Ahead of the latest round of climate change talks to be held in Durban, South Africa later this year, most countries, with the exception of European Union member states, Australia, and few others, have failed to advance national initiatives to regulate greenhouse gas (GHG) emissions.  Despite broad-based agreement on the need for a post-Kyoto international agreement on climate change, a constellation of forces, including the so-called “Climategate” affair of 2009 and persistent economic uncertainty, have led to a shattering of international consensus.  Earlier this year, both EU and United States negotiators said that a new legally binding deal emerging this year in Durban is not realistically possible.

While ambitious, multilateral initiatives have stalled, though, industry-specific regimes are moving forward and could accelerate the commercialization of carbon-neutral technologies.  One of those industries is aviation, where efforts to scale-up advanced biofuels production illustrates this new reality. 

Commercial airlines represent only 2% of global GHG emissions. But the airlines have embarked on a steady campaign to stabilize emissions with carbon-neutral growth by 2020, and to reduce emissions by 50% by 2050.  In an industry where, according to the IEA, CO2 emissions are estimated to increase 3.1% per year over the next 40 years, resulting in a 300% increase in emissions by 2050, this would be no small feat.    

The European Union’s “Aviation Amendments” to its GHG emissions trading system (ETS), which are set to be binding on the airline industry beginning in 2012, give those ambitious goals teeth.  Under the Amendments, aircraft operators that fly into or out of EU airports will be required to participate in the ETS, and surrender emissions allowances equivalent to the GHG emissions associated with their flights into and out of EU airports, regardless of whether the emissions occurred inside or outside of EU airspace. 

Assuming the Aviation Amendments survive legal challenges and direct opposition from countries like the U.S., China, and India, a joint study by Point Carbon and RDC Aviation estimates that carriers will have to spend around $15 billion between now and 2020 to comply with ETS quotas. 

The combination of impending offset purchases and high oil prices appear to be forcing the aviation industry’s hand when it comes to fossil fuel alternatives, which has been signaling strong demand for sustainable advanced biofuels.  Derived from diverse feedstocks such as algae (see Pike Research’s Algae-Based Biofuels report), plants of the genuses Camelina and Jatropha, and waste, aviation biofuels hold significant promise, but are still not produced commercially in sufficient volume or at a competitive price to offset the use of petroleum-based jet fuel.  To date, their use has been confined to isolated test and commercial flights using blends of advanced biofuels and conventional jet fuel.  Recent awards from the USDA – including $136 million in grants spread across five regional projects through its Agriculture and Food Research Initiative – are aimed at ramping up production over the next decade.  Awardees include advanced biofuels companies like ZeaChem, Lanzatech, Imperium Renewables, and Gevo, each profiled in our recently published Biofuels Markets and Technologies report.      

A recent article in Biofuels Digest, reported that scaling up production of aviation biofuels to the point of achieving a “clean energy win” – informally recognized to be roughly 20% of the fuel volume consumed by the industry – offers a near-term breakout opportunity for the broader biofuels industry if it succeeds.  That would equal roughly 22 billion gallons per year of aviation biofuels produced worldwide by 2020.  By contrast, we estimate that 287 billion gallons of biofuels would need to be produced to meet 20% of projected transportation liquid fuel demand in 2020, or 10 times current production worldwide.  Because demand centers around the largest international airports, the aviation biofuels pathway is smoother than other forms of transportation, where demand is fragmented across different fuel specs and distributed infrastructure.

Given the scale of the market sectors in which cleantech technologies must compete and the mercurial policy landscape they need to navigate, true market disruptions will be slow to materialize.  In the absence of an international climate deal, the EU’s Aviation Amendments and innovation in aviation biofuels may demonstrate that targeted, industry-specific regulatory efforts can provide an important catalyst for near-term scale-up efforts.