Listen in as Aviation Week Network's Victoria Moores sits down with International Airlines Group's Head of Sustainability Jonathon Counsell to discuss his thoughts on aviation’s path to net zero, including reducing non-CO₂ emissions.

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Rush Transcript

Victoria Moores:

Hello everyone, and thank you for joining us for Window Seat, our Aviation Week Air Transport Podcast. I'm Air Transport World Europe and Africa bureau chief Victoria Moores. Welcome on board. This week, I'm joined by Jonathon Counsell, who is the head of sustainability at International Airlines Group, which is the parent company to airlines like Iberia, British Airways and Aer Lingus. Welcome, Jonathon.

Jonathon Counsell:

Thank you. Great to be here.

Victoria Moores:

Well, it's great to be with you too, particularly because I think there's very few people within the industry that have the scope and depth of understanding of aviation sustainability, which is the topic that we're going to be looking at today because we're both here at the Aviation Carbon Conference, which is quite a technical conference looking at developments of aiming to reach that net-zero goal for aviation by 2050. And I'm wondering as an opening question, Jonathon, what is it that you are picking up from the conference? What key themes and trends are you hearing about and speaking about with your colleagues in the industry?

Jonathon Counsell:

No, indeed, and thank you for the invitation to join you today. And the Aviation Carbon, so it's actually been going since 2012 and it is probably one of the leading events in the aviation sustainability calendar, because as you say, it does get into some of the nitty-gritty detail and you'll see by the audience here, and I think we're over 400 people this year, it's a lot of the practitioners, the people that are involved in the delivery of those solutions. And I think the biggest difference I've seen since 2012 is the transition from a commitment phase. So the industry thinking about setting the right targets, the right goals that are going to get us to net-zero emissions by 2050 to really now focus on the delivery phase. So this decade, we've really got to think about what are the solutions that are going to help us to reduce our emissions. Now we're a hard to decarbonize sector. Everyone is well aware of that, but the exciting this is now we are actually starting to see some of those solutions that we can start to see begin to scale up.

So the key themes here are a big priority has been sustainable aviation fuels. I think there's a common subject we've seen across a lot of conferences this year, and it was a good debate around where are we, but importantly, what are the levers that are going to get us those first of a kind plants built? So that's a big key area. The other one is market-based measures. So here, in Europe, we have the two sort of primary carbon pricing instruments, so the EU emissions trading scheme and the UK emissions trading scheme. So a lot of discussion around what does the next phase of those schemes look like and also of course, CORSIA, our global scheme. And then beyond that, we had a really good session on non CO2 emissions, which is good. And then there's been quite a bit today also on disclosure because one of the things we're facing as many industries is increasing regulations on how we tell the story about what we're doing in terms of our carbon emissions.

Victoria Moores:

Yeah, I think that that's one of the changes that I've noticed one of the shifts in conversations from previous years to this year is the fact that previously, there seemed to be a lot more conversation around carbon credits and carbon offsets. Whereas now, like you said, the conversation here at the conference has been very much around sustainable aviation fuels and the development and the progression of that technology. Where do you see that we're up to on that development of sustainable aviation fuels?

Jonathon Counsell:

And I'd say that is probably the biggest single point of convergence in the last five years. So if you'd ask people what proportion of our emission reduction in 2050 would be sustainable aviation fuels, and it would be somewhere between 10 and 20%. We've seen a lot of momentum in this area, particularly through policy. So the key enabler to making SAF happen, sustainable aviation fuel, is policy. And we're seeing development in the US, UK, and Europe. So a lot more confidence. So those roadmaps that I mentioned, the view is anywhere from 50 to 70% of our emissions reduction in 2050 will now be down to SAF. So that's really good general agreement. So it's not if it'll happen, it's when it'll happen and how can we make it happen more quickly? So the very healthy thing at this conference is there's no question whether it'll happen or not, it's how and when.

