Cracking the “Chicken & Egg” Problem to Scale Sustainable Aviation Fuel

If you could choose between two functionally identical fuels to power your airplane, except one produces 60–80 percent less carbon emissions on a life-cycle basis, 100 percent less sulfur emissions, and 90 percent less particulate matter, while also supporting local economies, the better choice should be obvious, right? Sustainable aviation fuels (SAF) with those qualities exist today, and they have been proven safe and can be used in existing engines, fuel systems, and infrastructure (and are thus known as “drop-in” fuels). However, current SAF production represents a mere 0.003 percent of total global demand for jet fuel, while aviation carbon emissions continue to grow. So why are we not making the obviously better choice, and what can we do to fix that?

In a recent report titled Innovative Funding for Sustainable Aviation Fuel at U.S. Airports: Explored at Seattle-Tacoma International, Rocky Mountain Institute—known in this industry by the name Rocky Mountain Institute-Carbon War Room (RMI-CWR)—together with its partner SkyNRG, answers this question and redefines conventional aviation spheres of influence by showing the catalytic role airports can play in scaling the SAF industry.

The Chicken and Egg Problem

While SAF technology exists and is certified for use in commercial jet planes today, the truth is there is one key difference when comparing SAF to conventional Jet-A fuel: SAF costs about three times as much for airlines to purchase. Although the aviation industry has committed to ambitious carbon emissions reduction targets, it is a competitive, low-margin industry whose largest operational cost is fuel, leaving individual airlines unwilling to commit to large-scale SAF consumption at current prices. The resulting limbo can be ascribed to a chicken-and-egg problem in which, due to a lack of guaranteed purchase or “offtake” agreements, SAF producers cannot secure project finance to build new bio-refineries, achieve economies of scale, and bring prices down, while airlines cannot commit to cover significant price premiums.

The Solution

RMI-CWR and SkyNRG have developed a revolutionary model that overcomes this chicken-and-egg challenge by leveraging airports—and their unique position at the intersection of airlines, fuel suppliers, governments, and communities—to support the scale-up of SAF. By using a range of innovative, airport-centric funding sources to cover the higher cost of SAF and supply chain infrastructure investments, airports can send a steady demand signal for SAF, thereby incentivizing producers to develop production capacity.

One key insight about this approach is that airports are not legally allowed to spend money on jet fuel; therefore, if they want to cover the price premium, they must buy something else. Thus, they could purchase the “co-benefits” of SAF, in other words, the positive externalities associated with SAF production and consumption, such as reduced carbon emissions, improved air quality, and regional economic development—all of which are valued by airports.

Sea-Tac Steps Up

In its effort to become the greenest port in North America, The Port of Seattle teamed with RMI-CWR and SkyNRG to conduct a study evaluating the potential application of this innovative model. Seattle-Tacoma International Airport (Sea-Tac) seeks to become the first airport in the United States taking a leadership role to supply SAF to all its airlines on a long-term basis. The study assessed and ranked 14 co-benefit funding mechanisms based on their revenue potential and feasibility. It concluded that a combination of the four most viable mechanisms identified could generate the $6 million to $8 million per year needed to cover the incremental cost of supplying a 1 percent SAF blend to all Sea-Tac flights, which would reduce carbon emissions by approximately 29,200–38,800 metric tons annually on a life-cycle basis.

Moving Forward

The momentum in Seattle is strong. Sea-Tac airport staff are generating Port commissioners’ buy-in and support to integrate the innovative funding model into their planning, and together they are seeking supportive policy measures at the state and local levels. 

It doesn’t have to stop at Sea-Tac. Other airports can look to Seattle as an example and pursue some of the various SAF co-benefit funding tools put forward by RMI-CWR and SkyNRG. Airports can help level the playing field between SAF and fossil jet fuel, producing a durable climate solution for aviation.

Download the Innovative Funding for Sustainable Aviation Fuel at U.S. Airports report here.