What’s up with SAF in Canada, eh?

opinion

by Fayaz Hussain

October 3, 2024

Aviation is essential to Canada, the second largest country in the world, but the sector is also a large contributor to greenhouse gas emissions, generating 22 mega-tonnes in 2019 from domestic and international flights. In addition, emissions are increasing rapidly, up 75% since 2005. To meet this challenge, Canada released an Aviation Action Plan in 2022 that aligns with the ICAO and IATA vision of net-zero by 2050. The plan acknowledges that SAF will be the major decarbonization tool for the aviation sector. To this end, the Canadian aviation industry set an aspirational goal of 10% SAF by 2030, which equates to approximately 1bn liters of fuel. To achieve a long-term goal of net zero emissions by 2050, it is estimated that 8bn liters of SAF will be required.

Canada is blessed with every type of potential feedstock, oodles of cheap renewable power, world class universities, and advanced technology. If you think that these conditions would spur SAF development in Canada, you would be sadly mistaken. In reality, the Canadian industry objectives seem highly ambitious given that the SAF market in Canada is way behind Europe and the USA due to several key challenges:

No supply. There are no SAF facilities in Canada and very few planned. SAF is seen a risky investment due to the lack of government policy support. The Canadian financial industry is notoriously risk adverse and there are much safer places to invest. In addition, the Canadian Clean Fuel Regulations only include aviation on an opt-in basis and do not provide enough benefit to close the price differential with kerosene. Consequently, biofuel producers who could produce SAF are instead orienting their production towards biodiesel and other non-aviation fuels.
Limited demand. This may seem silly given the stated targets of the Canadian aviation sector, but the sad truth is that Canadian airlines, except for Air Transat, have been reluctant to sign long-term offtake agreements or support the SAF industry. Since no financial incentives exist to reduce the cost differential, no airline wants to be put at a competitive cost disadvantage in the crowded Canadian aviation landscape. Airlines are also not used to signing long-term fuel contracts and are worried about SAF price volatility and uncertainty. In addition, there are no regulations requiring the use of SAF so Canadian airlines are in a “wait and see” mode.
No accounting or sustainability frameworks. The government of Canada has not provided any guidance regarding book and claim systems or sustainability criteria, such as lifecycle analysis methodology. This is delaying investment and offtake uptake.
Lack of SAF infrastructure. Even though Canada has a well-developed jet fuel distributions system, several key infra
structure elements are needed, such as blending facilities. In addition, legacy petroleum companies control the distribution network and fair access for SAF producers needs to be assured.

To deal with these challenges, a SAF blueprint for Canada is being prepared by the Canadian Council for Sustainable Aviation, C-SAF, and the federal government. The Blueprint, scheduled to be released later this year, will make recommendations on the policies, standards, incentives, investments, and other elements that will be required for Canada to reach its aspirational SAF goals. The objective is to help create a domestic SAF market but also explores the possibility of SAF imports. Even though Canada is a major oil producing nation, today most jet fuel is refined outside the country and imported, and it is thought that the same principle could apply to SAF.

In conclusion, it is hoped that the Blueprint will spur domestic SAF production. However, Canada lags far behind the US and Europe in terms of policy, incentives, regulations, investment, risk mitigation instruments, and focus on SAF. Until these are put in place, SAF use in Canada will remain in the imaginary “aspirational” world and SAF producers will look to set up shop in countries where they are more welcome. Canadian airlines will need to rely on imports for their SAF and hope that there will be enough supply. They will also have to deal with he added logistical complications of SAF importation, blending, and distribution.

Disclaimer: Keith Lawless is a consultant for SAVIA, an aviation sustainability consultancy based in Canada. He has worked on SAF feasibility studies and development projects in Canada, Europe and Africa.