Transcript by Kensho.

Lindsey Hall: Hi. I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a senior writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

Esther Whieldon: Those sounds you just heard I recorded on my flight to Seattle, Washington. I was on my way to attend and cover a Sustainable Aerospace Forum that was hosted by Boeing and Financial Times Live on May 17.

Lindsey Hall: Now the aviation sector represents more than 2% of global emissions. And that footprint could double or even triple between 2019 and 2050 due to projected increases in demand. That's according to estimates from Climate Action Tracker, which is a collaboration of 2 organizations, Climate Analytics and the NewClimate Institute.

And as we'll hear today, aviation is considered a hard-to-abate sector. What does hard to abate actually mean? Well, in a nutshell, it refers to when the decarbonization pathways for a sector are expensive and technologically challenging. Despite the hurdles, a number of airlines have pledged to pursue net zero emissions by 2050 or sooner. And some manufacturers and technology companies are in the process of developing additional low-carbon solutions.

Esther Whieldon: In today's episode, we'll explore where the aviation sector is on the path to net zero. We'll learn what technologies and fuels it expects to use, the challenges ahead and the role of government and finance. In addition to my takeaways from the conference, we'll hear my on-the-ground interviews with experts across the aviation space.

We'll hear from Lauren Riley, who is Chief Sustainability Officer and Managing Director of Global Environmental Affairs at United Airlines. We'll talk with Diana Birkett Rakow, who is Senior Vice President of Public Affairs and Sustainability at Alaska Airlines. And we'll get the financial sector perspective from Joseph Shanahan, who is Head of Aviation at big multinational bank Citi.

I also sat down with Sheila Remes, who is Vice President of Environmental Sustainability at Boeing; and Philippe Lacamp, who is CEO of SkyNRG. That's a producer of low-carbon aviation fuels. And these fuels are more commonly referred to as sustainable aviation fuels or SAF. That term, Lindsey, will come up a lot in today's episode, by the way.

Lindsey Hall: So speaking of flying, Esther, I understand you had quite the adventure coming back from the conference.

Esther Whieldon: Oh, my good news, yes, I almost missed my flight. The TSA line took me about 1.5 hours to clear, which is about 3x as long as usual for me. I was standing there, Lindsey, watching the minutes tick by on my phone and calculating whether I'd have enough time to run to my gate before they close the cabin doors.

Lindsey Hall: Yes, I was holding my breath for you back here on the East Coast, just crossing my fingers that you make it. So I'm glad you didn't miss the flight.

Esther Whieldon: Thank you. Yes, it was down to the last minute. I think I ran about the fastest I have in my life.

Lindsey Hall: So now you're back, tell us how is the Sustainable Aviation Forum. And what did you hear?

Esther Whieldon: I really learned a lot at this event. And I got the sense that the aviation sector is still very much in the early stages of development and deployment. For example, I heard how sustainable aviation fuels, or that term SAF we heard before, last year accounted for only 0.1% of total jet fuel. At the same time, airlines and customers purchased every drop of that SAF that was produced, which panelists said showed a clear demand for these fuels, yet SAF is still quite expensive compared to regular jet fuel.

The International Air Transport Association, or IATA, found that sustainable aviation fuels in 2022 alone cost airlines an additional $322 million to $510 million. IATA is an airline trade association with about 300 members that collectively represent about 83% of total global air traffic today.

One big question that came up at the conference, Lindsey, was how will the cost of this transition for airlines affect the price of flying for customers and, along those lines, how are airlines working to educate and engage with customers on their sustainability efforts. We'll explore all these topics in this episode. So needless to say, there's a lot to cover, and this episode may end up being a little bit longer than usual.

Lindsey Hall: Now before we dive into your interviews, let me just quickly define a couple of terms we'll be hearing later on. One is feedstock, and this term refers to materials used to make fuel. Another term you'll hear is drop-in, and this refers to SAF that can be used in combination with regular jet fuel without having to change the airplanes' engines or design.

Currently, airlines are allowed to use up to 50% SAF in their fuel mix, but that could increase in the future. For example, Boeing has pledged that all of its new commercial airplanes will be capable and certified to fly on 100% SAF by 2030. So as I've heard you mention SAF several times, can you tell us what exactly is it made of?

