Policy when your Head's in the Clouds

The UK’s SAF mandate has finally (finally!) dropped. And on the whole, I'm distinctly underwhelmed.?

The press release focused on the early-years ambition - which is (credit where credit's due) ambitious - whilst neglecting to say that post-2030 the mandate is just a bit…. naff. Not only was the UK mandate always going to be compared to the EU’s version, but for years the pre-announcement rhetoric from (3!) minsters was that the UK was going to be a global SAF leader - so it was reasonable to expect higher levels of ambition than our European neighbours. In fact (and to get a bit wonkish), the talk was so great it was reasonable to assume that SAF mandate percentage levels would more than match the Jet Zero Strategy’s High Ambition scenario with SAF breakthrough scenario. But no, the Government is not planning for a SAF breakthrough, despite all the global leadership spiel (which the Tories can't resist). Instead, it plumped for the lowest ambition scenario modelled (which in true 1984 style was called “High Ambition”). All this means that aviation won’t decarbonise, and the UK SAF industry’s current woes (they can't get any money!) will continue

And here’s why:?

Emissions don’t actually reduce! Part 1.

SAF has been the topic of conversation in aviation policy circles for years - but like a magician’s flourish it has masked the fact that airlines have put some huge orders for new aircraft in, and all of them will be delivered over the next decade. With more planes flying around emissions from the sector will increase, and corresponding emission savings from SAF production will struggle to keep up.

The UK’s mandate requires 22% of jet fuel to be SAF in 2040. If aviation jet fuel demand (and corresponding emissions) grows at just 1.326% or more a year between now and then (it will), then that 22% won’t actually cover the growth of emissions, let alone the vast polluting balance underneath. For reference, between 1990 and 2019 emissions grew at more than 3% a year.

Oh.

Emissions don’t actually reduce! part 2.

It’s buried in the cost-benefit analysis, but this is paragraph 3.71:

Within the transport sector, road transport currently utilises large amounts of UCO and tallow refined as FAME biodiesel to meet RTFO supplier obligations. If the SAF Mandate results in these feedstocks being used to produce SAF rather than road fuel, the emission savings delivered by the RTFO would be reduced. This is calculated by estimating the reduction in FAME biodiesel which occurs under the RTFO. Then the extra emissions from road transport are estimated by assuming that FAME is replaced with fossil diesel.

The Government has allowed in huge quantities of UCO and tallow.

Oh. Again.

To be fair, UK diesel demand is falling (and that’s a good thing!). But it’s not falling at the rate the SAF mandate ramps up, so the UK will become more reliant on Chinese used cooking oil (and some palm oil*). Only a paltry 7% of UK biodiesel is made with UK feedstocks. The rest is imported. China is our biggest supplier.?

(And to go back to the first point, the more HEFA in the mix post-2030, the less incentive there is for the UK to become the global leader in advanced waste-to-SAF production, as ministers have been promising us for years now.)?

The huge HEFA cap starts making sense if you presume that there will be corresponding policy that will drive diesel use down in road and rail transport quickly. But that would be common sense. There are absolutely no diesel reduction policies on the horizon. One policy that is confirmed is that the overall percentage of biofuels required in road fuel will rise from 9.6% now, to 14.6% in 2032. Outside of transport the Government recently committed to consulting on the use of renewable liquid fuels in rural properties that currently are heated by kerosene (also known as heating oil). There are already 150 oil-heated homes that have converted to running on HVO, as part of a demonstration project organised by trade bodies UKIFDA and OFTEC.

No one really knows where all this waste oil is going to come from, - especially as the same waste oil is being demanded in the EU under their mandate. So expect the laws of supply and demand to kick in: expect waste oil prices to shoot up, expect road hauliers (like the Road Haulage Association (RHA)) or those companies committed to using large quantities of HVO (like Royal Mail, FedEx and DPD UK) to get angry about it.

When is SAF not SAF?

