Regulation and the race for sustainable aviation between EU and US, who will win?
Offering views from both sides of the Atlantic, Neste experts Virpi Kröger and Neville Fernandes discuss the regulatory incentives for advancing the deployment of renewable jet fuel.
In the US, the Renewable Fuel Standard (RFS) program is a national regulation that requires importers and refiners of gasoline and diesel to replace a certain volume of petroleum-based with renewable fuel. Although there is no mandate in place for jet fuel specifically, renewable jet fuel (RJF) can still generate renewable credits if it meets the regulatory requirements.
“If an obligated party utilizes renewable jet fuel, it reduces the amount, for example, of renewable diesel that they must put into the diesel pool. This monetization is thus an enabler for introducing RJF to the US,” comments Neville Fernandes, Head of Renewable Jet Fuel in North America, on the current regulatory situation.
As for the EU area, the Renewable Energy Directive requires the EU to fulfil at least 20% of its total energy needs with renewables by 2020. All EU countries must also ensure that at least 10% of their transport fuels come from renewable sources by 2020.
“Currently, this target does not include renewable jet fuel, although by legislature, any EU state would be able to implement their own objective. So far, the Netherlands and the UK are the only countries that have realized the inclusion of RJF,” says Virpi Kröger, Commercial Development Manager, Renewable Jet Fuel at Neste.
More significantly, Norway is now officially considering putting a mandate in place, which would require that 1% of the country’s jet fuel consumption is renewable from 2019. This would gradually increase to a share of 30% by the year 2030.
California leads the way
In the US, the Blender’s Tax Credit in the amount of one dollar per gallon, has been an effective incentive for the production and importation of renewable diesel.
“Renewable Jet Fuel would also be eligible by meeting similar blend specifications. However, the tax credit has currently expired. If it were reintroduced, as has happened several times before, this could provide a major federal incentive,” Fernandes points out.
On the state level, the California Low Carbon Fuel Standard is the most well-known policy incentivizing the use of lower-carbon fuels. Its target is to reduce the carbon intensity of gasoline and diesel by 10%, compared to the level in 2010. Currently, the jet fuel pool is not included, but the California Air Resources Board (CARB) has made a proposal to include Renewable Jet Fuel on an opt-in basis from January 2019.
“In this case opt-in means that there is no requirement to reduce the carbon intensity of jet fuel, but if renewable jet fuel were used in California, the importer or producer of the fuel would generate carbon credits that can be monetized. As a rough estimate at today’s value of LCFS carbon credits of US $100/tonne of carbon credits – the LCFS incentive for a gallon of RJF using Australian animal fat as feedstock would be around 80 cents per gallon,” Fernandes says.
He postulates that once California approves the inclusion of RJF in the LCFS, then other jurisdictions with similar LCFS programs will follow, including the state of Oregon and the province of British Columbia in Canada.
Geneva sets example
Both Fernandes and Kröger agree that the US currently leads Europe with regards to providing direct regulatory support for the use of Renewable Jet Fuel. Kröger notes, however, that it will be interesting to see how the development in Norway goes forward, and whether the other Nordic countries will follow.
“Also, there have been discussions in the EU Commission about setting up a mandate for Renewable Jet Fuel, but so far nothing official has emerged. The fact is that there will be an increasing demand also from the passenger side for concrete actions, so we just need operators to set an example and bravely take the first step,” Kröger says.
One of the forerunners is Genève Aéroport, where the target is that at least 1% of the annual jet fuel consumption is to be composed of RJF, starting late 2018. This is an excellent example of a state, an airport and a renewable solutions provider collaboration to decrease CO2 emissions of aviation.The Swiss authorities hope that other stakeholders including corporations, consumers, NGOs, and governments will follow and start raising awareness about renewable options in order to develop new business models.
Active consumers and stable policies required
Spreading the word about Renewable Jet Fuel among consumers is seen by both Fernandes and Kröger as a potentially powerful way of speeding up its implementation.
“Getting a passenger movement started and mobilizing the environmentally conscious consumers, combined, for example, by some support by the state and cooperation with national flag carrier airlines could make a difference,” Kröger says.
Fernandes points out that the major public visibility of recent catastrophic events related to harsh weather conditions, such as hurricanes, floods and wildfires are also very visible examples of the effect that climate change is having on our lives today.
“Corporations are realizing the high costs of climate change to their business, with many frequent and severe harsh weather related disasters causing massive damages. This should, hopefully, convince corporations and the general public that it is important to pay for climate change mitigation measures, including using low-carbon fuels, now rather than paying a very much larger price to repair damage in the future.”
Fernandes concludes that whatever regulatory incentives are implemented, they need to be long-term and stable, in order for Renewable Jet Fuel to promote research and development of new low-carbon technologies and feedstock as well as encourage investments in new production facilities.
“In addition, the policies need to be technology and feedstock neutral, and they should encourage fair trade on a worldwide scale.”
Kröger adds that the time to act is now, with decisions based on existing sustainable solutions, rather than only discussing future targets related to such technologies that do not even exist yet.
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