Esther Whieldon: Yes, for that answer, let's turn to Philippe of SkyNRG. He also describes for us how many more refineries will be needed to meet future demand and how his company finances its projects. Oh, and by the way, you'll hear him mention the acronym HEFA, spelled H-E-F-A. This is a jet fuel technology, and the letters in HEFA stand for hydroprocessed esters and fatty acids.

Okay. Here's Philippe.

Philippe Lacamp: So sustainable aviation fuel is from nonfossil sources is simply the best way to put it. And it can be a number of different pathways now. The most familiar to people will be what we call the HEFA technology, and that is waste oils and fats. So that's the used cooking oils, very familiar to people from renewable diesel. And it's actually the fraction from that distillation process. So that's a very common one. And that is the one today which is most scalable. It can be easily produced, relatively easily produced. And we see that providing the initial ramp-up of sustainable aviation fuel in the market.

However, there is a limit to waste oils and fats, simple as that. And you also have to be quite cognizant of the sustainability challenges around things like used cooking oil and the provenance of those, where they come from, are they causing unintended consequences on land use change, these kinds of issues around the used cooking oil.

The second interesting technology is alcohol to jet. So that's when you take and you produce an ethanol. And that can be derived from agricultural residues, you have forestry residues, those kinds of materials. And that -- they then go through an ethanol process, and the ethanol itself is then converted into jet fuel. That's called alcohol to jet.

And the third pathway that is relevant for SkyNRG is the power to liquids. And that is where you take renewable electricity. You run it through an electrolyzer, which separates the hydrogen and the oxygen. You combine that with CO2. And through a magical process, you then end up with a liquid fuel.

SkyNRG has 3 facilities underway. The first is a HEFA facility, and that was because when this was started, the move into capacity development has begun in 2017. HEFA was the technology -- the most de-risked technology out there. The differentiation for SkyNRG, because we're very, very sustainability focused, was on using really difficult-to-use waste oils. And that predominantly in the oleochemical industry, these are wastes that would normally just go for incineration.

So there are techniques now. There's the possibility of cleaning up those waste materials. It's expensive to do, but it produces a waste oil that can then be put into the HEFA process. So you can treat it as you would then with used cooking oil, for example. But clearly, it's much more sustainable, more challenging because just the collection is more challenging. It's not homogenous, so you've got to treat it well. But for the scale of project that we have for that HEFA facility, that works fine.

The Pacific Northwest project for SkyNRG is the alcohol-to-jet pathway, and we'll be using biogenic methane for that.

Esther Whieldon: What does that mean?

Philippe Lacamp: So these are biogases. So you think of dairy farms, cattle, so that is regarded as a cellulosic pathway. And that then is converted into ethanol, which is then converted to liquid fuel. And the third is the power to liquids, where you need -- your major feedstock is actually renewable electricity.

Esther Whieldon: How much is really needed to scale up to what we're talking about, both from what different regions are looking for as well as this net zero by 2050 loftier goal?

Philippe Lacamp: Our projection is around, for the U.S. and EU announced targets, somewhere in the region of 750 new facilities; for net zero, somewhere in the region of 2,500, okay? So...

Esther Whieldon: That's a lot of stuff to site.

Philippe Lacamp: And you'll see numbers that are higher than that. Some of it will depend on the speed at which we can scale. The success of some of these novel pathways, which will allow us to replicate and makes them a lot easier to finance because, of course, you're going to raise that equity and debt, and that in itself takes time, right? So that's where you want to get into something that is a replicable, financeable offering so that we can then really build that capacity.

Esther Whieldon: What Philippe said about how he finances new refineries, I think, is a good segue to exploring what banks are doing to aid in the aviation industry transition. Here's Joseph of Citi who says the bank is working to help companies track their data and increase market liquidity.

Joseph Shanahan: We just released our view regarding how the banking industry should obtain data and then measure its own emissions. It's simply guidance around creating a framework through which banks on an individual basis can collect data and report on a consistent basis apples-to-apples across institutions the emissions that occur from their aviation lending portfolios. And so that's one of the ways within aviation that we are focused on sort of helping in this endeavor. That's the reporting side, which I think is important. We have to measure what's occurring in the space.

