Sustainable aviation fuels cost less than you think

Starting the journey towards green aviation

While it’s a tough challenge, there’s already been significant progress. Today’s aircraft emit 80% less CO2 per seat than planes in the 1950s. And global commercial aviation is assessed to have improved its average fuel efficiency by 2% a year between 2009 and 2016.

However, these advances must be only the start. If aviation is to help prevent irreversible damage to the planet, it needs to achieve further deep reductions in emissions. Fast. The only question is how.

Taking the sustainable aviation fuel route

So, what are the options? Increased operational efficiency and technological innovations like hydrogen-powered aircraft may play a role. But a far bigger contributor is likely to be sustainable aviation fuels (SAFs): new non-fossil fuels that are projected to slash aviation GHG emissions by 53% while still using existing infrastructure.

Currently being blended with fossil kerosene, SAFs have a capacity to reduce emissions that varies with the feedstock used and the transition pathway. Today, their full potential is still far from being realised: less than 1% of aviation fuels used in Europe are SAFs, with demand muted by their higher cost and the upfront capital expenditure they require.

Test-flying the economics of green aviation fuels

This situation raises many questions around SAFs’ economic feasibility. Questions like, what’s the real cost markup of SAFs compared with fossil-based jet fuel? How does the impact differ by airline business model and length of route? And what’s the right blend of SAFs to achieve the target of limiting the climate increase to 1.5°C?

We at PwC decided to answer these questions and more. So we conducted an in-depth analysis of the costs of SAF adoption from 2025 to 2050, based on two ramp-up scenarios with different SAF blending ratios—the first is based on the EU’s ReFuelEU Aviation directive, and the second on the International Energy Agency’s (IEA’s) Net Zero by 2050 pathway. We then compared the resulting cost markup to a ‘no SAF’ baseline.

Varying cost impacts

You can read the full results now. But to whet your appetite, here are some headline findings. Under scenario 1, the ‘EU Quota pathway,’ the SAF cost markup peaks in 2040 at 9% per ton, whereas under the ‘IEA Net Zero pathway,’ the maximum markup is about 16% in 2038.

Long-haul routes see the biggest markup per flight, at 6% in 2038 (compared with 2% for short-haul) on the IEA Net Zero pathway. And low-cost carriers (LCC) experience a cost markup around twice that of full-service network carriers (FSNCs).

Our report also examines the different cost distribution approaches that airlines might use to cover the additional costs. For example, using an approach based on the customer’s revenue share, we calculated that the economy-class fare for a typical long-haul flight like Munich to New York would rise by around US$10–$17, and non-economy by around US$36–$63.

Time for a joint effort

We think our findings are highly encouraging for the future of SAF, indicating a cost markup that’s manageable for both airlines and their customers. Add in the ongoing tightening of regulatory requirements and customers’ increasing willingness to pay extra for sustainability, and the results are more promising still.