Victoria Moores:

Yeah. And there have been a lot of calls for policy makers to be more supportive of this in-between stage. It’s the really critical point is where it's agreed that this is a solution that sustainable aviation fuels are going to play a really big role, but it's chicken and egg in terms of needing to prove that there's demand. But then you can't get the demand until you've got the supply, but then you can't get supply until you've got the demand. So-

Jonathon Counsell:

Exactly, exactly.

Victoria Moores:

... have you seen policy makers being providing the instruments that are needed by the airlines, by the industry, by the sector?

Jonathon Counsell:

Absolutely. If I saw the quickly overview, the three areas of the world that are leading in this. So the US without a doubt has got the most attractive portfolio of policies. So I mean, they had pretty strong policies, state policies, particularly in California and now in Washington state and Illinois and so on. So more states developing pretty attractive, which has enabled the first chance of plants to get invested in the US. But I think the big change in the last two, three years is the Inflation Reduction Act. So that, and then the beauty of that it accumulates. So you get that on top of the state incentives. So when you look at that, it's by far and away the most attractive place in terms of de-risking investment in SAF plants. And that's why a recent report I read is 90% of all investment in SAF capacity is taking place in the US.

So a really strong example, investment will follow policy. The UK and Europe, we're taking a different view, a different perspective rather than the incentive based approach of the US is very much a mandate, so a mandated approach. And a mandate is fine because it creates a very clear demand signal. So for future producers, they know there's going to be demand for that product, but a mandate on its own doesn't drive investment. So it doesn't necessarily reduce the investor risk. So you need to couple that with some incentives. So the EU has started to do that. And so, we're having had a very good presentation today from Damien Meadows. He talked about some of those incentives.

Victoria Moores:

Damien Meadows, he works with basically the part of the European Commission that deals with climate impacts, DG CLIMA. And one of the things that he said when I had a conversation with him was that there is this innovation fund, which is supported by the revenues that we're getting from this European carbon trading scheme. And he said it really surprises him that more airlines, more aviation companies aren't applying for this large sum of money that's available. I think it was 40 billion euros that he was saying is available for all industries that are involved in the EU ETS to come forward.

Jonathon Counsell:

Indeed.

Victoria Moores:

And to apply for and when there's so much research and development going on in aviation to try and meet these sustainability criteria, it actually really surprised me to hear, particularly given the conversation about the US being very heavy on the carrot, the EU being heavy on the stick, the mandates, that it seems as though there's a great big carrot there.

Jonathon Counsell:

There is. And that was recently announced, I think it was July, that set of funding was announced. So I think we'll start to see renewable companies, including SAF companies apply for those. I mean, one of the things that the feedback I've got from startup companies, it can be administratively very burdensome applying for a startup company that is challenging because you just don't have the resource to do it. But I'm hearing that they're reducing that level of administrative burden, so for just applying for these funds. So that's great to hear. And then in terms of the SAF allowances, I have absolutely no doubt that airlines will be applying for those as soon as the rules become clear on how you can. My biggest concern is they'll be gone pretty quickly.

So 20 million SAF allowances when we're looking at the volume of mandated SAF between now and 2030, they could be gone in a couple of years. But again, it is very encouraging to hear that this is very much the first tranche. If it's proven that they're successful and they're incentivizing airlines to buy more SAF, then more will become available. So that's exactly the sort of signals that we need to hear. And I think in combination, that package of the mandate, the SAF allowances and the innovation fund, that's the sort of thing that is going to enable an industry to get started.

Victoria Moores:

And to recap on what that SAF allowance is from the European Commission, what they're saying is we have 2 billion euros, so it's a significant pot of money. And they're saying that from the 1st of January 2024, airlines will be able to go out and buy their SAF or their more advanced forms of SAF if and when the production is there, which is eSAF, eFuels, and then they would be able to claim back up to 100% of the price difference between conventional kerosene and SAF. So all of a sudden this huge hurdle that airlines have got for the price differential for how expensive it is to operate on sustainable aviation fuel. The only problem is that you've got to be able to bankroll that through until September 2025 when you would then be able to claim it.