The second thing that I would say is we are also a financier. We have a leading energy practice. We have a leading aviation practice. And so it's going to take both of those sectors coming together in order to create the transition that we've been talking about at this event. And so we are collaborating across those 2 sectors to raise capital for clean energy, to work with clean energy providers as well as consumers to ask how can we provide finance and work with both clients on both sides in order to get more things like sustainable aviation fuel into the aviation ecosystem.

Esther Whieldon: What needs to happen to help de-risk these technologies for you to be able to feel more comfortable to put more money into them than you currently are?

Joseph Shanahan: Well, I think from our standpoint, we take our signals from the players in the space, right? And so we hear 2 things. One, the airlines will buy as much SAF as produced at a price. The producers will say I will also produce at a price. Unfortunately, those 2 prices that they're talking about are not the same. And so one of the things that we spend a lot of time doing is talking to the communities on both sides to say how do we narrow that gap on price.

And so from our perspective, one of the things that we would like to see and actually work to make happen is to create a more liquid marketplace for sustainable aviation fuel the same way the jet fuel has a very liquid market, frankly, the same way that crude oil has a very liquid market. And our view is that with more liquidity, that cost premium will indeed come down.

Esther Whieldon: Was there any new takeaways or sort of themes you heard today or any really important ones that you think it's important to note to our audience?

Joseph Shanahan: One thing that I would highlight, and this goes back to the liquidity and the breaking-down barriers because one thing we do know in economics, liquidity reduces price, barriers increase price. There are airlines that have been speaking today that would like to access SAF, cannot do it in their own marketplace. And we need to, as an industry, find a way to tap into that desire to invest for the aviation ecosystem and give those clients credit for doing so even if they don't have a mechanic to get the SAF directly into their airplanes. And that's a place that we look forward to working more closely with our aviation colleagues, our energy colleagues and policymakers to make a reality.

Esther Whieldon: We just heard Joseph mention that sustainable aviation fuels are not currently available globally. And in fact, this came up a number of times at the event. For example, I heard the Head of Sustainability for Virgin Australia said that they do not fly to any airports that offer SAF mixed to jet fuel.

As Joseph alluded to, this lack of a global market has prompted early discussions of the creation of a market mechanism called book and claim. This mechanism would enable airlines to essentially buy SAF credits as emission offsets when they cannot buy the fuel itself. We'll hear more of this idea referenced in interviews later on.

But first, I'd like to return to the main theme of this episode, which is how the airlines intend to achieve net zero emissions. Here's Diana explaining Alaska Airlines' decarbonization goals as well as how it is engaging with customers on its sustainability plans.

Diana Birkett-Rakow: So Alaska Airlines has been working on sustainability for a long time, and I think part of that is just sort of our nature. We grew up, as our name suggests, in the State of Alaska, where we actually serve today 20 communities that are -- 20 communities, only 3 of which are accessible by road. And so I think there's just an ethos of really being close to communities and the role of communities and the land and sort of the whole ecosystem of how things connect.

And so we have this saying that we want to deliver value for all those who depend on us. And that includes passengers, employees, communities and owners. So sustainability is part of actually making that balance work and making sure that all of those -- that we are delivering value for all of those different stakeholders.

So our 2025 goals include being the most fuel-efficient U.S. airline by 2025. A lot of that is based on the sustainability or fuel efficiency of our fleet with a big help from Boeing as well as operational efficiency. And our long-term goal is to reach net zero by 2040. And then our Board at the time was incredibly supportive of setting a big, bold goal, but they also said, "Okay. In our culture, we don't set goals unless we know how we're going to get there. So how are you going to get there?"

And there's sort of a -- we know our path and we don't know our path at the same time. So what we decided to do was knowing that we couldn't determine every single step and that we are going to rely on some technologies that don't exist today at the scale that's required to get there, we outlined a 5-part path to net zero. So the 5 parts are operational efficiency, fleet renewal, sustainable aviation fuel, new technology and carbon -- high-quality carbon offsets and removals to close the gap to target. So that's the course that we're on right now.

