Jon Hart (Rolls-Royce Environment Strategy Manager)

for

Leigh Hudson (BA Sustainable Fuels and Carbon Manager

Delivering Environmentally Sustainable

Aviation Fuels

Sheffield University 5th April 2017

Introducing: aviation

1,402

Commercial airlines

3,864

Commercial airports

173 Air navigation service

providers

26,065

Aircraft

in service

38.4 million

Flights (2017)

3.9 billion

Passengers (2017)

51,554

Routes

80% average

passenger load factor

Flights (2017)

Introducing: aviation

62.7 million

Jobs supported

35% of world trade by

value ($6.4 trillion)

21st largest Economy, ranked by

GDP impact

$2.7 trillion

GDP supported (3.5%)

52%

Of tourists fly to their

destinations

Social cohesion

More people have

access to air

travel than ever

Connectivity For today’s modern

world

The climate challenge

Global

challenge 840 million tonnes of CO2 from

aviation (2017)

United Nations Processes

2% Of global human-

induced CO2

Growing industry, particularly

in emerging

economies

80%+

improvement In fuel efficiency

since first jets

88 billion USG

jet fuel (2017)

(270 m tonnes)

Our climate action plan

Our climate action plan

Working to develop a global

market-based measure • 2009: industry presents Governments at ICAO with climate plan.

• 2013: Governments agree to develop global MBM for sector.

• 2016: CORSIA (Carbon Offsetting and Reduction Scheme for

International Aviation) agreed

• Currently: technical work at ICAO to design the structure of the

CORSIA/Fuels and implementation from 2020.

Global Market Based Measure (GMBM)

•ICAO resolution set out overall design of the GMBM, and implementation timetable

•Applies to international aviation, (but ideally applied to regional schemes to simplify compliance)

•Requires airlines to purchase carbon offset credits on CO2 emissions above 2020 levels

•2021-2026 – voluntary phase, 65 states agreed to participate. (83% operations covered)

•2027-2035 offsetting mandatory (with exemption – LDC, LLDCs, SIDS,* or low RTK threshold)

Monitor Review Verification : write processes, implement by 2020

Emissions Unit Criteria (EUC) – critical to ensure credibility

2018 – Finalise guidelines on emissions unit eligibility

Registries – critical to avoid double counting (and claiming)

Develop guidance and policies, ICAO establish central registry

Fuels: sustainability criteria and Carbon reduction credit

EU ETS – commission proposal Jan 2017.

• Current scope (intra EEA) continue to 2020. (continued clock-stop for international flights)

• Potentially extend clock-stop on international to 2027 while evaluate GMBM voluntary phase

effectiveness.

ICAO Assembly agreements

Sustainable Alternative fuels

Could reduce CO2 from airline operations by up to 80%.

Industry is working with supply chain, researchers, civil society to

introduce sustainability standards.

Can be created from waste sources and non-food crops.

Over 5,000 commercial flights so far.

90% of the online public across 24 markets worldwide agree:

“Companies should pay more

attention to the environment”

Source: Ipsos Global Adviser

of the online

public across

24 markets

worldwide

agree:

“Companies

should do more to

contribute to

society”

86%

Source: Ipsos

Global Adviser

Strongly disagree

Tend to disagree

Tend to agree

Most large companies in the UK are working for the long term good of

everyone

Strongly agree (2%)

Source: Ipsos MORI

Neither agree nor disagree

Only 13% agree that most companies are

already doing it – half (47%) disagree

… But few think it is currently happening to any great extent

Are sustainable fuels really sustainable?

Fuel processing routes

Sustainability challenges

Sustainability certification

Indirect effects

Harmonisation

It’s not just about the climate

Global

Sustainable Aviation Fuels Users

Group (40% aviation fuel)

• Production non-competitive with food

• Biodiversity impacts are minimized;

• Should not jeopardize drinking water supplies/affect water stressed

areas

• High conservation value areas & native eco-system should not be

cleared and cultivated for aviation fuel production– directly or indirectly;

• Total life cycle GHG emissions should be significantly reduced

compared to those associated with fossil sources (at least 60%

emission saving);

• In developing economies, development projects should improve

socioeconomic conditions for small-scale farmers who rely on

agriculture to feed them and their families, and that do not require the

involuntary displacement of local populations.