Foreigners (and often myself) are sometimes confused by the UK policy-making process, which can seem to come in dribs and drabs. The drib to last week's drab was the response to the first consultation the Government ran on SAF.?In it, there was a clear commitment to ensuring that the use of a feedstock represented the "best environmental outcome arising from that waste". It even tells us what factors would be considered to determine this: carbon emissions, agriculture, other economic activities, sustainable development, and the environment generally.

Last week's publications didn’t mention this at all. Does this mean this commitment has been quietly dropped? Potentially. See, if you measure the worth of SAF against other potential uses of the feedstocks, then some of them simply aren’t sustainable.?

Forestry residues are best used to maintain forestry biodiversity, but are also already used in the paper, cardboard and chemical industries. Municipal solid waste is used for electricity production. Sewage is used for fertiliser production. Used cooking oil makes up the bulk of UK biodiesel. All plastics can now be mechanically or chemically recycled. Animal fats are turned into pet food (and lipstick!). Hydrogen can be used for pretty much anything.

In short, problems abound with SAF feedstocks, because each and every one is or could be used somewhere else. My hope was that last week's response would at least try and square the contradictory circle around all of this. But it didn't. Example 1: What's the point of modelling how much forestry waste can be gasified, if none of it represents the best environmental use and is therefore unavailable?

(NB Follow this line of thinking, and you realise it's perfectly possible to say that no feedstock should ever become SAF - and therefore any percentage level above zero is too high. I don't believe that, but I do believe that some of the feedstocks touted about right now should never become jet fuel)

This contradiction means that, at the very least, SAF will end up with a bad name for decades. It also means that investors may decide a revenue certainty mechanism - that only pays out on volumes of finished product - doesn't make a blind bit of difference if feedstocks aren't guaranteed. If that's not serious enough, it could legally serious. For example: Who's right when, for instance, the pet food industry body launches a legal case against the Government because “their” raw materials start going to aviation, meaning that the pet food industry is forced to import palm oil from cleared Indonesian rainforests? (or should we just stop keeping dogs as pets?)

(as an aside, last year's Biomass Strategy was supposed to answer some of these questions. It didn’t. We’re expecting a Low Carbon Fuels Strategy from Department for Transport (DfT), United Kingdom anytime now. It would have been really nice to have had that before the mandate announcement. We didn’t. We still don’t have it.)

Bad for Zero-Emission Aircraft Uptake

Apologies for the economics gobbledygook here. Jet fuel is a commodity and since all drops of it (in theory) should be identical, then prices should be set by the most expensive price of fuel supplied to match demand, provided sufficient quantities of that fuel are demanded (told you it was gobbledygook. If its easier, think how the electricity sector pricing works - the cheapest possible sources of electricity - solar - will be used first, but the price for all of them is set by the price of the last selected offer - gas). Crucially though, in practice that only works if large volumes of the last supply are supplied. This line is important, as in the EU, the mandate requires that 35% of jet fuel supplied in the bloc in 2050 is power-to-liquid (which is made from hydrogen and carbon smashed together). The 35% figure is sufficiently high enough to set prices, which means that the operating fuel costs of future hydrogen aircraft (no carbon or smashing needed) will always be cheaper than the operating costs of hydrocarbon-burning aircraft - and the market should respond and ‘naturally’ adopt zero-emission aircraft.?

The UK has gone for a measly 3.5% PtL sub-mandate in 2040 (and atm 2050 too) - which isn’t high enough to set prices and drive change to zero-emission planes. This is despite the Government, via the Department for Business and Trade investing ￡3.6 billion into the Airspace Technologies Institute so far, with nearly a billion quid more to come this decade. Perhaps UK taxpayers should be asking why we’re funding all this R&D for shiny new planes, with no seeming intention of actually flying them???

Over to you, Labour.

In short, this is already one of the policies in the “not good enough” pile that the next Government will inherit. Since the polls suggest that will be Labour-led, then Louise Haigh MP wins this prize. And when she (invariably) has to tighten the sustainability criteria, or increase percentage levels, or bring in regulation to ensure zero-emission planes are actually flown commercially, then expect the (potentially few) remaining Tories to?scream blue murder. Despite causing the pain in the first place.