Esther Whieldon: Okay. So real quick, the second term you mentioned there, which was fleet renewal, can you talk real quick about what that means?

Diana Birkett-Rakow: For sure. So that is for us specifically bringing the new 737 MAX into our fleet. And the MAX is about 25% more fuel efficient than the aircraft that it replaces and about 50% less nitrous oxide emissions as well. So that 25% more fuel efficient added up over a number of airplanes, that makes a major dent in our path.

Esther Whieldon: Can you talk about how you are working to sort of build consumer trust?

Diana Birkett-Rakow: One of the things that's really interesting when we survey people, and I think this changes pretty quickly over time, but consumers respond more quickly to the idea of recycling or eliminating plastic than they do to the idea of our carbon footprint. Because it's something that you can touch and feel and understand, and it's in your house, and you think about it when you go grocery shopping, so it's a much more relatable topic. And we do have an industry-leading recycling program on board, and we've eliminated plastic cups and plastic water bottles from our service in favor of boxes and recyclable paper options.

And so that's a good starting point for engaging consumers in the conversation because it is relatable and it's tangible and it's real. And it also is one of our ESG goals in terms of waste reduction. And so then the challenge is to bridge into these more seemingly esoteric concepts for people that aren't as close to them in terms of greenhouse gas emissions and carbon footprint.

And the idea of avoiding fuel burn, that's a little bit more relatable because it's in your car. But sustainable aviation fuel is a little bit more of a complicated topic that I think is just going to take time for people to understand. I think it's going to be easier when there starts to be local production in more areas of the country because you can specifically cite projects that might actually be where your friends work or down -- exactly, or downstreet or what have you and talk a little bit about more of the specifics of some of those production pathways and where they come from to use waste from the local waste treatment plant or whatever to actually power the SAF.

Esther Whieldon: Lindsey, one big question for airlines is how much they will ultimately need to rely on carbon offsets. I'm talking about carbon credits for emission reductions taken elsewhere such as like reforestation, for example. We heard Diana of Alaska Airlines said that they expect to use some offsets, but United Airlines has decided to not include offsets in its net zero plan. Here's Lauren from United explaining that decision.

Lauren Riley: United is committed to really doing the right thing in this transition to net zero. The industry has a goal of net zero by 2050, and that includes United as well. But in addition to just a standard net zero target, United has actually made the statement that our trajectory to net zero 2050 will not include the use of carbon offsets.

Esther Whieldon: I was going to ask about that. Yes, how are you going to do that?

Lauren Riley: Well, technology, technology, technology and innovation. When we were having this conversation about what does it mean to set the North Star of net zero and really affect the kind of change at the speed that we need, it was very, very quick that we reached the decision not to include offsets. We are a hard-to-abate industry, which means today, roughly 3% of global greenhouse gas emissions. Future, that percentage of total greenhouse gas emissions is going to go up because we don't have the solutions at scale to really tackle those emissions and reduce them from flying.

And so when we're having this discussion about what does it mean to set a target for net zero by 2050, we quickly concluded that for us to do the right thing, for us to really solve the problem, for us to look at permanent changes in reducing those emissions in our operations, we couldn't afford to simply write a check and claim that suddenly, overnight, we're decarbonized. It didn't feel right.

And so for us, it was really a principled decision around this is the harder thing to do. We have to roll up our sleeves. We don't actually know the solutions. We know that sustainable aviation fuel, electric, hydrogen-powered aircraft, there's a sort of suite or basket of solutions that are going to come forward to help us decarbonize. They're there. They're going to mature. There'll be efficiencies yielded over time that will help us get there. But we cannot afford to take our eye off the ball and claim success when, in fact, we haven't changed anything we do in our operation.

Esther Whieldon: So how does it work? How do you realistically get to zero because sustainable aviation people still have an emissions footprint, right?

Lauren Riley: They do. And so it's a little bit science, a little bit art here. So we talk about a life cycle assessment, so over the life cycle of the production of that fuel and the use of the fuel, how much can we reduce emissions compared to conventional jet fuels. So today, sustainable aviation fuel is the solution you hear a ton about. SAF, you might as well get used to the term SAF, it's here to stay.

