S&P Global Platts (Platts), a leading independent provider of information and benchmark prices for the global commodities and energy markets, has launched the first-to-market Sustainable Aviation Fuel (SAF) price assessment in Europe to bring "additional transparency" as the industry embraces energy transition.
In 2019, aviation accounted for over 6 percent or around 220 million tonnes of total annual energy carbon dioxide (CO2) emissions in Europe, according to estimates by S&P Global Platts Analytics, with 0.2 tonnes of CO2 emitted for every thousand passengers carried.
Intra-EU aviation emissions covered by the EU ETS carbon program totaled 70 million tonnes that same year. Earlier this month, the European Commission (EC) launched a public consultation on measures to reduce greenhouse gas (GHG) emissions in the aviation sector, inviting citizens and interested parties from industry and society to share their views and ideas.
Daily cost-based SAF price assessment
Published as of August 17, 2020, the new daily S&P Global Platts Sustainable Aviation Fuel cost-based price assessment reflects the cost of SAF produced from used cooking oil (UCO) on an ex-refinery basis in Northwest Europe. The daily price assessments, published in US dollars per metric tonne, reflect the production cost of SAFs for blending into jet fuel.
Despite an environment where airlines are under exceptional pressure from demand destruction, the green agenda is still being progressed and airlines remain committed to decarbonization. While the Sustainable Aviation Fuel market evolves with the emergence of a spot market, our new cost-based assessment will add critical transparency allowing market participants to compare the price of traditional jet fuel with the cost of new Sustainable Aviation Fuel, said Vera Blei, Head of Oil Markets Pricing, S&P Global Platts.
With an increased focus on transitioning towards a lower carbon future, cleaner fuels are emerging as a compelling solution to achieve emissions reductions within the aviation sector itself, rather than through the purchase of outside offsets – even as consumer awareness grows around the environmental impact of transportation.
Decarbonization incentives include tighter EU emissions reduction targets with intra-EU flight covered under the EU Emissions Trading System (EU ETS) and the International Civil Aviation Organization’s (ICAO’s) market-based Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) program.
An increasing number of airlines have made forward-looking commitments to decarbonize and an emerging pathway involves the integration of SAF into supply chains. While there are only seven airports in Europe taking active deliveries of SAF, an equal number have signed on to accept batch deliveries from pilot SAF production facilities, primarily in Scandinavia.
COVID-19 has led to an unprecedented decline in global air travel, with S&P Global Platts Analytics estimating a 32 percent reduction in jet fuel consumption in Europe in 2020, though activity is expected to recover by mid-decade. The EU’s aspiration to be net-zero by 2050 is pressuring the aviation sector’s rebound to be sustainable. Current volumes of delivered SAF in Europe have been estimated at 0.05 percent of total jet fuel consumption. But maximizing production capacity could push this higher and full production together with additional incentivized uptake could see SAFs speed up the rate of carbon-intensity improvement of European air travel by as much as 50 percent by 2030, said Roman Kramarchuk, Head of Energy Scenarios, Policy, and Technology, S&P Global Platts Analytics.
Could be expanded to the US and Asia
The new Platts SAF assessments follow extensive consultation with producers, consumers, traders, and others in the European oil and biofuel markets as the demand for sustainable aviation fuel grows in consumption and supply.
The Platts SAF assessment assumptions have been calculated by S&P Global Platts Analytics based on existing Platts assessments and other fixed costs. The SAF inputs are costs of Used Cooking Oil (UCO) CIF ARA and Hydrogen Netherlands, added to fixed renewable biojet refinery costs, then deducting the by-product credits to include FOB ARA Propane, Naphtha CIF NWE cargoes, and Diesel CIF NWE ARA Cargoes.
S&P Global Platts will review the specifications and assumptions going forward based on market feedback and as the SAF market develops, and is already considering additional assessments in other geographies, including the United States (US) and Asia.
