S&P Global Platts Launches First Sustainable Aviation Fuel Price Assessments in Europe

Rhea-AI Summary

S&P Global Platts has launched the first Sustainable Aviation Fuel (SAF) price assessment in Europe, effective August 17, 2020. This initiative aims to enhance market transparency as the aviation sector shifts towards cleaner energy solutions amid pressures from decarbonization goals. The daily price assessment reflects costs associated with SAF produced from used cooking oil. The aviation industry accounted for over 6% of Europe’s energy CO2 emissions in 2019, and the new pricing model intends to facilitate comparisons between traditional jet fuel and SAF costs. This launch follows extensive consultations with industry stakeholders.

Positive

• Launch of the first SAF price assessment in Europe.
• Enhances transparency for market participants in the aviation fuel market.
• Supports the industry's transition towards lower carbon solutions.
• Aligns with EU's net-zero by 2050 aspiration, potentially improving carbon intensity by 50% by 2030.

Negative

• COVID-19 pandemic led to a projected 32% decline in jet fuel consumption in Europe in 2020.
• Current SAF production represents only 0.05% of total jet fuel consumption.

LONDON, Aug. 17, 2020 /PRNewswire/ -- S&P Global Platts ("Platts"), the leading independent provider of information and benchmark prices for the commodities and energy markets, today announces the launch of the first-to-market Sustainable Aviation Fuel (SAF) price assessment in Europe to bring additional transparency as the industry embraces energy transition.

Vera Blei, head of oil markets pricing, S&P Global Platts, said: "Despite an environment where airlines are under exceptional pressure from demand destruction, the green agenda is still being progressed and airlines remain committed to decarbonization. While the Sustainable Aviation Fuel market evolves with the emergence of a spot market, our new cost-based assessment will add critical transparency allowing market participants to compare the price of traditional jet fuel with the cost of new Sustainable Aviation Fuel."

In 2019, aviation accounted for over 6% (around 220 million tonnes) of total annual energy CO2 emissions in Europe, according to estimates by S&P Global Platts Analytics, with 0.2 tonnes of CO2 emitted for every thousand passengers carried. Intra-EU aviation emissions covered by the EU ETS carbon program totalled 70 million tonnes that same year. Earlier this month, the EC launched a public consultation on measures to reduce greenhouse gas emissions in the aviation sector, inviting citizens and interested parties from industry and society to share their views and ideas.

The new daily S&P Global Platts Sustainable Aviation Fuel cost-based price assessment will be published from August 17, 2020, and reflects the cost of SAF produced from used cooking oil on an ex-refinery basis in Northwest Europe. The daily price assessments, published in dollars per metric ton, reflect the production cost of SAFs for blending into jet fuel.

With increased focus on transitioning towards a lower carbon future, cleaner fuels are emerging as a compelling solution to achieve emissions reductions within the aviation sector itself, rather than through the purchase of outside offsets - even as consumer awareness grows around the environmental impact of transportation. S&P Global Platts is already considering additional assessments in other geographies, including the US and Asia. 

Roman Kramarchuk, head of energy scenarios, policy and technology, S&P Global Platts Analytics, said: "COVID-19 has led to an unprecedented decline in global air travel, with S&P Global Platts Analytics estimating a 32% reduction in jet fuel consumption in Europe in 2020, though activity is expected to recover by mid-decade. The EU's aspiration to be net-zero by 2050 is pressuring the aviation sector's rebound to be sustainable. Current volumes of delivered SAF in Europe have been estimated at 0.05% of total jet fuel consumption. But maximizing production capacity could push this higher and full production together with additional incentivized uptake, could see SAFs speed up the rate of carbon-intensity improvement of European air travel by as much as 50% by 2030."  

Decarbonization incentives include tighter EU emissions reductions targets (with intra-EU flight covered under the EU ETS) and the International Civil Aviation Organization's (ICAO's) market-based Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) program. 

An increasing number of airlines have made forward-looking commitments to decarbonize and an emerging pathway involves the integration of SAF into supply chains. While there are only seven airports in Europe taking active deliveries of SAF, an equal number have signed on to accept batch deliveries from pilot SAF production facilities, primarily in Scandinavia.

The new Platts SAF assessments follow extensive consultation with producers, consumers, traders and others in the European oil and biofuel markets as the demand for sustainable aviation fuel grows in consumption and supply.

The Platts SAF assessment assumptions have been calculated by S&P Global Platts Analytics based on existing Platts assessments and other fixed costs. The SAF inputs are costs of Used Cooking Oil CIF ARA and Hydrogen Netherlands, added to fixed renewable biojet refinery costs, then deducting the by-product credits to include FOB ARA Propane, Naphtha CIF NWE cargoes and Diesel CIF NWE ARA Cargoes.  S&P Global Platts will review the specifications and assumptions going forward based on market feedback and as the SAF market develops.

Additional details about the S&P Global Platts Sustainable Aviation Fuel cost-based price assessment methodology can be found in the Subscriber Note.

About S&P Global Platts
At S&P Global Platts, we provide the insights; you make better informed trading and business decisions with confidence. We're the leading independent provider of information and benchmark prices for the commodities and energy markets. Customers in over 150 countries look to our expertise in news, pricing and analytics to deliver greater transparency and efficiency to markets. S&P Global Platts coverage includes oil, gas, LNG, power, petrochemicals, metals, agriculture and shipping.

S&P Global Platts is a division of S&P Global (NYSE: SPGI), which provides essential intelligence for individuals, companies and governments to make decisions with confidence. For more information, visit www.platts.com.

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SOURCE S&P Global Platts

FAQ

What is the significance of the Sustainable Aviation Fuel price assessment launched by S&P Global Platts?

The assessment provides transparency in pricing for Sustainable Aviation Fuel, supporting the aviation industry's transition to lower carbon solutions.

When was the SAF price assessment launched by S&P Global Platts?

The SAF price assessment was launched on August 17, 2020.

What were the CO2 emissions from aviation in Europe in 2019?

In 2019, aviation accounted for over 6% of total annual energy CO2 emissions in Europe, approximately 220 million tonnes.

How does S&P Global Platts assess the cost of Sustainable Aviation Fuel?

The assessment reflects the production cost of SAF produced from used cooking oil on an ex-refinery basis in Northwest Europe.

What impact has COVID-19 had on jet fuel consumption in Europe?

COVID-19 has resulted in an estimated 32% decline in jet fuel consumption in Europe for 2020.