Today's SAF can reduce emissions up to 85%. SAF of the future has the potential to be carbon neutral or perhaps carbon negative over time. And that's because we are refining the technologies where we are getting higher yield out of the feedstocks. We have different pathways that are emerging that can help us use SAF smarter than we're using it today. We're essentially in Generation 1 of SAF.

Esther Whieldon: Yes.

Lauren Riley: And it really does pull down the emissions when you think about 85% less on the same plane. And you've also heard today that it's referred to as drop-in, which means you take it, you put the SAF in the same fueling tank that you put regular jet fuel, and it goes on the same airplanes.

I mean, United made a commitment to purchase, I think it's upwards 700 aircraft this decade. So this year alone, 2 new aircraft a week; next year, 3 new aircraft a week added into our fleet. Some will retire, some will not. But that's a lot of airplanes that we need to fuel.

And those airplanes are in the sky for 30 years, 25, 30 years. So we're also being addressed with this challenge of how do we use the assets that are not going to fundamentally change for the next 30 years while we know that we don't have that time line to really address climate change. And so SAF is really the silver bullet today to enable us to continue to use those aircraft because we don't want to have to replace them early. That's got its whole other climate issues associated with the materials and the production of the aircraft. And we want to use it for its useful life, but we want to use it in a sustainable manner.

Esther Whieldon: So how are you dealing with the cost issue for consumers? There has to be a price point at which they may not be willing to pay any more for a flight.

Lauren Riley: Yes, that's a great question. If you had asked me that question 2 years ago, I would have shrugged my shoulders and said I don't think there's a willingness to pay, I've not seen it yet. It's different today. And I attribute that a little bit to the sophistication and understanding from consumers. So things like United hiring a Chief Trash Officer with Oscar the Grouch has really helped inform and educate the flying public around we have a plan, there is a solution, be part of the action associated with that. So there's a bit of sort of awareness and education building going on.

But there's also some really practical products and opportunities for engagement. I'll give you 2. One, we launched this Sustainable Flight Fund earlier this year. It's more than $100 million that United is putting forward with partners like Boeing and GE and Honeywell and others to invest in sustainable aviation fuel producers.

In our booking path today, we launched 2 information sources for the average flier. One, emissions in the booking path, so you can look at all of your flight options and know which one -- which flight is the lowest emitting, which one is the highest emitting. And perhaps that influences your decision. 

But two, as you move through the booking path, we have embedded a capability in there for the average flier to contribute to our Sustainable Flight Fund, anywhere from $1 to $7. I'm optimistic about the power of financing the transition, whether it's something big and hairy and crazy like establishing a fund or offering our consumers the ability to engage in that.

Or I'll give you one last example real quick in the time we have. We have launched this program called the Eco-Skies Alliance. This is for our corporate and cargo travelers. We launched it in 2020, and it allows our corporate travelers to pay for the Scope 3 emissions associated with the SAF. They get to reduce their emissions from travel on United. We get to go buy more fuel. That is sustainable aviation fuel. We just announced earlier this month that this year alone, we procured 10 million gallons from that program. That's a threefold increase from last year, a tenfold increase from 2019.

Those are the signals that we need to send the market right now, that we have a tenfold increase in less than 4 years demand for sustainable aviation fuel through this creative financing mechanism in partnership with our corporate customers, huge, huge statement. And so we need to continue to provide those opportunities, whether it's through the corporate channels, our leisure travelers, venture funds and partnerships with other corporations that are looking to change the way we fly. We have to look across the entire spectrum and provide a variety of opportunities for engagement. And that's exactly what United is doing.

Esther Whieldon: We just heard Lauren mention how corporate and cargo travelers are helping fund the procurement of SAF. This was something I also heard during the panel sessions, that is how the airlines are seeing strong support from corporate clients on decarbonization options.

Lindsey Hall: Okay. So we've heard a lot about SAF. But what other low-carbon technology options does the aviation sector have?

