Having been stuck in the political battle between the EU, USA, China and ICAO for what seems an age, are Europe’s airlines any closer to resolving the long term challenge of greenhouse gas (GHG) emissions? And is there a role for biofuels in the short, medium or long term as one of the abatement options for an industry that continues to grow significantly ahead of GDP – on a global aggregate level, at least.
This article originally appeared in the March/April issue of Regional International, the journal of the European Regions Airlines Association.
There has always been a tension between the aspiration of policy makers to comply with - or lead - the international effort to reduce GHG/CO2 emissions and the perception of how the industry is conducting itself. Unlike some other sectors such as power generation or cement production, that have found themselves sucked into climate change policy when, perhaps, their emissions output is tangential to their core business, air transport is not an unwilling participant.
There have been times when the major carriers have done the industry no favours in articulating arguments about efficiency and future emissions targets. Jet kerosene represents the most volatile element of any airline’s operating cost; in the last decade it has more than trebled in price; it is the component that can generate unexpected profits as easily as it can bankrupt carriers; and it is the piece of the cost equation that is hardest to control. Within this context, it seems nonsensical to suggest that airlines would seek to be anything other than as fuel-efficient as possible and, as burning jet fuel generates a steady and known output of CO2, they are by association already seeking to minimise emissions throughout every stage of flight operations.
Of course, climate change policy is not industry-specific and therefore aviation finds itself potentially embroiled in a patchwork of global carbon trading mechanisms, such as the EU ETS, in which it competes with other sectors for a diminishing supply of carbon credits – unless ICAO is able to develop a global mechanism to keep the policy-makers at bay. But the reality is that, in an environment of escalating oil prices, airlines and OEMs need to find more efficient ways of transporting passengers to keep operating costs under control, irrespective of the carbon penalty. Which leads us into the debate over how to cut emissions.
Looking at the ways in which airlines can minimise CO2 output, particularly within an environment where they are already seeking to reduce fuel burn, the options are limited. The European fleet is young by global standards and so one obvious pathway of replacing aged equipment with more modern airframes is not in play. There are some opportunities to upgrade, but on the whole the wide and narrowbody aircraft within Europe are current generation, the forward order-book for next-generation is strong and regional carriers are already operating highly efficient, modern turbo-props.
There are some operational enhancements that can be made to reduce fuel burn through initiatives like continuous descent, Single European Sky initiataive and improved operational procedures but these can only achieve reductions in the current emissions inventory by a maximum of 10% which, in a growth industry, won’t make the kind of difference policy-makers are seeking.
In the longer-term new super-efficient aircraft may produce a step-change in fuel burn but given where we sit within the production and delivery cycle, it will be at least two decades until we see such airframes enter service on a large enough scale to achieve reductions in absolute emissions. And so the only medium term solution to the CO2 conundrum appears to come from emitting less CO2 from the fuel that we burn, rather than burning much less fuel – which can only be achieved through the introduction of low or no-carbon biofuels.
The potential for biofuels
At face value it seems obvious that biofuels are the answer to reducing emissions from the industry and also, potentially, ensuring future security of supply and production. However, at present there remain significant challenges to overcome before these fuels become a scalable operational reality. There are principles that apply to the use of biofuels as a replacement for, or in addition to fossil fuels, some of which are unique to air transport and others that apply across the spectrum. The latter include ensuring that any crop-based biofuels don’t compete with land used for the cultivation of food-crops, or indeed use the food-crops themselves to create the fuel; whilst the former relate to specific characteristics of aviation fuel – including energy content, density, viscosity, flash and freeze-point to ensure the fuel behaves in a known and reliable way at altitude.
The only solution is those second-generation ‘drop-in’ biofuels that replicate, and can be mixed with, Jet A1. These fuels can be introduced as a partial mix with existing jet fuel using existing refuelling infrastructure - providing the supply chain is in agreement – to produce a partially carbon-neutral fuel. So where’s the catch?
At present, several production options exist – biomass and algae being two of the more commonly known. If we move algae to one side for a moment, biomass fuels have already powered commercial flights in small proportions – amongst them United, Lufthansa, JAL and several others, all of whom have operated flights with one engine powered by a mix of Jet A and biofuel derived from Jatropha, a non-edible evergreen shrub. British Airways and Solena have partnered to produces a synthetic kerosene product from agricultural and municipal waste that is planned to begin production in 2015; so there is good progress.
The real challenges for biofuels lie beyond the science. There is little doubt that we are can create a fuel that replicates conventional jet kerosene from sustainable alternative raw materials. However, doing so in a cost effective way and at a scale that the industry will need is the bigger problem.
