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The writer is CEO of International Airlines Group
The UK economy is at a critical turning point in its decarbonisation efforts. Right now, there is an opportunity to boost growth by investing in the technologies that will power the future.
One of the industries that will need to transition to lower carbon fuels and technologies is aviation. A key part of UK infrastructure and competitiveness, we act as an economic catalyst for other vital industries. Pre-Covid, the UK’s aviation industry contributed £95bn of the country’s annual gross domestic product.
It’s also clear that people want and need to fly, not just for holidays and family but to gain a deeper understanding of other cultures and countries. Travelling is how we make the world a smaller, more inclusive place. Last year, 297mn people flew to or from the UK and demand shows no signs of slowing.
We recognise that aviation has to be more sustainable. Airline groups including IAG are investing billions in more efficient aircraft as well as new technologies such as hydrogen-powered planes. The most promising technology of all for long-range flying is cleaner jet fuel — or so called sustainable aviation fuels (SAFs).
SAFs, which can be produced from a range of byproducts such as used cooking oil and agricultural waste, as well as synthetically from renewable energy, can be used in existing jet engines. These green fuels can reduce lifecycle emissions by about 70 per cent. Currently though, they represent less than 1 per cent of all jet fuel being used.
The demand is there. Aviation has an industry-wide commitment to be net zero by 2050, and many airline groups, including IAG, have additional SAF targets. IAG bought 12 per cent of all available SAF globally in 2023, but production in greater volumes is needed and fast.
Progress is being made across the Atlantic and in continental Europe. The US has a leading position in SAF production, thanks largely to the Inflation Reduction Act. The Biden administration has committed to supporting the production of 9mn tonnes of SAF annually by 2030. Meanwhile, the EU has committed innovation funding worth hundreds of millions of euros aimed at reducing the price gap between conventional jet fuel and SAF.
Earlier this month, the UK confirmed a 10 per cent SAF mandate. This is a welcome step, supporting industry-wide efforts to decarbonise while positioning the UK as a potential leader. But mandates alone are not enough. The UK now needs to build on this by quickly deploying incentives to encourage production. The government recently launched a consultation on the options for a mechanism to give producers revenue certainty. Through our participation in the Jet Zero Council, IAG will seek to recommend a way forward, but a decision is needed quickly.
This combined with the recent SAF mandate would provide a strong signal of support to the market. Airlines are willing to pay for SAF, we just need the supply. So the remaining question is, will that supply continue to come mostly from the US? We would like to use our resources to help scale a UK and European SAF industry, and I believe it can be done.
There are several potential producers with innovative businesses planning projects around the UK, but they need policy support to move to the construction phase. The government promised five SAF plants would be under construction by 2025. We still have time to meet that target, but action needs to be taken urgently, either through a revenue-certainty mechanism in the next 12 months or through some form of interim measure such as an extension of the Advanced Fuels Fund.
Now is the time to support critical industries in the transition towards net zero. Providing incentives for SAF to scale will in turn attract private sector investment, create jobs and deliver long-term economic growth.
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