Esther Whieldon: Well, they really have 2 additional options they're exploring right now. Those technologies are batteries and hydrogen. What I heard at the conference is that both options are expensive and have some technical limitations. For example, batteries weigh a lot, which means using them as they currently exist is really only an option for short-distance flights.

And at the conference, I heard about something really interesting. It's this company called Wisk that is creating a sort of autonomous-driven air taxi. I don't know about you, but the idea of an air taxi immediately brought to mind like the '80s cartoon The Jetsons or the movie Fifth Element with taxi zooming everywhere between skyscrapers.

Lindsey Hall: And when you say autonomous, we're talking about like no pilot driving the airplane, right?

Esther Whieldon: Right, exactly. It's just like hard to believe, right? Well, Lauren from United Airlines tells me we're not that far off from starting to see that kind of future. By the way, you'll hear her mention the FAA, that's the U.S. Federal Aviation Administration. Okay. Here's Lauren.

Lauren Riley: So United, we've got a couple of different prongs on the fire. First and foremost, we launched earlier this year a Sustainable Flight Fund. And we also have venture investments in electric and hydrogen aircraft. So we have a couple of investments out there, whether it's standard, shorter-distance regional jets or if there are vertical takeoff and landing that happened to be electric. We are also looking at hydrogen-powered batteries and finding a way to sort of realize the technological potential of all of these options on the table because, frankly, we're going to need them all.

What I like about the electric space, frankly, the challenge today for long haul and in some of our mainline flying is that the batteries would be so heavy that you may not be able to actually lift that jet off the runway.

Esther Whieldon: Right.

Lauren Riley: That's kind of a problem if you can't get it in the sky, right? But when you think about vertical takeoff and landing, so think about urban taxis. So here we are in Seattle, Washington, looking at Lake Washington, I can get in an electric-powered vertical takeoff and landing, go to SeaTac, even though it's right next door but let's ignore that, and I can actually get there arguably at the same price as an UberXL with a lower carbon footprint because it's powered by electric.

And then from an airline point of view, we're giving our travelers a very different experience. Not only are you actually going to get on the regular flight to go to your destination and hopefully be flown on SAF, but you can actually get to the airport, lower stress, lower emissions, potentially equal in cost, you're avoiding the traffic, I mean, it could be a plus-plus for everyone, and it's good for the environment.

Esther Whieldon: But realistically, how far off are we from a world where you could get a cab equivalent of a flight via electric? I mean, is this something that's by the end of this 2100? Or we...

Lauren Riley: Oh, yes. So the vertical takeoff and landing prospects are by the end of this decade. The biggest challenge here is not technology, it's the regulations, how do we access the airspace, how do we make sure that the safety protocols are there, how do we make sure that you're permitted appropriately. A lot of that has to do with the FAA, and they're working very hard on that.

So it's a bit out of the manufacturers' control of some of those aircraft and the operators' control like United will be one day. And it's more about how do we build an infrastructure of airspace that supports all these different modes that are emerging. And that will take a little bit of time, but that's solvable. That's what our FAA and air traffic control do. So that's forthcoming, and I think that will be coming by the end of the decade.

Esther Whieldon: Earlier in this episode, I mentioned one theme from this conference, which was the role of government in helping the aviation industry transition. Two government actions in particular came up. One was the U.S. Inflation Reduction Act or or the IRA. As a reminder to our listeners, the IRA dedicates nearly $370 billion in federal spending to decarbonization efforts over the next decade. Now included in the IRA was something called the sustainable aviation fuel credit, or SAF credit, which we'll hear more about shortly.

Another thing that came up was a new law in Europe called ReFuelEU Aviation. That law will require aviation fuel suppliers to have SAF comprise at least 2% of overall fuel supplies at EU airports by 2025. And those levels will increase to 70% by 2050.

I asked Lauren of United how the IRA's new incentive might help the airline as well as about the EU's new SAF mandate. We also talked about how the policies and incentives might help the aviation industry compete with ground transportation for the feedstocks that both sectors are using for low-carbon fuels, which was a topic that came up several times during the conference. Here's Lauren.

