The market for renewable aviation fuel in Europe is expected to grow at a CAGR of over 55% during the forecast period of 2020 – 2025. Supportive government policies such as introduction of Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), by ICAO (International Civil Aviation Organization) and potential economic advantages along with the long-term growth in aviation industry such as increasing number of air passengers, on account of the cheaper airfare and stronger economic conditions with increasing disposable income are the major factors that are expected to drive the market during the forecast period. On the other hand, high cost of renewable aviation fuels is expected to hinder the market growth.
- The commercial sector is expected to be the largest market, owing to the increasing government focus on promoting bio-jet fuels in the aviation sector.
- Increasing concerns over emissions from the airline industry and initiatives taken by the governments in developed economies to reduce airline emissions are expected to provide significant opportunities for renewable aviation fuel in the future.
- Germany is expected to witness significant demand during the forecast period, owing to the aviation initiatives taken by the government for development of SAF (Sustainable Aviation Fuel).
Key Market Trends
Commercial Sector to be the Largest Segment
- As of 2018, the air passenger transport in the European Union (EU) carried more than 1.1 billion air passengers, approximately 63 million more than the value registered in 2017. Countries, such as the United Kingdom, Germany, Spain, France, and Italy, accounted for major share in air passenger count, in 2018.
- Owing to the air passenger traffic growth, in 2018, the greenhouse gas emissions from the region’s aviation sector are considered as one of the fastest-growing sources of emissions that contribute to climate change.
- As of 2018, Europe is one of the leading regions in terms of biofuel production technologies, with a significant number of production plants under operation. The production capacity of bio-based aviation fuel in the region depends on a small number of plants, accounting for a maximum potential output of approximately 2.3 million metric ton per year.
- The European Commission (EC), in coordination with Airbus, leading European airlines, such as Lufthansa, Air France, and British Airways, and key biofuel fuel producers, such as Neste and Biomass Technology Group, launched an initiative in 2011, called the European Advanced Biofuels Flight Path, to speed up the commercialization of aviation biofuels in Europe.
- The European Advanced Biofuels Flightpath aims mainly to get the aviation industry use 2 million tonnes of biofuels by 2020 and to get sustainably produced biofuels through the construction of advanced biofuels production plants in Europe by 2020.
- In October 2019, Finland-based oil refiner and renewable fuel producer Neste Oyj, and German national air carrier, Lufthansa, strengthened their collaboration regarding the development of renewable solutions for aviation.
- In 2019, Norway emerged as the first country in the world to mandate the policy of blending 0.5% sustainable fuel with kerosene from 2020. The aim is to increase the blend to 30% by 2030, driving the growth of the market in the coming years.
- Therefore, based on the above-mentioned factors, commercial sector is expected to drive the renewable aviation fuel market during the forecast period.
Germany to Witness Significant Demand
- Founded in 2011, the Aviation Initiative for Renewable Energy in Germany (AIREG) aims to promote the research, production, and usage of sustainable aviation fuels in the country. Members of AIREG include universities, research institutions, plant manufacturers and operators, petroleum companies, engine and aircraft manufacturers, airports, and airlines. In July 2019, Rosneft Deutschland and BP Europa joined this SAF initiative, thus increasing the demand for SAF in Germany.
- The usage of sustainable aviation fuels in Germany is expected to be huge and hence, the AIREG has set of targets of reaching 10% blend for SAF implementation by 2025.
- Rosneft Deutschland, a subsidiary of Rosneft Oil Company, has supplied its customers in airports of Germany with 142,500 tonnes of jet fuel in the first half of 2019, August. Rosneft Deutschland has signed several contracts for the marketing of the JET A-1 jet fuel of its own production. Among them is a contract with Aeroflot PJSC for aircraft refueling in the Berlin Schönefeld Airport.
- Apart from that, Rosneft Deutschland has signed contracts for into-plane refueling with airports in Munich and Berlin (Tegel and Schönefeld) as part of its jet-fuel market share expansion in Germany.
- In January 2020, Shell Aviation partnered with World Energy LLC, to supply sustainable aviation fuel (SAF) to Deutsche Lufthansa AG, mainly for the German airline’s three intercontinental flights out of San Francisco International Airport. Shell Aviation stated that the contract is expected to result in the supply of up to one million gallons of SAF, thus increasing the demand for aviation fuel market.
- Therefore, based on the above-mentioned factors, Germany is expected to witness significant demand on the renewable aviation fuel market during the forecast period.
The Europe renewable aviation fuel market is consolidated. Some of the major players includes Total SA, Neste Oyj, Honeywell International Inc., Swedish Biofuels AB, and Fulcrum BioEnergy Inc.
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