IAG S.A., the owner of British Airways, and Southwest Airlines have reportedly agreed to buy close to 300 million gallons of sustainable aviation fuel (SAF) produced using woody biomass at a biorefinery in Mississippi.
As part of the company’s goal of using 10% SAF by 2030, IAG has agreed to buy 220,000 tonnes of SAF over a decade starting 2026. On the other hand, the 220 million gallons of SAF bought by Southwest will last for 15 years.
The sustainable aviation fuel will produce tradable credits under the Low Carbon Fuel Standard of California as well as the federal renewable fuel standard. IAG and Southwest will purchase at a fixed price that includes estimated credit costs.
The aviation industry has backed SAF as a method to facilitate environment-friendly flights before electric, less carbon-intensive hybrid, and hydrogen airplane alternatives become available from the late 2030s.
The Bayou Fuels facility of Velocys is expected to produce carbon-negative fuel owing to its usage of renewable power, biogenetic feedstock, and carbon capture technology balancing the emissions from burning the fuel.
The fuels produced at the Bayou Fuels plant will be mixed with petroleum-based jet fuel to produce over 750 gallons of carbon-negative sustainable aviation fuel that according to the company will be commercially available by 2026.
Velocys has stated that the expected revenues, during the course of the offtake agreements, could reach up to USD 3 billion.
Typically, SAF produces around 70% less carbon in comparison to fossil fuels but is more expensive to generate without tax credits, especially given low production volumes which are currently at less than 1% of the total demand for jet fuel.
Pete Buttigieg, the Transportation Secretary stated that the United States is aiming to achieve net-zero greenhouse gas emissions from its aviation sector by 2050. In September, the White House revealed its aim of achieving 20% lower emissions from aviation by 2030.