Greener aviation set for end-of-year lift

Aviation has an emissions problem but the EU is looking to tackle it by ramping up clean fuel supply and demand. [Photo: Shutterstock]

An EU initiative aimed at boosting the uptake of cleaner aviation fuels is set to launch at the end of 2020 and a new push by the European Commission to streamline tax policy might yet have a big impact on air travel’s carbon footprint.

The RefuelEU scheme aims to increase the supply and demand of Sustainable Aviation Fuels (SAFs) that are made either from advanced biofuels or produced using renewable energy sources, which are known as e-fuels.

Air travel produces about 3% of the EU’s total carbon emissions and, despite the coronavirus, the numbers of flights and passengers are only expected to increase in the coming decade.

Global airlines are on board with offsetting their greenhouse gas output by paying into certified environmental schemes and abiding by efficiency targets that aim to slash emissions per passenger-kilometre, but neither cap total output.

That is where advancements in fuel technology come in. SAFs offer an alternative to kerosene but currently only make up 0.05% of total jet fuel consumption, due mostly to the prohibitive costs of producing them and lack of supply.

According to the Commission’s initial thoughts on SAFs, “while so-called ‘drop-in fuels’ are compatible with current aircraft engine technology, the present production and use of SAF in the EU is still negligible.”

It also warns that “new clean aircraft technologies such as electric or hydrogen-powered aircraft are not expected to be mature enough to play a significant role in commercial aviation in the next decades.”

Aerospace firms like Airbus are yet to start production of any commercial aircraft powered by non-conventional fuels, although the French government unveiled a €1.5 billion innovation fund last month that hopes to stimulate R&D.

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In its analysis, the Commission also adds that “advanced biofuels and e-fuels produced using additional renewable energy have the potential to make an important contribution to tackling GHG emissions in aviation: emission savings can go up to 80% compared to conventional jet fuel.”

A legislative instrument should be published at the end of the year and stakeholders and civil society have already told the Commission what kind of objectives and targets RefuelEU should pursue.

Clean mobility group Transport & Environment said in a paper published today (16 July) that “this initiative will only succeed if its support is limited to those fuels which can truly deliver emission reductions, and which can be scaled up sustainably to meet the demand from the aviation sector.”

In terms of what feedstocks should be used to produce the fuels, T&E insists that “experience to date would preclude the use of crop-based biofuels, as such a policy would only drive substantial land use impacts and deforestation.”

The group concludes that “a combination of sustainable waste and residues fuels and e-fuels” should form the backbone of the initiative and that safeguards should be put in place in the form of so-called ‘contracts for difference’ (CfDs) for the latter.

CfDs would plug the gap between e-fuel production costs and what the market is willing to pay and could be funded through stripping airlines of their free Emission Trading Scheme (ETS) permits or dipping into the EU’s recovery and innovation funds.

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The European Commission revealed on Friday (3 July) details about how it plans to adapt climate policy to the aviation sector, by integrating a global offsetting scheme into EU rules and slashing free pollution permits.

In its feedback during the consultation period, Finnish refiner Neste warned that “a wide feedstock base has to be ensured for SAFs” and pointed out that the Commission’s initial analysis does not include all the feedstocks mentioned by the Renewable Energy Directive (RED II).

“Member states, like Sweden and Finland, must be able to be forerunners and to implement national reduction quotas for aviation to reduce emissions and show the way for an implementation on EU-level. They can be a driver for more production,” Neste added.

T&E suggests than an initial EU-wide e-fuels sub-target within RED II of between 1% and 2% would be feasible and recognise “that the technology is still in relatively infancy”.

Airlines are in favour of SAFs and the International Air Transport Association (IATA) has acknowledged that a 2% tipping point could be reached in 2025 if production reaches 7 billion litres annually and the right conditions are met.

“As much as airlines want to use SAF, production is well below the scale needed for prices to fall to competitive levels. Attaining the right price point is even more crucial as industry losses and debt levels rise,” said IATA chief Alexandre de Juniac.

T&E’s 1-2% benchmark would require additional clean energy capacity in Europe of between 13 and 26TWh – nearly four times Germany’s current offshore wind capacity – and at least nine green hydrogen-producing electrolysers.

According to the group’s calculations, the target would drive more than €9 billion into clean energy technology and increase fuel costs for airlines by up to 9%. T&E adds that the gap between kerosene and e-fuel costs could be bridged by slapping a tax on the latter.

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Taxation Airways

Jet fuel is still exempted from taxation by countries that cite a decades-old international convention but momentum is building behind the idea of making aviation pay its way more fairly.

The instruments available include imposing kerosene charges bilaterally between willing countries or other levies like ticket taxes.

Yesterday, the Commission unveiled its latest Tax Package, aimed at ensuring policies support the EU’s coronavirus recovery effort and other priorities like long-term growth and climate action.

The EU executive reiterated its intention to wring the maximum that is legally permissible out of the existing treaties by exploring rules “that allow proposals on taxation to be adopted by ordinary legislative procedure” rather than unanimous vote in the Council.

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“Initiatives such as the review of the Energy Tax Directive and the establishment of a Carbon Border Adjustment Mechanism are part of the European Green Deal, which also aims to create the context for broad-based tax reforms at national level,” the package adds.

The Energy Tax Directive is widely regarded as one of the most outdated pieces of EU legislation and a high-ranking Commission official told EURACTIV that “this is where we can and intend to really unlock the potential of the Green Deal.”

The Tax Package also reveals that the idea of “removing subsidies for fossil fuels [and] shifting the tax burden from labour to pollution” will be the subject of a conference under the title ‘Greening taxation’ later in 2020.

Environmental groups insist that a kerosene tax is essential in order to create a level playing field in climate policy in Europe and a Citizens’ Initiative called ‘Fairosene’ aims to gather enough support to force the Commission into action.

This week, Fairosene and other ECIs – whose canvassing efforts have been impacted by the virus – got a shot in the arm from the Council, which agreed to give the initiatives more time to collect signatures, extending existing deadlines by six months.

Taxing jet-fuel still on the radar, despite aviation’s virus woes

Kerosene’s plum position as one of the few fuels exempt from taxation is still under severe scrutiny, as momentum builds behind the idea of setting up multilateral agreements between willing countries.

[Edited by Frederic Simon]

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