Lauren Riley: So we are in a business today of creating a marketplace for a product that doesn't exist. So think about that. Like we are leaps and bounds in the early stages of establishing what should become a robust marketplace for fuels that are clean. So this is fundamentally about that problem statement.

So policy incentives are crucial right now. The Inflation Reduction Act and specifically the credits associated with sustainable aviation fuel, SAF, they're great. It's the first time we've had a federal policy that has signaled that the administration, U.S. economy should be shifting, it's time to go, let's back SAF.

The challenge, though, to your point, is that the SAF blenders tax credit, it's a 24-month policy. It kicked in, in January. It expires at the end of 2024. You cannot get a shovel in the ground to build new capacity or convert existing capacity in that time line.

There is a second credit that follows. It's the clean fuel production credit, which is great and that's sort of broader, but we really need to focus on what aviation needs to grow these alternative fuels right now. So 2 years is not enough.

The great news is that there seems to be consensus and understanding around why. What's sort of the crystal ball of the future is can we change that? I don't know. I don't know the answer to that. But given some of the momentum we've seen in the last 12 months, I'm optimistic.

Esther Whieldon: And then how does this fit -- obviously, you fly internationally as well. So how does this -- what the U.S. is trying to do fit with what the EU or even other countries, other regions of the world are trying to do?

Lauren Riley: That's a great question. Because we are a global industry and we have to start and end in that capacity because the minute that we start having these patchwork regulations and the administrative burden of complying becomes so heavy that you can actually execute against it, we all lose. And that's exactly what we don't want to have happen.

So there is broad and collaborative coordination at global capacity across the industry. Last year, we all committed to net zero by 2050. That was a really, really bold statement by a global industry saying we're going to get there. What is different, to your point, is how each region puts policies in place and incentives in place to enable that. So we know that the European Union likes to take more of a mandatory mandate approach. U.S. takes a market-based incentive approach. There's a whole bunch in between. But what we're trying to accomplish is consistent, and I think the signaling that is really important.

It will be interesting to watch the next couple of years because we've got a couple of different models out there. In terms of carrots and sticks, when you're trying to grow a marketplace, are you driving up the cost of a scarce resource through your policies or are you actually enabling new production and then, over time, lower cost remains to be seen.

Esther Whieldon: All right. So now we've touched on nearly all the themes I heard at the conference. We've covered what airlines, banks, governments and SAF manufacturers are doing. But what about the companies like Boeing that actually make the airplanes? For this, I spoke with Sheila of Boeing.

And one of the reasons I saved her for last, Lindsey, was because Sheila and I also touched on a topic that we've covered before in this podcast, which is how the low-carbon transition will not occur in a silo and intersects social issues as well. Here's Sheila, where she starts by outlining Boeing's decarbonization strategy.

Sheila Remes: So what we're doing for the decarbonization of the aviation industry is we've really focused on 4 different levers. So that's the fleet renewal, which is where we spend billions and billions of dollars of R&D to make that next new airplane more fuel efficient. And then we also are investing in a number of digital tools to help make it operationally more efficient and working with airlines and air traffic management to help them find solutions to either making lighter sleets, reconfiguring, adding aftermarket fixes to the aerodynamics; and then the air traffic management, how can we find ways to fly more efficiently through the year.

And then we get to what we've been spending a lot more time on is that new fuels, renewable fuels. And so that gets to sustainable aviation fuel and the renewable energy economy, if you will, because no matter which fuel you take, whether it's SAF, electric or hydrogen, we're going to need a clean grid. And so we've been spending a lot of time with energy companies on that as well as helping put that into our own operations.

So we've been decarbonizing our operations, reducing our energy footprint in how we produce and also talking and working with our supply chain, just trying to understand where they are because everybody is at a different point, and some of the suppliers are further along than even we are. So it's been a great learning experience, but it's also been a journey of progress. And we've set goals several years ago, and now we're resetting and reestablishing harder and higher goals for our operations.

