7 minute read
Why aviation is considered hard to decarbonise
Aviation faces a number of unique challenges in its decarbonisation journey. This is thanks to aircraft longevity and specific aviation fuel requirements.
Aircraft in 2050 will likely resemble those flying today, owing to their two to three decades-long lifespan. This contrasts sharply with the automotive industry, where vehicle turnover occurs every 10-15 years.
Looking at Airbus, its December 2023 backlog of 8,599 aircraft is expected to grow with upcoming air shows, which underscores this issue. These planes, slated for delivery this decade, will largely remain operational until 2050 and beyond.
This extended lifespan significantly impacts the industry's ability to implement greener technologies. The slow fleet turnover rate means efficiency and emissions reduction improvements take years to impact the global fleet substantially.
Moreover, the industry's commitment to current technologies complicates the transition to alternatives like hydrogen. Despite developing a hydrogen aircraft, Airbus has indicated that the A320's successor will still rely on kerosene or – at best – sustainable aviation fuel.
The good news? Change is possible.
We believe change is possible – the current revolution in renewables points the way.
California, the world’s fifth-largest economy, achieved a significant milestone in spring 2024 by running entirely on renewable energy for extended periods. This demonstrated the potential of solar and wind power to meet the demands of a large population centre and economic hub.
The key to this has been the fall in the prices of solar energy.
It was considered eccentric when US President Jimmy Carter placed 32 solar panels on the White House East Wing in June 1979.
At the time, solar energy wasn’t perceived as an answer to America’s energy needs, particularly because the energy from the panels cost a whopping $36 per watt. Perhaps not surprisingly, the much more fossil-fuel-friendly Reagan administration that followed took the panels down.
But many years have passed since then, and the situation has changed. By 2020, the International Energy Agency (IEA) said that solar, at less than $0.20 per watt, was the “cheapest electricity in history” – even cheaper than fossil fuels in most countries.
Investors have played a key role in driving that change, investing in everything from new battery technology to electric cars, green steel, and renewables.
According to Pitchbook, Q1 2024 saw record investment into the climate tech space, with $8.1 billion flowing into the sector.
Small wonder that Larry Fink, the chairman and CEO of Blackrock, the world’s largest asset manager, said that - “The next 1,000 unicorns (startups that achieve a valuation of $1 billion or more) won’t be search engines or social media companies, they’ll be sustainable, scalable innovators – startups that help the world decarbonise and make the energy transition affordable for all consumers.”
As the world transitions towards a lowcarbon future, climate tech is poised to become a major economic force, driving sustainability and prosperity.
Looking specifically at aviation, we see an opportunity for investors to be part of that transformation for good while benefiting from involvement in high-growth companies.
Regulators and industry giants are creating the right investment climate
An evolving regulatory landscape is reshaping the aviation market and creating new imperatives for innovation, strategic adaptation, and investor opportunities. Key regulatory frameworks include:
• EU's "Fit for 55" Package: This comprehensive set of proposals aims to reduce net greenhouse gas emissions by at least 55% by 2030. For aviation, it includes ReFuelEU Aviation, which mandates increasing levels of sustainable aviation fuel blending, starting at 2% in 2025 and rising to 70% by 2050.
• Revision of the EU Emissions Trading System (EU ETS): Proposes phasing out free emission allowances for aviation and implementing a more stringent cap on allowances.
• CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation): Adopted by the International Civil Aviation Organisation (ICAO), CORSIA aims to stabilise CO2 emissions at 2020 levels. From 2027, participation will be mandatory for all international flights between the 193 ICAO member states. In practice, airlines monitor and report their emissions. If their emissions exceed their 2020 baseline, they must buy carbon credits from approved environmental projects or use approved sustainable aviation fuels to offset the difference.
• The UK targets net-zero aviation emissions by 2050, with a SAF mandate starting in 2025.
• In the United States, the proposed Sustainable Aviation Fuel Grand Challenge aims for 3 billion gallons of SAF by 2030.
• Japan will require a 10% SAF blend by 2030 for international flights.
• Though Australia has yet to commit to a mandate, the government is investing significant money to support local SAF and green hydrogen production.
• There are reports that China will introduce its own SAF blending mandate, requiring 5% use by 2030.
• Airlines have agreed to a 5% ‘green fuel’ target by 2030 in the Asia-Pacific region.
• At the same time, India has set targets for SAF use on international flights of 1% by 2027 and 2% by 2028. If these targets turn into a mandate, the potential volume of SAF needed will be significant, given that India is the world’s largest aviation growth market.
• Several countries, such as Denmark and Norway, will ban fossil-fuel-powered domestic flights from 2040.
These regulatory frameworks are creating a strong impetus for climate tech innovation and adoption in aviation:
Market creation: Mandates for SAF and emissions reduction create guaranteed markets for sustainable technologies.
Investment stimulus: Clear regulatory targets provide investors with certainty, stimulating capital flow into aviation climate tech.
Innovation incentives: Stringent future targets drive R&D in advanced technologies like electric and hydrogen propulsion.
Level playing field: Global schemes like CORSIA help ensure sustainability efforts don't create competitive disadvantages, encouraging widespread adoption.
As these regulations tighten over time, they will continue accelerating the transition towards sustainable aviation, presenting significant opportunities for innovative climate tech solutions.
Collaboration with industry giants is helping to foster innovation
One of the cornerstones of the SimpliFlying Launchpad is collaboration, which is a powerful catalyst for change in sustainable aviation.
Partnerships between startups, established aviation companies, and research institutions are driving rapid advancements in technology and operational efficiency.
These collaborations leverage each partner's unique strengths:
Startups bring agility and fresh ideas
Established companies provide industry expertise and resources and
Research institutions contribute cutting-edge scientific knowledge
This synergy accelerates innovation, shares risks, and expedites the path to commercialisation.
Notable examples of successful partnerships include:
• Airbus with US-based startup Advent Technologies on a $13 million project to develop and optimise Advent's Ion Pair™ Membrane Electrode Assembly (MEA). MEAs are a crucial component in hydrogen fuel cells, influencing factors like efficiency, weight, and cost. This collaboration aims to support Airbus' goal of deploying hydrogen-powered commercial aircraft by the middle of the next decade.
• The winner of Fast Company’s 2024 World Changing Ideas Awards in the impact investing category, the United Airlines Sustainable Flight Fund brings together 22 corporate partners to invest in sustainable aviation fuel startups.
• Automotive giants Stellantis (with Archer), Toyota (with Joby), and Hyundai (with Supernal) have invested in and are working with electric air taxi startups to help these companies manufacture at scale once their aircraft have been certified.
Looking ahead, we anticipate new collaboration models emerging, potentially involving cross-industry partnerships with sectors like renewable energy and digital technology. These partnerships will be crucial in addressing complex challenges, such as infrastructure development for new propulsion technologies.