Certified

pathways

Synthetic Paraffinic Kerosene

Pros

Can take low value

materials and have low

cost of production

Cons

Not commercially proven

at scale

High cap ex for plant

making financing difficult

Certified

pathways Pros

Existing production

capacity exists for road

transport

Cons

Veg oils are unsustainable

if grown on agricultural

land (food vs fuel and

indirect land use change)

High conversion losses

and costs of production

Hydrogenated Esters and

Fatty Acids (HEFA)

Certified

pathways Pros

High value SIP (DSHC)

could cross subsidise fuels

production

Could eventually use

agricultural residues/waste

Cons

Uses sugars grown on

agricultural land

Cost is high and it has a

lucrative market in

health/fragrance/pharma

Synthesised Iso-Paraffinic

or

Figures exclude ILUC, which could significantly reduce CO2

benefits for some feedstocks, or make them worse than

conventional fuel

Sustainable Aviation:

Cleaner, Quieter,

Smarter

16 July 2014

Current Signatories

Boeing

Heathrow

UTC Aerospace Systems

SA CO2 Road-Map (2016)

What technologies will be possible? How much fuel will we need to meet the emission reductions we

outlined? What fuel can be manufactured here in the UK?

What is the global picture?

The potential for sustainable aviation

fuels

Project objectives

– What volumes of sustainable fuels could be available for UK aviation

in 2030?

• CO2 emissions savings

• Value added to the UK economy, including jobs

– How much sustainable fuel is required to meet the SA projections for

2050?

• Validate the Sustainable Aviation CO2 Roadmap estimated that by

2050 sustainable fuels would offer GHG emission savings of 15 –

24%

Scope

Sustainable fuels - produced from wastes (including biogenic and non-biogenic post-consumer

and industrial wastes), residues, and non-food crops from degraded land (avoiding food versus

fuel conflicts and ILUC)

& provide GHG savings of at least 60% compared to conventional kerosene

UK sustainable aviation fuel

potential in 2030

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2020 2022 2024 2026 2028 2030

Sustainable aviation fuel production, UK Tonnes per annum

High scenario Low scenario BAU

4.3% aviation fuel demand

Worldwide: • 2020 global production: 1.3 million tonnes* • 2030 global production: 3 and 13 million tonnes in 2030 • 2030 share of aviation fuel demand: 0.7% and 3.1%

0.7% aviation fuel demand

*(Ref. 2017 total jet fuel consumption 270 m tonnes)

Examples of US alt jet fuel supply – 2016 Fuel

company

Country

base

Conversion

Process type

ASTM

CLEARED

Suitability

Max

blend

Feedstock

LCA –

Sustainability

% GHG

reduction*

Volume prod

Scale

Airlines/custome

rs supporting

In commercial

aviation use?

Tons PA

Alt Air fuels USA UOP HEFA Yes – in 2011 (D7566 Annex A2)

30% (50%

max)

Tallow 45-60%

RSB certified

42 mil USG/yr United

KLM

Gulfstream

LAX 5mil USG/yr 3 yrs

LAX ?

Tests/demos

6,000

?

Fulcrum

Bioenergy

USA 1. Gasifica

tion

2. FT

(Fischer

-

Tropsch

)

Yes – in 2009

(D7566 Annex

A1)

50%

max

MSW TBD 1st refinery

planned 2018 +

others WIP

Cathay

United

Air BP

375 mil USG 10yrs

90-180 mil USG/yr 10

yrs

50 mil USG/yr 10 yrs

125,000

60,000

17,000

LanzaTech New

Zealand

1. Ferment

ation to

ethanol,

2. AtJ

process

WIP (11k litres RR

CLEEN2)

TBD

CO from steel

mill

Depends on

region

55-80% (LT

assessment **)

China 100,000

USG/yr, Taiwan,

Belgiuim

+ DoE $40m grant

for demo plant

Virgin demos

Red Rock

Biofuels

USA 1. Gasifica

tion

2. FT

(Fischer

-

Tropsch

)

