British Airways calls for carbon revenues to be used to help scale up the development of aviation biofuels
Jonathon Counsell, BA's Head of Environment
Thu 25 Mar 2010 – Carbon pricing is critical to the business case for aviation biofuels as airlines join schemes such as the EU Emissions Trading Scheme (EU ETS), which starts in 2012, said British Airways’ Head of Environment Jonathon Counsell at last week’s World Biofuels Markets. He said the recently announced plans to build a waste biomass to jet fuel plant in London had been driven by an economic imperative based around the price of carbon and local environmental landfill taxes. Sourcing capital from airlines to help develop aviation biofuel projects was not an option, but he believed governments who earned revenues from the auctioning of carbon emission permits from airlines should use some of the money to fund low-carbon aviation technologies such as biofuels.
Counsell said finance was a major barrier to progress on scaling up the production and commercialization of aviation biofuels. “We will commit to buying biofuels but we’re not prepared any more for them – bar the carbon credit – because fuel is our biggest single cost, around 25% of the cost base across the airline industry. We also don’t have a lot of capital – the industry balance sheet is not in great shape – so sourcing finance from us is not an option.
“So let’s go after governments for some of this funding as they are taking a lot of money out of the industry. They say they are committed to low-carbon technology – let’s see them prove it.”
From the EU ETS, he maintained, European governments will be collecting auction revenues from 2012 in the region of half a billion dollars a year from airlines.
“That’s based on a 15% level of auction permits, but if it rises to 100% then the revenues increase to $6 billion a year,” he said. “If you were to ramp that up globally, you’re talking about $20 billion a year. We would argue that some of that money should go into funding low-carbon technology for the industry.
“We are trying to convince the UK Government to use some of the income it raises from Air Passenger Duty – currently around $5 billion a year – for the same purpose. We haven’t had much luck so far but the EU ETS provides a better opportunity.”
Also speaking at the conference, Niels-Eirik Nertun, SAS Group’s Director of Environment and Sustainability, said he was not optimistic that auction revenues from the EU ETS would find their way back into biofuels development. Instead, he wanted biofuels to enter the aviation jet fuel system as quickly as possible since they were zero-rated in terms of CO2 emissions under the scheme and their use would help reduce the amount of permits required.
Counsell told delegates that under a global sectoral approach proposed by the aviation industry for dealing with international aviation emissions, revenues from a global carbon trading system for the sector could be channelled towards biofuel projects in developing countries and at the same time help meet the Kyoto Protocol’s Common But Differentiated Responsibilities (CBDR) requirement. Reconciling the CBDR principle with the equal and non-discrimination treatment principle governing civil aviation is hampering efforts to bring international aviation emissions into a global climate change framework.
He said the recently-announced project in which the Solena Group will build a waste biomass to jet fuel plant in east London from which BA has agreed to buy all the jet fuel produced – some 50,000 tonnes per year – had been driven by an economic imperative based around carbon pricing and UK landfill taxes. Proposals are being considered under which local authorities would pay the plant to take waste destined for landfill sites rather than pay the landfill tax, currently up to $100 per tonne.
Costing around $280 million to build, BA would be helping gain local authority support to obtain planning permission, said Counsell. Construction was due to start in 2012 with production following from 2014.
“It will be fairly small volume, only around 1% of BA’s total fuel demand, but it is important to understand the economic drivers, particularly in terms of scale,” he explained. “We recognize it is small in scale but we need to understand issues like location – should the plant be near the source of the waste biomass or near the airport? If this is successful then it could be the first of many.
“We are also looking at how to simplify the introduction of biofuels into the supply chain. The original thinking was that every aircraft stand at every airport would have to have different pumps for conventional Jet A fuel and jet biofuels. That is clearly not practical. The other option is to take just the top 20 or 30 airports in the world and supply them with a fixed blend of biofuel, which would simplify the logistics, on the basis that the top 50 airports supply 60% of the total jet fuel requirement, roughly equating to 120 million tonnes a year.”
Counsell said BA’s engine test cell programme with Rolls-Royce – first announced in 2008 but postponed due to a lack of availability of the required quantity of biofuels – has been rescheduled to commence early next year after a tender process and testing would run for three months, with the results made publicly available. He said they were looking for 60 tonnes of a range of biofuels and was confident supplies would now be forthcoming.
He said the Sustainable Aviation Fuel Users Group (SAFUG), of which both BA and SAS were members, was a leading driver in accelerating the implementation and sustainability criteria of biofuels. The 19 airline members represent 20% of the airline industry’s total fuel demand – around 40 million tonnes a year. He said SAFUG had a target to supply a minimum of 600 million gallons of biofuel per year by 2015 into the airline sector.
The Australian and New Zealand group of SAFUG – Air New Zealand, Virgin Blue and Qantas – together with Boeing and the Defence Science and Technology Organisation, meanwhile, have just commissioned a world-first roadmap study that is aimed at accelerating the development and commercialization of sustainable aviation fuel in the region.
The study will be carried out by the Commonwealth Scientific Industrial Research Organisation, Australia’s premier scientific body, and will bring together a diverse range of stakeholders from airlines, engine and airframe manufacturers, biomass experts, fuel suppliers, government and NGOs.