The recent EU pathway for aviation, 2 million tons per year: A performing biofuels supply chain for EU aviation seeks to show a tangible route to production of 2mt of biofuel by 2020, equating to around 4% of the current EU fuel-burn requirement. However it acknowledges that “sustainable bio kerosene comes currently with significant cost penalty for the airlines.” The EU estimates that the cost to construct and secure production, including plant and supply chain, is in the region of EUR3bn, added to which there is a further EUR3bn cost of the actual fuel above that of Jet Kerosene – equating to EUR1,500/tonne more than today’s price for regular jet fuel. Today, fuel costs below EUR700/tonne, so the EU estimate is that bio-jet will be almost three times that figure at over EUR2,000/tonne. Having seen the impact of fuel rising from USD35/barrel a decade ago to an average of USD120/barrel in recent times, the notion that the industry can survive a trebling of cost without a massive impact on demand seems highly implausible.
The economics of biofuel seem to have been largely overlooked in the short-term feasibility debate. Even adding the carbon cost to the price of jet fuel, it is far more economically advantageous to burn regular fuel and pay the carbon penalty than to switch to biofuel. One tonne of jet emits just over three tonnes of carbon, carbon trades at less than EUR10/tonne, which means purchasing a tonne of jet kerosene will cost, say, EUR700 and cost a further EUR25 to cover the carbon burden. Even with a trebling of the cost of carbon, it is significantly cheaper than the projected EUR2,200/tonne for bio-jet, as shown in the chart below.
Figure 1: Price Comparison per Tonne, Jet + Carbon v Biofuel
Source: RDC Analysis
Although in the long term it is likely production will be more efficient, the cost of the raw materials to produce biofuels remain similar to oil. The table below shows the cost of two biomass sources, palm-oil and wood-pulp, correlated against jet kerosene over a 15-year period and, as can clearly be seen, they track closely. Although currently higher in price, it should be remembered that the cost line of jet fuel represents the price for user-ready product, whereas the wood pulp and palm prices are for the raw material, before transportation and the cost of conversion to fuel. The conclusion - there is almost no chance that biofuels derived from any form of biomass can provide a cost saving to the industry, unless large-scale cultivation of non-food crops is an option.
Figure 2: Cost of Jet Kerosene v Selected Biofuel Raw Materials 1999-2014
Source: Index Mundi
The subject of which is challenge number two. Of course, the notion of turning agricultural land over from producing human or animal foodstuffs into fuel production is not an option, which leaves a problem when looking at the land use requirements to produce biofuels on a large commercial scale. Any crop-based fuel source must be come from land that cannot easily be used for food crops. It must also produce known quantity of product on a regular basis i.e. crop regularly and predictably. Jatropha, for example, can grow on ‘marginal land’; salicornia, another biomass option, can be grown in salt-water; but in both cases, the crop yield is unpredictable. The land mass alone required to produce crop-based fuels on a large scale is vast, not to mention the potential water requirement and impact of non-fuel waste disposal.
Added to this, the drive to find alternative fuel sources is not unique to aviation. Transport emissions accounted for 20% of EU CO2 outputs in 2011, of which nearly three-quarters arose from road transport; maritime and aviation emissions each contribute about half of the remainder. Using a proportion of biodiesel is already mandatory in Europe for road vehicles and increasingly aviation will be competing with other segments of the transport industry for low carbon fuels. Arguably the question of which fuels to produce will come down to market economics. The sector whose fuels have the lowest cost of production and which command the highest market price will prevail, and the pump-price of road fuels is already significantly higher than jet fuel.
Figure 3: EU CO2 Emissions Breakdown, EU27, 2011 data
Source: European Environment Agency
The debate often returns to algae, theoretically a powerful solution. It grows very fast, in marginal conditions such as waste or salt-water and far higher yield than other biomass-derived fuels. The US DoE estimates that a land-mass of around 15,000 square miles would be sufficient to replace the entire US petroleum requirement with algae-based fuels, which is less than 0.5% of the US land mass. But the production risks and optimal techniques are far from conclusive at present and the oil industry has estimated that commercially-viable production is still twenty years or more away.
No doubt there will be a new world of biofuel production that develops over the next two decades, leading to cleaner aircraft and reducing reliance on fossil fuels. It will result in opportunities for countries in emerging markets to enter the energy production race. But for the moment, balancing the expectation of the travelling public with the economics and production scalability of biofuels seems a tough challenge.
By Peter Hind / Connect on LinkedIn