Introduction
The aviation industry accounted for about 2.5% of global energy-related carbon emissions in 2023. As air travel is projected to continue to grow, alignment with the Paris Agreement would require the aviation industry to significantly reduce its greenhouse gas (GHG) footprint.
According to the International Air Transport Association (IATA), one way to reduce GHG emissions from aviation is to shift to sustainable aviation fuel (SAF). The aviation industry considers SAF an important step towards meeting its target of Net Zero carbon emissions by 2050, as this technology alone has an emissions reduction potential of 65%.
The SAF industry is continuously developing because of government policies and incentives, as well as regulatory support and sustainability commitments from companies, aviation companies, and industry associations. However, to meet its decarbonization targets, the SAF industry must address challenges such as ensuring feedstock availability, reducing production costs across the supply chain, and developing global policies to provide financial support and to encourage greater investment in SAF adoption and production.
This article reviews the opportunities provided by SAF, the challenges to SAF adoption, policies being implemented to encourage adoption, and what opportunities are available to advance SAF efforts in decarbonizing the aviation industry.
Impacts of Air Travel on Climate Change
The aviation industry emits significant amounts of carbon dioxide and GHGs that contribute to climate change. According to the International Energy Agency, aviation accounted for about 2.5% of global carbon emissions in 2023.
With an increasing demand for air travel—the International Civil Aviation Organization reports that by the mid-2030s, air traffic would increase to at least 200,000 flights per day—the aviation industry’s carbon footprint is projected to rise. A study on aviation’s contribution to climate change found that the cumulative emissions of global aviation (from 1940 to 2018) were roughly 32.6 billion metric tons of CO2, with about 50% being produced in the last 20 years of this period. (All tons in this article are metric tons.) The sector has also seen 3% annual growth since 1970.
The industry has reduced emissions by improving aircraft technology and applying fuel-efficiency programs. From 1968 to 2014, the average aircraft fuel burn decreased by about 45%. From 2000 to 2019, the industry’s fuel efficiency further improved from 1.84 to 0.84 CO2 tons per thousand revenue ton-kilometers (RTK). (RTK is a metric ton of revenue load carried one kilometer.)
Despite these improvements, global air traffic growth has historically outpaced these efficiency gains. A comprehensive approach involving improvements in aircraft technology, airport operations, fuel sources, and policy mechanisms is needed for the aviation sector to achieve Net Zero carbon emissions by 2050.
Options for Reducing the Aviation Industry’s Emissions
Possible decarbonization solutions include operational (air and ground) improvements and new aircraft technologies, including electric and hydrogen propulsion. Market-based carbon offsetting instruments complement the decarbonization efforts of the industry.
However, these and other measures will have only either limited direct effects or indirect effects. The International Air Transport Association (IATA) reports that the easier efficiency gains from fleet improvements have already been achieved, and any further advances will be more costly and difficult to attain. Offsets and taxes have only indirect effects, with unclear efficiency.
Another option for decarbonizing the industry is finding alternatives to traditional petroleum jet fuel to power aircraft. One alternative is sustainable aviation fuel.
Sustainable Aviation Fuel: What Is It and How Is It Made?
Sustainable Aviation Fuel (SAF) is a non-conventional liquid aviation fuel, with up to 80% potential carbon reduction on a life-cycle basis compared to traditional jet petroleum-based fuel.
The European aviation industry alliance Destination 2050 and the IATA both project SAF to be the biggest contributor to reaching the Net Zero emissions target by 2050. IATA projects that other methods will have less significant roles in achieving Net Zero: aircraft and engine technology development, for example, will account for 13% of progress to Net Zero by 2050, while SAF will account for 65%.
Types of SAF
Different types of SAF are typically identified by the means of production pathways and are synthesized from various sustainable feedstocks. Common pathways include the following:
- Hydroprocessed Esters and Fatty Acids (HEFA): These include waste fats, oils, and greases (FOGs) from vegetable and animal sources.
- Gasification and Fischer-Tropsch (G/FT): Biomass-based feedstocks such as municipal solid waste (MSW) and agricultural waste products are gasified and then further treated to become fuel.
- Alcohol-to-Jet (AtJ): Starch crops and cellulosic (non-food) biomass are converted into isobutanol or ethanol, then further processed into fuel.
- Power-to-Liquid (PtL): Renewable electricity is used to convert water and captured CO2 (through direct air capture or other forms of carbon capture) into what is known as e-fuels (unlike the first three, which are types of biofuels).
SAF and Sustainability Impact
The type of feedstock and production pathway used influences the sustainability of SAF, so not all SAFs are equally sustainable. To be considered sustainable, the source of feedstock must not directly or indirectly contribute to land-use change, compromise food security, or have significant emissions from production.
First-generation biofuel feedstocks such as palm oil and corn grains were derived from food crops and are generally no longer considered sustainable. IATA identifies second- and third-generation feedstocks as being more sustainable biofuel feedstocks.
