SAF’s Invisible Hand

opinion

by Oscar Henderson

November 17, 2023

World Energy and DHL agree a partnership for SAF certificates

SAF’s Invisible Hand

The ‘invisible hand’ concept first appeared in Adam Smith’s Wealth of Nations and became a defining concept of free market economics. Simply put, the invisible hand is a market’s natural ability to find equilibrium without external interventions.

Gene Gebolys, CEO and president, World Energy believes that customers will force the industry to maintain high standards for responsibly sourced feedstocks and accountability. “The market will be set by customers. If the customers have the option to do things right, they will demand their suppliers go through the right mechanisms,” Gebolys explains on a recent episode of our podcast.

World Energy recently signed large SAF certificates (SAFc) with Microsoft and DHL. “They both recognise the power of Book and Claim,” Gebolys tells SAF Investor. “You need a system that is bullet proof, that’s traceable, going through third party registries. You need to have a system of complete integrity, with the traceability of carbon reductions.”

Despite his bullishness on the integrity on the buy side of the market, Gebolys readily acknowledges that if there is economic motivation to cut corners, corners may get cut. This is a real concern as he says the industry has one chance to get Book and Claim right. If the reliability and integrity is undermined, it could very quickly look like, what he calls, the “debacle” of carbon offsets.

“We are aware there is the potential for bad actors to wreck this for everyone. We are committed to not having that happen,” says Gebolys. “But for this system there is no good alternative to moving people and things around in a lower carbon way. It is either this or the status quo.”

In real life, the invisible hand works alongside regulations. Gebolys recognises the importance of government action on SAF.

The EU has not included Book and Claim in ReFuelEU aviation initiative. However, it could be added later. Article 15 states that: “By 1 July 2024, the Commission shall… assess possible improvements or additional measures to the existing SAF flexibility mechanism, such as establishing or recognising a system of SAF tradability. This would enable fuel supply within the Union without requiring a physical connection to a supply site. The objective is to further streamline the supply and utilisation of Sustainable Aviation Fuel [SAF] for aviation during the flexibility period, incorporating elements of a Book and Claim system.”

The European Business Aviation Association says business jet operators at smaller airports are at a disadvantage without Book and Claim. The same would be true for regional airlines at small airports beyond regional hubs.

“There is no getting around the fact that you have to get some mechanism that you are not moving molecules around in an inefficient way,” says Gebolys. “I trust that the Europeans will eventually get there, and I trust that we will all get there. This applies equally anywhere in the world and frankly in every industry. If you look at how we are going to green the steel industry, it is going to be through Book and Claim. Shipping is going to be through Book and Claim. How are we going to do any industrial process that involves moving molecules around as efficiently as possible? it is going to be through some form of Book and Claim.”

Listen to the full podcast episode here.