US-based United Airlines expects Inflation Reduction Act to spur more SAF output

US-based United Airlines expects the Inflation Reduction Act, a government plan set to unlock $370 billion in clean energy investments, will help incentivize higher production of sustainable aviation fuel, which is currently in short supply, according to a company executive.

"There is insufficient SAF available on the market today, but the Inflation Reduction Act in the United States...really sets us up very well for the future in terms of encouragement of future SAF production," Andrew Nocella, United's executive vice president and chief commercial officer, said in a media roundtable in Dubai March 27.

United currently uses around 49% of the world's available SAF, according to the carrier's estimates.

United has little carbon offsets because SAF is "the real answer" for decarbonizing the aviation industry, alongside carbon sequestration, Nocella said.

Platts, part of S&P Global Commodity Insights, assessed US West Coast SAF with credits on March 28 at $5.53/gal, up 0.14% on the day.

Most of the SAF produced today uses a feedstock of fats, oils and greases, which is too small of a category to supply the aviation industry's full needs.

"Feedstock for SAF has to be the right feedstock," said Nocella. "We can't compete with food supply."

"Flight plan"

In 2022, the Inflation Reduction Act was passed as part of President Joe Biden's attempt to woo investments into clean energy projects in the US through tax credits and implement his pledges to fight climate change.

Tax credits for SAF in the act are expected to help lower the cost of the fuel, which trades at a premium to renewable diesel.

Under the act, the SAF credit is $1.25/gal in a qualified mixture and to qualify for the credit, the SAF must have a minimum reduction of 50% in lifecycle greenhouse gas emissions.

Already the US authorities, including the departments of energy, transportation and agriculture, have laid out a whole-of-government "flight plan" to support the Biden administration's Sustainable Aviation Fuel Grand Challenge.

That initiative aims to boost SAF production to at least 3 billion gallons/year by 2030 and wean the sector off petroleum-based jet fuel completely by producing 35 billion gallons/year of SAF by 2050.

Transportation is the largest source of greenhouse gas emissions in the US, with 11% of those emissions coming from non-military flights within and departing from the US.

Net zero by 2050

Airlines such a United are planning to increase the usage of SAF in their flights as part of the plans to reduce emissions, which are considered among the hardest to abate.

United plans to have net zero emissions by 2050, without relying on traditional carbon offsets, and is working to decrease its carbon intensity by 50% by 2035, compared with 2019 levels.

United is also leading a new $100 million fund designed to support startups and research focused on decarbonizing the airline industry via SAF.

The use of SAF can lower CO2 emissions by up to 80% and may contribute to around 65% of the reduction in emissions needed by airlines to hit net-zero by 2050, according to the International Air Transport Association.

More than 300 million liters of SAF was produced in 2022, but output will have to rise to 449 billion liters by 2050 for the aviation industry to reach its net-zero targets, according to IATA.

To date, over 450,000 commercial flights have used SAF, and more than 50 airlines have experience in using the fuel, according to the association.

Much of US SAF production is due online in 2025 as new plants start up, according to S&P Global estimates.