SAF production in 2024 falls short of target

opinion

by Fayaz Hussain

January 13, 2025

December is always hectic month for aviation businesses. But it’s worth snatching a moment to review progress over the past year. There’s little to celebrate – in terms of sustainable aviation fuel (SAF) production at least.

The International Air Transport Association (IATA) had projected SAF production would reach 1.5m tonnes by year-end, representing a promising 150% increase from 2023. However, the reality falls short, with actual production barely touching 1m tonnes – half a million below the anticipated volume.

Willie Walsh, director general IATA explains the complex landscape. “SAF volumes are increasing, but disappointingly slowly. Governments are sending mixed signals to oil companies, which continue to receive subsidies for their exploration and production of fossil oil and gas.”

Further highlighting the investment hesitancy, Walsh notes: “And investors in new generation fuel producers seem to be waiting for guarantees of easy money before going full throttle. With airlines, the core of the value chain, earning just a 3.6% net margin, profitability expectations for SAF investors need to be slow and steady, not fast and furious.”

The scaling challenge is terrifying. IATA estimates that between 3,000 to 6,500 new plants must be constructed to meet the aviation sector’s 2050 decarbonisation goals. This translates to a staggering $4trn in capital expenditure – about $128bn annually by 2050 – underscoring the massive financial commitment required to decarbonise aviation.

However, Walsh offers a glimmer of optimism: “The good news is that the energy transition, which includes SAF, will need less than half the annual investments that realising wind and solar production at scale required. And a good portion of the needed funding could be realised by redirecting a portion of the retrograde subsidies that governments give to the fossil fuel industry.”

The policy implementation landscape varies globally. In the US, initial incentives through the Inflation Reduction Act showed promise, but progress has been tepid. Multiple developers have recently postponed SAF and renewable diesel projects to the latter half of 2025, citing uncertainties around 45Z credits and potential policy shifts with the upcoming presidential administration.

Europe presents similar complexity. The European Union Aviation Safety Agency’s recent assessment reveals that the SAF production market remains changeable.

“SAF production market is inherently volatile, underpinned by several factors. These include the high CAPEX required, feedstock supply chain limitations and risks associated with investing in early-stage technologies. While many projects are announced, some may not reach commercialisation.”

As we inch closer towards another year, the trajectory of SAF mirrors broader challenges in environmental transition. The goals are clear, the technologies are emerging but the path remains fraught with financial, political and technological uncertainties.

Let’s hope that the SAF industry meets the 2025 target: to produce 2.1m tonnes of sustainable aviation fuel.