Yes – in 2009

(D7566 Annex

A1)

50%

max

Woody biomass

Forestry residue

70-80% Prod from 2017 15

mil USG total

Plants 2,3 WIP

Fedex

Southwest

3 mil USG/yr 8 yrs

3 mil USG/yr 8 yrs

1,200

1,200

SG Preston USA UOP HEFA Yes – in 2011 (D7566 Annex A2)

30% Various

renewable

biomass

Nom 0<50%<-

200%

V dependent on

feedstock

Several Plants

each 120mil

USG/yr

Jet Blue 33mil USG/yr 10 yrs

11,000

Gevo USA 1. Ferment

ation to

isobutan

ol,

2. an AtJ

process

Yes – in 2016

(D7566 Annex

A5)

30%

max

Non-edible corn.

Woody biomass

Forestry waste

55-80%

Targeting

$4.50/USG

2017- 0.5mil

USG/yr

Prod 1.5mil USG/yr

Alaska

Lufthansa

Demos

33mil USG/yr 10 yrs

11,000

NESTE Finland 1. HEFA Yes 50% 79% waste

19% palm oil

2% veg oil

Finland .2mTPA

S’Pore 1m TPA

Holland 1m TPA

Lufthansa

KLM

SAS

2,400,000

*(Ref. 2017 total jet fuel consumption est. 270 m tonnes)

Trajectory to meet 2050 GHG emission targets

30

• UK aviation fuel use estimated to peak around 2040 and decline such that demand in 2050 is approx.

equal to 2030 at almost 15 Million tonnes

• UK require 3.3 – 4.5 million tonnes of sustainable fuels to achieve GHG savings of 18 to 24%

• Global aviation industry will require 140 – 190 Million tonnes of sustainable fuel

• To achieve these production rates would require a sustained annual growth of 14 to 18%

Potential benefits to the UK of

developing sustainable fuels

31

Worldwide • In 2030, there may be between 90 and 160 sustainable fuel plants in operation

globally producing aviation fuels in combination with fuels for road transport

and other modes

• Global revenue for these sustainable fuel plants is estimated at between £8

billion and £17 billion

UK • In 2030, between 5 and 12 sustainable fuel plants producing a combination

of aviation and road transport fuels (between 20% and 60% aviation fuel)

• Gross value added contribution to the UK economy is estimated at between

£70 million and £265 million, including global exports of £100 million to

£220

• Between 900 and 3,400 UK jobs, including 500 to 1,000 linked to global

exports

Overcoming Barriers: Enabling sustainable

aviation fuel production by de-risking investment

This chart

illustrates the

urgent need to

act now to

reduce

investment risk

over the next 10

years to ensure

that commercial

scale production

can be achieved

from 2030.

UK policy - Levelling the

playing field • Proposal for Aviation jet fuel to count towards

transport RTFO from 2020. – allow sustainable jet to qualify for tradeable certificates within incentive

regimes (e.g. RTFCs in the UK)

• Still discussion on: – what % volume cap,

– whether fixed or increasing over time

– what feedstock types are eligible (incl what wastes)

– what CO2 reduction benefit

RTFC = UK Renewable Transport Fuel Certificate

RTFO = UK Renewable Transport Fuel Obligation

Sustainable Alternative Fuels – Why aviation ?

• Supply industry benefits of working with aviation sector: – We have no alternative technologies to liquid fuel to meet our 50%

reduction in emissions by 2050

– Other sectors have alternative technologies eg electric

– Relatively simple supply logistics ~ 100 airports = 80%+ global demand

– We are investors for the long-term

• Focus on second generation biofuels that avoid negative environment impacts and produce clean burning fuels

• We import 60% of our jet fuel into the UK and this trend is set to continue

Commercial Sustainable Biofuel

North America Southwest Fedex United Cathay Pacific

Europe BA France/KLM Lufthansa Finnair SAS

Global Airline Projects Sustainable Fuels

South America GOL Aeromexico

Asia Virgin Atlantic JAL ANA

Collaboration is key

Thank you.

Leigh.Hudson@ba.com