Decarbonising aviation is one of the most significant challenges to the energy transition yet, paradoxically, it offers some of the most salient investment opportunities.
Though aviation accounts for just 2-3% of global CO2 emissions, this figure conceals the profound environmental impact of air travel. Remarkably, 10% of the global population is responsible for over 60% of all flights. As economies expand and air travel demand grows – a 4.3% annual increase projected over the next two decades – the urgency to decarbonise aviation becomes increasingly paramount.
The aviation sector’s ambition to achieve net-zero carbon emissions by 2050, championed by the International Air Transport Association (IATA) and endorsed by the International Civil Aviation Organisation (ICAO), underscores the sector’s apparent commitment to sustainability.
However, the pathway to achieving this goal is complex, requiring collaboration across the industry and innovative technological advancements, which brings with it significant investment opportunities in those companies leading the transition.
The role of sustainable aviation fuels
Sustainable Aviation Fuels (SAFs) are currently the cornerstone of efforts to reduce aviation’s carbon footprint. SAFs have the potential to reduce lifecycle carbon emissions by up to 80% compared to traditional jet fuel. Today, SAFs can be blended by up to 50% with conventional fuels and used in existing airport infrastructure and aircraft engines. At the forefront of technology enablement, CFM International (a joint venture between GE Aerospace and Safran), has developed engines compatible with approved SAF blends and ready for 100% SAF once approved for commercial use.
However, widespread adoption faces significant hurdles. The cost of SAFs is currently two-to-six times higher than that of traditional jet fuel, and their supply is constrained by limited production infrastructure. Despite these challenges, regulatory mandates are driving adoption. For example, Europe requires a minimum of 2% SAF usage by 2025, increasing to 70% by 2050. Such mandates, combined with subsidies and customer willingness to pay a premium for sustainable travel, are crucial for the broader adoption of SAFs.
Technological innovations in aviation
Despite advancements in engine efficiency, overall fuel carbon intensity has not significantly changed since the 1990s. This underlines the need for continued innovation and investment in new technologies. CFM’s Revolutionary Innovation for Sustainable Engines program (RISE), aims to reduce fuel consumption and CO2 emissions by more than 20%. The initiative focuses on developing revolutionary, open-fan architecture and ensuring compatibility with alternative energy sources like SAFs.
Emerging technologies such as hydrogen power and hybrid-electric aircraft present promising avenues for reducing aviation’s carbon footprint. Hydrogen power, although facing challenges with storage and fuel cell density, offers potential for shorter-range flights. Hybrid-electric aircraft, combining combustion and electric engines, could achieve up to 40% CO2 reductions with newly designed airframes like the Blended Wing Body.
Fully electric aircraft, while emitting zero CO2 during operation, are currently limited by the low energy density of batteries. Without significant breakthroughs, electric propulsion is expected to comprise only about 2% of aviation energy use by 2050. Nonetheless, small hybrid-electric aircraft are anticipated to enter service this decade, with regional and potentially larger models following in the 2030s and 2040s.
Operational efficiencies and infrastructure upgrades
In the interim, operational improvements and infrastructure upgrades can deliver immediate efficiency gains. Measures such as weight reduction, aerodynamic improvements, and optimised air traffic management have already led to a 55% improvement in fuel burn per passenger kilometre since 1990. Replacing older aircraft with more efficient models typically reduces emissions per seat mile by approximately 15%.
Further advancements in sustainable manufacturing processes, using responsible materials and ethical labour practices, are also essential. Innovations in sustainable technology will provide aerospace companies with a competitive edge, reducing costs associated with incoming regulations and rising fuel prices while catering to the growing demand for environmentally friendly products.
Investors can pave the way to bluer skies
The pathway to sustainable aviation will be multifaceted, requiring industry-wide collaboration, continuous innovation, and strategic investment. Investors have a critical role to play in this transition. By supporting sustainable aviation technologies, they can contribute to global climate goals and capitalise on the emerging market dynamics of greener aviation.
The journey to decarbonise the skies is undoubtedly challenging but, with concerted efforts and strategic investments, it is within our grasp to achieve a sustainable and prosperous aviation industry.