Second generation (2G) feedstocks such as non-edible waste fats, oils, and greases (FOGs) (e.g., used cooking oil, industrial waste greases, and biomass) are one of the most used feedstocks and are processed into SAF with HEFA technology. However, 2G feedstocks are costly due to inconsistent supply and limited as they are being utilized by other sectors.
Third generation (3G) feedstocks, such as biological and agricultural wastes (e.g., municipal solid waste, forestry residues, algae oils, and energy crops from degraded land), are more abundant and have lower associated costs compared to 2G feedstocks. However, processing them into SAF requires more advanced technologies such as Gasification and Fischer-Tropsch.
SAF’s emission reduction factor (ERF) values can also differ among the various feedstocks and production pathways. The higher the ERF, the greater the amount of carbon savings of such SAF output (Figure 1).
Figure 1: Emission Reduction Factor Values across Different Production Pathways and Feedstocks
Projected SAF Production
An IATA roadmap presents how the different SAF pathways’ production output will progress differently from 2020 to 2050 (Figure 2).
Figure 2: Projected SAF Production Output by Pathway, 2020-2050, Million Tons
Biogenic feedstocks such as HEFA are currently commercially available and will continue to supply the most SAF at the earlier stages of transition, from 2020 to 2030. SAF from HEFA is projected to provide a total volume output of 49 Mt per year between 2045 and 2050.
The other production pathways, such as SAF from AtJ, FT, and PtL, are projected to gradually rise. By 2050, they should reach 105 Mt, 154 Mt, and 205 Mt per year, respectively.
Challenges to Achieving Emission Reduction Goals through SAF
Several critical barriers impede the industry’s progress toward achieving Net Zero carbon emissions.
According to IATA, global SAF production reached 1 million tons, or 1.3 billion liters, in 2024, doubling from 2023 production of 0.5 million tons or 600 million liters. SAF production is projected to reach 2 million tons, or 2.5 billion liters, in 2025, accounting for 0.7% of airlines’ total fuel consumption this year. SAF accounts for only a 0.3% share of 2024 global jet fuel production, though, and it is below the projected production needed to reach the 2030 target.
Expanding the production and deployment of SAF involves addressing limited feedstock supply, high production costs, and fragmented global policies.
Limited Supply
Commonly available HEFA SAF is primarily derived from bio-based feedstock, which is limited in supply and used for other industries and transportation sectors. For example, waste fats, oils, and greases (FOG) are also limited by the human and livestock population.
To meet growing SAF demand by 2030, the industry is expected to supplement HEFA processing with more advanced technologies such as the AtJ pathway derived from municipal solid waste and agricultural residue feedstock. Providing a consistent supply requires further investment, such as increasing other types of sustainable biomass production and improving feedstock collection capabilities.
High Production Costs
High SAF costs across the supply chain pose challenges to scaling production. SAF costs about five times more than conventional jet fuel. Initial and ongoing costs vary depending on the production pathway selected:
- HEFA using FOG has higher operational costs from constrained feedstock, but it has low capital costs because existing renewable fuel production infrastructure can be used to produce it.
- G/FT and AtJ pathways use agriculture and forestry residues and MSW that are more abundant and have lower costs. However, these pathways are a capital-intensive process as new production infrastructure needs to be built where the residues and MSW are available.
- E-fuels derived from PtL and direct air capture carbon have the highest costs, as current technology is still in development or early stages of commercialization.
To lower costs, the lack of clean electricity sources also needs to be addressed. Investment in improving research and development and building production facilities and distribution networks capacities would increase SAF production and lower overall costs.
Policy Fragmentation
Providing greater financial incentives to make SAF a viable alternative to conventional jet fuel requires harmonizing global policies. Global fossil fuel subsidies remain for exploration and production. Removing such subsidies and adding taxation or levy policies could redirect investment into SAF initiatives and other renewable energy production. Grants, tax credits, and other policy reforms supporting research and development, feedstock cultivation, and lower production infrastructure costs also promote SAF scalability.
Even with the tax credit policies in place, though, SAF producers in the United States find current policies that provide up to five-year incentives lacking and not enough either to offset high production costs or to encourage long-term investments, especially for the advanced pathways.
Developing the SAF Industry
Support and Commitments from Governments
Various government mechanisms encourage the development of the SAF industry. The European Union Regulation on ensuring a level playing field for sustainable air transport (Regulation (EU) 2023/2405) was adopted in 2023 and entered into force on January 1, 2024. The Regulation mandates that at least 2% of the fuels taken onboard aircraft at EU airports in 2025 be SAF. The percentage should increase every five years to reach at least a 70% share in 2050.
The same Regulation says the air transport sector needs to boost the production, supply, and uptake of SAF for the European Union to reduce net GHG emissions by at least 55%, relative to 1990 levels, by 2030. To support meeting these mandates, funding has also been provided to support SAF research and projects.
