Sustainable Aviation Fuel (SAF) will help reduce fuel price volatility for the airline industry but incentives rather than a blending mandate are required to boost the production of the fuel, global grouping IATA said on Wednesday.
The International Air Transport Association (IATA) also said that there will be significant positives in making the transition from traditional jet fuel to SAF.
In 2021, around 100 million litres of SAF was produced and the quantum has to jump to 30 billion litres in 2030 and then scale up the production further, as per estimates.
Between 2022 and 2025, renewable fuel capacity is set to grow by more than 400 per cent. "SAF needs to be 30 per cent of that output -- 24 Mt (30 billion litres) in 2030 to reach the tipping point," IATA said.
The Indian government is working on mandating blending of jet fuel with SAF as part of efforts to reduce carbon emissions.
Against this backdrop, IATA Director Energy Transition Environment & Sustainability Hemant Mistry on Wednesday told PTI here that a mandate for blending would not really help increase production of SAF.
"If you just give a mandate, all you do is support the opportunity for a handful of suppliers. That does not solve the problem... mandate by itself at this stage wouldn't really help production of SAF because we need incentives to boost production of SAF," he said.
IATA is a grouping of around 300 airlines, including various Indian carriers.
While talking about SAF at a session here, IATA Director General Willie Walsh said there should be greater scaling up for SAF in 2023.
Going forward, there will be less volatility in SAF price compared to significant volatility in oil prices, he added.
Jet fuel prices account for a significant part of the operational cost of an airline.
SAF will remove a lot of that volatility, which will provide greater ability for the industry in terms of forecasting and pricing models.
Not only new entrants but traditional players should also make real commitments towards SAF, Walsh emphasised.
At present, there are at least 20 SAF production projects announced in the Asia Pacific region.
Further, the industry grouping noted that the opportunity cost of producing SAF, relative to renewable diesel, needs to decrease and that can be achieved through supply side, incentive-based policies that support SAF production.
In the context of efforts to reduce carbon emissions, Walsh said there is no evidence that taxation has a direct correlation to environmental improvement.