Singapore Airlines announced in early July that it has begun testing what has become known as Sustainable Aviation Fuel (SAF). A biofuel made from waste cooking oil and plants, it will be supplied by Finland’s Neste.

The airline will burn 1,000 tons of SAF over the next year, which is equivalent to about eight of the company’s Boeing 787-10 Dreamliner jets in terms of onboard fuel, targeting a reduction in carbon dioxide emissions by 2,500 tons. It has a goal of achieving zero emissions by 2050.

Flights departing from the country, including those by its low-cost carrier Scoot, will use the greener fuel. Lee Wen Fen, the airline’s senior vice president, said, “SAF is a key decarbonisation lever, and this (test) demonstrates our commitment to achieve net-zero carbon emissions by 2050.”

Singapore is trying to promote SAF across the city-state. In February, the government established the International Advisory Panel on Sustainable Air Hubs, which is expected to come up with a plan to establish a SAF market by early 2023.

Malaysia Airlines operated its first passenger flight using SAF in early June in conjunction with World Environment Day.

The International Air Transport Association (IATA) announced in late June that global air travel in 2022 is expected to reach 3.8 billion passengers, up approximately 70% from the previous year, with the number of passengers hitting 80% of pre-pandemic levels.

Asian countries are easing entry restrictions, including for tourists, and recovery in airline demand will provide a much-needed tailwind for earnings in the aviation sector.

With recovery in sight, airlines are starting to focus on decarbonisation as a key to future competitiveness. Passengers may gravitate toward airlines with green credentials and governments may start to push the industry to adapt. It is estimated that replacing all aircraft fuel with SAF would reduce carbon dioxide emissions by 70% to 90%.

In spring, Japan set a goal of replacing 10% of domestic airlines’ fuel use with SAF by 2030. Aiming to set up a supply network, the ministry of land, infrastructure, transport and tourism and the ministry of economy, trade and industry (METI) launched a public-private council in April.

In addition to the country’s two biggest airlines, All Nippon Airways (ANA) and Japan Airlines, the council also includes oil refiner Eneos Holdings and airport operators. It has just begun discussion on ways of utilising SAF, as well as the formulation of safety standards for new technologies such as electric aircraft and hydrogen aircraft.

Other Japanese companies are also accelerating moves to produce SAF domestically. Japanese engineering company JGC Holdings and petroleum wholesaler Cosmo Oil will begin commercial production of SAF for the first time in 2025.

International partnerships are also beginning to emerge. Europe’s Airbus and Australia’s Qantas Airways announced in June that they will form a joint venture in SAF. The two companies will invest US$200 million in bio-related startups to support development of SAF in Australia.

METI estimates that the production cost of SAF ranges from ¥200 to ¥1600 (US$1.4 to US$11.5) per litre, which is 2 to 16 times the cost of conventional jet fuel. In order to cover production costs, consumers must be persuaded to foot a portion of the bill.

ANA may pass on the cost to passengers through its own programme, under which companies that use airplanes for business and other purposes pay a portion of the SAF costs and receive a certificate showing the reduction of CO2 emissions.

It would calculate the actual amount of CO2 reduction based on distances flown by employees, then issue certificates that can be used to disclose information to investors.

Singapore Airlines will issue credits equivalent to the amount of greenhouse gas emissions reduced by using SAF and sell them to corporate customers. The airline company plans to introduce SAF in July, seeking to partially offset costs through the carbon credits.

Still, the limited supply of SAF poses a challenge to its full-scale implementation. The IATA estimates that the production of 449 billion litres of SAF per year will be necessary to achieve decarbonisation targets by 2050. However, only a few companies, such as Finland’s Neste, have commercialised SAF and production is limited to 125 million litres per year.

Currently, the EU is deliberating a bill that would require airlines at all airports in the region to use SAF for up to 5% of their fuel consumption by 2030. Efforts across multiple industries are already underway, with Europe’s Airbus, energy giant Shell and others forming alliances to expand the use of SAF.

However, Willie Walsh, director-general of the IATA, criticised in June the EU’s stance on SAF mandates at airports, saying that it would not be feasible, as it could intensify the battle over SAF, which is in short supply, and inhibit its widespread use.