Jonathon Counsell:

No, indeed. So there's a little bit of uncertain debt because there's the lead time between. And I think the approach of... Because when we talk about SAF, we talk about these three generations. So the first generation is to mature of what we call HEFA type of SAF. So that's waste and gases. So that's pretty mature, and that will be certainly the most available SAF for the first few years. Then we talk about second generation SAF, which is municipal solid waste and alcohol to jet. So that's less developed and it will be more expensive. And then we talk about third generation, which is the eSAF, the powder-to-liquids. Now that's definitely very early stage and it'll be even more expensive. So I think the SAF allowances, so we talked about the 100%. Basically what they're saying is that 100% benefit is for those third-generation fuels. And then for second-generation, you get a slightly smaller incentive and then for third-gen. So I think that is for first... So they basically, they've aligned the policy incentive with the relative maturity of the pathway.

I think that's the right way to do it because you don't want to over incentivize stuff that isn't mature technology anyway. So that's quite good. I think with the PTL, the biggest challenge was there's just so little available. So I don't think there's going to be many airlines being able to attract that huge incentive just now, but hopefully within the next two or three years. Because ultimately, our view is by the beauty of SAF is you have these different pathways. But ultimately, by the time we get to 2050, the general view is up to 50% of these SAFs will be these powder liquids where you're capturing CO2 from the atmosphere and you're mixing it with green hydrogen, the ultimate 100% sustainable fuels.

Victoria Moores:

Yeah, it's that virtual circle of everything-

Jonathon Counsell:

Exactly, capturing CO2 from the atmosphere.

Victoria Moores:

But it's also worth specifying, although the European Union is making this available, the 2 billion euros, available to reclaim back on sustainable aviation fuel costs, that will come back in the form of allowances into the European emissions trading scheme.

Jonathon Counsell:

Exactly.

Victoria Moores:

However, the innovation fund that we talked about before, that's the up to 40 billion that is separate. So that is actual money in the form of actual cash available to projects-

Jonathon Counsell:

Grants for producers. No, exactly. So you need that twin track if you like. You need incentive to producers because essentially we need a lot of capital to build these plants. So SAF plants aren't cheap, they can be up to a billion dollars each. And recent years, all the investors I talked to, they say, "Yeah, I definitely want to invest in SAF, but I'm probably more interested in the third or fourth plant rather than the first. So come to me once you got..." So it's always this getting the first plants funded. That's the maximum risk. And that's why you need that producer incentive. And the innovation fund is there to help the producers get those grants to overcome that initial risk. And then in parallel, you get incentives to airlines to help close that price gap. I mean, fuel for airlines, it's anywhere from 30 to 40% of our costs. So paying significant premiums on our most significant cost element, that's not economically viable for us, even at the small SAF mandate levels that we're looking at. So those two parallel approaches to incentives are really important.

Victoria Moores:

Our conversation so far has focused very much on sustainable aviation fuel, the SAF part of the conversation. I think we've got just a couple of moments left to talk about the elephant in the room in terms of sustainability, which is the non-CO2 effects-

Jonathon Counsell:

Indeed.

Victoria Moores:

... non-carbon effects of aviation. And we’ve seen some discussions about that here at the conference. What are your thoughts on non CO2 effects? Whereabouts are we up to?

Jonathon Counsell:

Yeah, and I think there's been lots of research into this area. And essentially there's about three or four non CO2 effects. But the main one is contrails and persistent contrails and a lot of great work being done by the academic community, be it Imperial College or MIT in the states and DLR in Germany. So I think we're getting a lot better understanding of how they're formed and when they're formed and their climate impact. But we're not quite there yet in terms of ready to form policy. So we talk about non CO2 pricing. I think we've probably got a few more efforts on just finalizing, removing that last bit of uncertainty before we get there. But the good news is we're doing a lot of trials with a number of companies just understanding under what conditions those contrails form. And an interesting aspect is it's only 5% of days and you'll see it, you look up in the sky when you get those contrails that just tend to linger for long periods of time, and then they tend to coagulate and they create this high level cirrus cloud.