The SAF Grand Challenge Roadmap highlights the United States’ progress towards reaching 3 billion gallons (or about 11 billion liters) per year of domestic SAF production by 2030 and 35 billion gallons (or 132 billion liters) of annual SAF production by 2050. The Roadmap is led by the interagency team of the US Departments of Energy, Agriculture, and Transportation, as well as the US Environmental Protection Agency (2024). Different US government agencies have awarded tax, grant, and loan support towards activities to scale up SAF production, such as advancing commercial production of biofuels, developing technology that improves fuel yield, and expanding clean hydrogen initiatives.
The U.S. government has focused on an incentive-based approach, including a 10-year plan presented in the Inflation Reduction Act of 2022. It offers a tax credit starting at USD 1.25 for each gallon of eligible SAF that was sold or used after 31 December 2022, and before 1 January 2025, provided that the SAF produced has a minimum reduction of 50% in lifecycle GHG emissions to be eligible. The Clean Fuel Production tax credit, beginning 1 January 2025, will continue the per gallon tax credit.
Other countries have proposed or plan to implement uptake mandates in the next few years to increase global SAF production (Table 1).
Table 1: SAF Uptake Mandates and Incentives Worldwide
| Country/Region | Policy Mandates for SAF Uptake or Production | Status (as of January 2025) |
| European Union | 2% by 2025, increasing every 5 years; at least 70% in 2050 | Implemented |
| United Kingdom | 2% by 2025, increasing to 10% in 2030, and 22% in 2040 | Implemented |
| United States | 2025 Incentives for domestic SAF production/blender’s tax credit; 3 billion gallons (~9 Mt) annual production by 2030, 35 billion gallons (~100Mt) by 2050 | Implemented |
| Turkey | For international flights: 1% 2025, 5% in 2030 | Proposed |
| Singapore | 1% in 2026 | To be implemented |
| Thailand | 1% in 2026 | Proposed |
| Malaysia | 1% in 2026, 47% in 2050 | To be implemented |
| Brazil | For domestic flights: 1% in 2027, 10% in 2037 | To be implemented |
| South Korea | For international flights: 1% in 2027 | Proposed |
| India | Indicative blending targets for international flights: 1% in 2027, 5% in 2030 | Proposed |
| Indonesia | For international flights: 1% in 2027, 2.5% in 2030, 12.5% in 2050, 30% in 2050, 50% in 2060 | To be implemented |
| Canada | 1% in 2028, 2% in 2029, and 3% in 2030 | To be implemented |
| Japan | 10% in 2030 | To be implemented |
| China | 10% in 2035, up to 50% in 2050 | Proposed |
Note: For the status categories, Implemented = Policy has been adopted and is being implemented; To Be Implemented = Policy adopted and the implementation year is in the future; Proposed = Policy under development or consideration.
Support and Commitments from Industry Associations and Airlines
The private sector can also play a crucial role in addressing potential barriers and advancing the SAF industry. Industry associations and private actors have committed to the development and commercialization of sustainable aviation fuels. An estimated 60 airlines have set a goal of 10% SAF uptake (estimated total of 13 Mt) by 2030.
IATA is a trade association with nearly 350 airline members (representing over 80% of global traffic) as of March 2025. In 2021, IATA member airlines passed a resolution and committed to reaching Net Zero carbon emissions from their operations by 2050.
The developing SAF market in Asia is expected to increase production capacities as companies construct more production facilities in China, Singapore, and South Korea. Organizations in the region such as the Association of Asia Pacific Airlines, including 18 Asian flag carrier members (as of March 2025), have announced SAF commitments, including a 5% SAF usage target by 2030.
Outlook on Developments for 2025-2030
The global SAF market is expected to grow, even while needing to address risks and challenges to meet 2030 decarbonization targets. Regional outlooks are varied and can result in demand-supply shifts leading to 2030. The United States has a target of producing about 9 MT of SAF annually by 2030, but uncertainties such as changes in government priorities and the Section 45Z tax credit lasting only through 2027 could affect the country’s SAF market.
Mandates for European countries, under ReFuelEU Aviation (EU 2023/2405), to blend SAF and traditional jet fuel and the United Kingdom’s SAF policies both start in 2025. These can be catalysts for demand. However, they also require added costs, as SAF is more expensive than traditional jet fuel.
Europe may face increasing competition from Asia as more SAF production facilities become operational in China, Singapore, Malaysia, and South Korea. Asia may become an SAF exporter because of forecasted higher capacity and lower production costs compared to the United States and Europe.
Sustaining the SAF market’s progress requires lowering risks and advancing production technologies. Approximately 82% of announced SAF capacity would rely on HEFA technology up to 2030. However, lowering SAF costs and meeting demand beyond 2030 would require using alternative feedstocks and production technologies.
Advancing SAF would likely include governments providing policy incentives and subsidies as well as the involvement of the private sector through individual SAF offtake agreements, strengthening book and claim mechanisms, direct investment into SAF projects, and raising SAF funding. Airlines could also improve transparency and labeling of SAF projects to better inform and improve customers’ participation in decarbonization options.
By:
Patricia Marie Cabredo, Analyst, Corporate Responsibility, ISS STOXX