But then as it pertains to the aviation industry and aerospace, as this new energy meets the look and feel of that new aircraft form, we're also investing in what those new aircraft concepts are. So making sure that we're investing in the 100% SAF-compatible airplane, which will come out in 2030. We're also investing in trying to figure out how you use some new energy sources like the joint venture with Wisk, what are the operational learnings for the airlines, how might they utilize this new type of technology. And then the hydrogen space, that is a whole new form and function in terms of how it integrates with the airplane, so what would that look like and what might be the implication to airlines, operations, fuel, airports. So all of those are works in progress that we're working towards.

The joint venture with Wisk, we're working with them on just from our standpoint, understanding more about that technology, the electric technology and also supporting them with their understanding of the electric technology. And their CTO spoke a little bit about that today with us. In addition, there is also the potential of learning and translation of the autonomous knowledge. So some of the work that they're doing relative to the autonomous flight is also going to be something that we can also perhaps port back over into our commercial airplanes in terms of how we can keep it safer and better in terms of how they're flying. It's basically how do you detect and avoid. That's what it is, detect and avoid. And if you can put some of that on our current airplanes, that technology, that just makes us better as an industry.

Esther Whieldon: If you were describing to someone who wasn't able to attend, what would you say were like the biggest themes or takeaways that are noteworthy from this?

Sheila Remes: Well, I think one of the biggest takeaways is really the ability to have that conversation with the different sectors that are involved, so policy, energy, finance and aviation, was insightful because you can see where there's points of tension and yet where there's large amounts of agreement. And so I think that, that is a huge opportunity in front of us to solidify those points of agreement and move it forward so that we can start making progress.

Esther Whieldon: And what would you consider the points of agreement versus points of tension that you observed?

Sheila Remes: I think some of the areas of tension is how big of a demand signal needs to be sent for the financing to come to the table. And I think what I took out of this was book and claim, as a complicated topic, needs to help address it. And that's going to also be a significant potential unlock to starting to get some of the sustainable fuels flowing.

And I think what we heard today is that we don't have a market. At least with renewable energy or energy in general, there is a market. For this, it actually starts to frame up a market and a global market at that. So I think there it's slightly different in that manner when you've got something that it doesn't -- it's not a commodity, and so it's really hard to price. It's really hard to get it to flow. And so this is a vehicle that might help it.

Esther Whieldon: The emerging markets question, which is a question for the energy transition in general, for the low-carbon transition in general, is these economies that want to be part of the transition, to what extent are you targeting trying to get into those markets or help those markets develop?

Sheila Remes: So it depends on what you call an emerging market, but we have worked with a number of places around the world. So Brazil is one of those places that oftentimes is cited as an emerging market, but yet it is an incredibly strong ethanol market. And so they are looking at that very seriously as a commodity that they can turn into sustainable fuels.

If you look at Africa, we've looked -- we've worked with South Africa over the years on different crops that can be grown, and it actually kind of has a co-benefit of helping agriculture. And then the waste product becomes something that actually can turn into fuel. So there's livelihood that can be made from it. And it can also -- it could be an and for some of these parts of the world where you can transition to a cleaner fuel, you can improve your agricultural yields, and you can get rid of your waste products by turning it into SAF. So there's places for it.

And I think it was great that we were able to have the World Bank here talking about that and really interested and engaged in trying to facilitate some infrastructure development in those parts of the world because they're hard. It's oftentimes harder than it is in other places.

Esther Whieldon: And the lady from the World Energy Council also talking about sort of the social aspect of this and how we have to think about that, which is always refreshing to hear at a conference because at our podcast, we're always talking about and talking to people about how you can't think of these things in silos, right?

Sheila Remes: Right. It's -- I like to think of it as the social foundation and the environmental ceiling, so that whole Doughnut Economics concept. And I think that, that is really important, and that's why the 2 goes so hand in hand. And if I was going to give you another takeaway, I too found that to be incredibly powerful to have so many people mention that intersection of social and environment that oftentimes we just talk about the emissions, and yet it's so important to have both in the conversation.

Esther Whieldon: So we've heard a lot today about what the aviation sector is doing on the path to net zero and that it will require a combination of options.

Lindsey Hall: Well, thanks, Esther, for such a comprehensive rundown. And to our listeners, please stay tuned as we continue tracking the ways that different sectors are pursuing their net zero targets.

Thanks so much for listening to this episode of ESG Insider and a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

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