Those are the days that we're trying to avoid. And so, if there's 5% of days, and now the science is telling us we can really predict those with some accuracy. When are those weather conditions going to exist, where they're going to exist? So you can see, you can get to a position where actually we could adjust our flight patterns to avoid those because they actually form in quite a narrow band of atmosphere between 3,000 and 4,000 feet and they call it super saturated air. You need lots of water, because essentially contrails is a set of ice crystals. So aircraft engines emit a lot of water, they form ice crystals and that forms those contrails. So we're getting a lot closer. One of the complications, which tends to grab people when we mention that is that daytime contrails are actually climate cooling. So when you all see these pictures of non CO2 and all those contrails, they're actually good for the climate because they cool the climate, because they reflect more sunlight than the heat they trap.

So the issue we've got is nighttime contrails because they have no cooling activity, they just trap heat in the atmosphere. So you start to think, well, wait a minute, if there's only 5% of days, most of the problem is on the Northern Hemisphere. And actually most of the problem is on the North Atlantic because that's when you've got... So it's long haul fights when they're flying between 30 and 35,000 feet. You can actually say, actually there's just a few number of days in the Northern Hemisphere winter when we need to think about wholesale adjusting flight plans. So you can see, okay, let's just work on perfecting that science and then maybe we can get to some solutions where it actually could be relatively straightforward to avoid those contrails. But as a number of the academics are saying, avoiding contrails does generally involve burning a bit more fuel, i.e. creating carbon dioxide.

So you've got a 100% certainty of increasing your CO2 for something at the moment where you're less than 100% in terms of avoiding the non CO2. So we just need to do that final bit of research to get that balance of probability where we're happy to create that, even if it's a marginal bit of CO2 to avoid that non-CO2. But a lot of effort and lot companies are working on this, I'm pretty confident we'll get to a point we'll be able to avoid some of those. And then there's sustainable aviation fuels. So a lot of research going to fact that as you move to sustainable aviation fuels, they actually reduce the incidents of contrails, so it's quite exciting that we actually could get to mitigation opportunities before we get to the need to regulate.

Victoria Moores:

And it's nice to hear that there's an element of sustainability, which could be fairly easily resolved if it's a flight planning shift and if we can get a better handle on the science around this. But from the sessions that I was listening to yesterday, they said it might be quite a long time before we get the certainty on the science, we do know that there is an impact. So what we might need to do is act now within the realms of uncertainty that we have to make sure that that's already being addressed.

Jonathon Counsell:

Exactly. And I think that's where you'll have heard quite a lot of interest around the 100% SAF certification. Now, previously, a few years ago, people weren't particularly worried about that because there’s still a long time where before we're going to have enough SAF for lots of flights. But if we think about a non CO2 issue, if it's only a small number of days and actually running on a 100% SAF avoids all contrails, maybe-

Victoria Moores:

There's a solution.

Jonathon Counsell:

If you can get to 100% solution, maybe what you can do through some sort of clever book and claim system, you just use that SAF on those days when you're going to get contrails. So that's why there's been a bit more interesting getting that earlier certification on 100% SAF.

Victoria Moores:

At the moment, as a recap, we're at 50% certification for commercial aircraft in terms of being operated on sustainable aviation fuel. But there is a transatlantic trial coming up-

Jonathon Counsell:

There is.

Victoria Moores:

... later on. Actually, it's next month. So in November 2023, that's going to be happening.

Jonathon Counsell:

Indeed.

Victoria Moores:

All will be well if the final permissions come through. We need to leave it there, Jonathon, we're up for time, but I really thank you for sharing your insights on.

Jonathon Counsell:

Thank you very much, it's a pleasure.

Victoria Moores:

Thank you.

Jonathon Counsell:

Thank you, Victoria.

Victoria Moores:

And thank you to our listeners. Make sure you don't miss us each week by subscribing to the Windows Seat Podcast on Apple Podcasts, or wherever you listen. Until next week, this is Victoria Moores disembarking from Window Seat.