Welcoming a Watershed moment for SAFc

opinion

by Fayaz Hussain

June 3, 2024

From the earliest bazaars in Persia to today’s Amazon, markets connecting buyers and sellers have simplified the exchange of goods and services. In the same vein, carbon marketplaces provide companies with solutions to reduce their carbon footprint by connecting them with emissions reduction opportunities.

US-based Watershed wants to develop a similar marketplace for sustainable aviation fuel certificates (SAFc). The company already has major corporations such as Paramount, Spotify, Klarna etc as clients to help reduce their carbon footprint. And these clients want to reduce their emissions from the transportation of employees in vehicles owned or operated by third parties. SAFc is the easiest way to do that until other solutions emerge.

So, when in April Sustainable Aviation Buyers’ Alliance (SABA) issued a request for proposal (RFP) to purchase 50m gallons of SAFc worth $200m for its members, Watershed saw this as an opportunity to participate.

“SAFc procurement is an incredibly complex process to go through that many climate leads at large corporations or folks building out sustainability programmes might not have the expertise in-house to tackle on their own,” says Claire Kiely, head of marketplace, Carbon supply, Watershed.

Watershed said that by participating in the RFP, their clients can now buy SAFc through the organisation. “In addition to advising them on the [SAFc] volumes to purchase because we know what their decarbonisation plans are … we also help them with the procurement expertise side with incorporating that into disclosures and reporting [as] we understand their scope 3.6 travel emissions,” adds Kiely.

And the demand from corporates for SAFc is growing. “Not only are we seeing demand in our customer base for SAFc, for their own business travel emissions, but we’re having conversations around how they might mandate this and request this of their suppliers,” explains Kiely.

The SABA SAFc deal sends a strong demand signal in to the market. Sharing the sentiment among Watershed‘ s clients, Kiely says that companies which understand that aviation emissions are a core part of their Scope 3 emissions are taking the concrete steps needed to decarbonise.

However, she adds that the biggest obstacle at the moment is the lack of recognition for SAFc as a scope 3 reduction under Greenhouse Gas Protocol (GHG). Although, GHG Protocol and Science Based Targets initiatives (SBTi) are on board with SAFc as a tool for companies to meet their emission reduction goals, they are not yet formally recognised.

“The GHG protocol and the SBTi are in the process of, reviewing that guidance now … and we are hopeful … that the treatment of SAFc will follow more similarly to what clean power has in the past,” she adds.

“We really need that clarity around the accounting and reporting treatment, because then it gives the ability for all customers to understand the real dollar return on investment [ROI] value of purchasing one of these SAFc certificates,” she explains.

On the supply front, Kiely argues that there‘s a limited supply in the market. However, strong demand signals like the SABA deal are crucial to encourage increased production, not just for existing, mature production methods, but also for innovative ones needed in the long term.

“We’ve seen this work in other spaces. We’ve seen this work in clean power. We’re seeing it work in carbon removal in terms of forward demand aggregation, pulling innovation and development forward,” she adds.

Kiely warns that without demand and signed offtake agreements, it is very hard for SAF suppliers to get to final investment decisions to build plants.

“There’s a flywheel that needs to get started. And where it starts is with that demand. So we are helping accelerate that demand by growing the potential pool of customers of SAFc by giving them the option to participate in SABA and purchase SAF.”