what the moving parts are here,” he adds.
Offering the Commission’s perspective, Filip Cornelis, director for aviation at the EU body, says that “generally speaking it is very good” to see other parts of the world pursuing sustainability objectives, but he questions the wisdom of the USA competing with Europe on SAF subsidies through the IRA measures.
”But that goes far beyond the aviation sector and a general response is being put forward,” he says.
Nevertheless, Cornelis describes the EU’s policies on SAF as “very strong”, featuring a combination of regulation and incentives.
“We are putting in place mandates that are going to give a long-term security to energy companies to invest,” he states.
“Giving a few years’ tax credit is nice, but it doesn’t create a long-term environment,” he adds in reference to the US IRA.
Speaking on the same panel, however, the chief executive of Finnair, Topi Manner, describes the IRA as a “game-changer in many ways on a global level”, saying the he “respectfully disagrees” with Cornelis’s assessment.
Manner’s belief is that Europe now needs to work out how it can “incentivise further” when it comes to SAF, covering areas such as tax credits and measures to boost production.
Echoing Baan’s comments, the Finnair chief says many people in the airline industry see Europe as “quite heavy on regulation and relatively light on incentives” compared with how SAF is now being treated in the USA.
And Shell Aviation’s general manager for Europe and Africa, Ashleigh McDougall, added to the voices suggesting the Commission might wish to consider its next steps in response to the IRA.
She highlights the fact that while the EU is looking to mandate around 5-6% of aviation fuel being sustainable by 2030, most industry targets are for a 10% mix.
“If I look at my customers… with that additional 4 or 5%, those customers who start their journey in one country and five countries later finish their day, they have a choice in where they pick up that [fuel],” McDougall explains.
“And right now, the stackable incentives that are available in the US, combined with the logistical advantages of having that relatively concentrated in a selective supply chain, with more flexibility around feedstock and a lower cost in some cases, all of those things add up.”
The question for Europe is how much of that voluntary SAF space it wants to take up, she suggests.
Earlier at the summit, A4E – which represents Europe’s largest airline groups – said the USA had “thrown down the gauntlet” when it comes to investments in SAF and that Europe must act in kind