Transition to zero-carbon shipping and aviation

Advanced biofuels are those produced from non-food or non-feed inputs such as algae or waste organic matter. They provide a more sustainable alternative to conventional biofuels that compete with food production, drive global food prices higher, and take up arable land that contributes to otherwise deforestation. Conventional biofuel production is also water-intensive, with every liter of ethanol requiring up to 63 liters of water to produce.

Advanced biofuels are still in their development phase and will require vastly greater levels of investment to help decarbonize hard-to-abate sectors like aviation and shipping. They could also play a key role in decarbonizing the large number of fossil fuel cars that will remain on our roads into the future.

Only nine countries were identified as having policies supporting advanced biofuel development as of 2020; all but two — the United States and India — are in Europe.

A key step in developing zero-emission fuels is proving that demand for the fuel exists: it unlocks financing, draws more players to the field, and, ultimately, ensures that the fuel makes it into real-world use.

The most straightforward way to understand the state of demand for zero-emission shipping fuels is to measure the number of companies committed to running vessels on these fuels. In 2021, the Aspen Institute brought together nine major companies with large shipping demands, including Amazon, Ikea and Unilever. These nine companies committed to, among other things, leveraging their freight demand to support only shipping services powered by zero-emission fuels by 2040. Encouragingly, an additional 18 companies have made similar commitments since then, bringing the total to 27 companies as of 2024.

Because zero-emission shipping fuels are nascent, demand is low, but it is reasonable to expect that it will increase as more options emerge. The number of companies in this coalition is a proxy for the broader private sector commitment to source zero-emission shipping fuels, for which there is no publicly available data.

Because zero-emission solutions for aviation fuels and plane design are still nascent, more work must be done to develop, prove and scale them. Most attention is focused on liquid fuels and hydrogen, although recent advancements may allow for new options in electric aviation in the coming decades.

Measuring spending on research and development (R&D) helps us understand how much effort is being put into developing new solutions in a particular industry, and there is a positive relationship between R&D spending and the number of patents for new technologies. There is currently no publicly available information on global spending on R&D for zero-emission aviation fuels and plane design.

Developing new solutions for aviation, such as sustainable aviation fuels (SAFs, including sustainable biofuels and synfuels made from green hydrogen and captured CO2) and battery electric planes, requires significant research and development (R&D) spending.

From 2015 to 2022, publicly listed companies increased their investments in aviation R&D from $12.7 billion to $13.7 billion per year. These investments included new SAF production, such as a $2.2 billion expansion of Neste’s waste-to-fuel refinery in Rotterdam, which will bring the company’s SAF development capacity to 1.2 million tons per year. However, SAFs are not the only solution requiring R&D, so the $13.7 billion likely also includes new energy efficiency measures, new engines and new plane designs. A breakdown by technology is not available, so these investments may also be going to innovations that are not sustainable.

New funding opportunities, such as the $9.4 billion offered by the Inflation Reduction Act for SAF development in the United States, and new requirements like the European Union’s 70% SAF requirement by 2050, are likely to help drive additional corporate R&D spending in the coming years. However, it will be key to ensure that SAFs are developed sustainably and with as few emissions as possible.

The Inflation Reduction Act, for example, provides a credit for fuels that reduce emissions by at least 50% compared to fossil jet fuel (with greater incentives to go beyond 50%), but reductions at or close to 100% would be necessary for net-zero emissions by 2050. Fuels such as those made by combining green hydrogen with carbon dioxide captured from the atmosphere or alternative propulsion with batteries could help deliver these much steeper emissions reductions.

Sustainable aviation fuels (SAFs) will be vital to decarbonize the aviation sector. Alongside the electrification of aircrafts, SAFs such as green hydrogen, sustainable biofuels and synfuels could play an important role in zero-carbon fuel supplies for aviation. For the moment, only a negligible quantity of SAFs have been adopted by the aviation sector, mainly due to a lack of global supply and their associated costs.

To stay on track for a 1.5 degrees C (2.7 degrees F) scenario, the share of SAF needs to reach 13% in 2030 and 100% in 2050. However, SAFs that emit zero or net-zero CO2 are nascent, and therefore they cost much more to produce than their fossil fuel equivalents. For example, e-kerosene for aviation was estimated in 2020 to cost $8.80 per gallon to produce in the United States, whereas fossil kerosene cost $1.30 per gallon to produce. Additional policy support, including the kinds of mandates for use that are emerging in the European Union alongside other efforts such as carbon pricing, will be necessary to bring these fuels to scale and therefore drive down their costs.