Sustainable aviation fuel (SAF) is increasingly being recognized as a viable alternative to conventional jet fuel as the aviation industry seeks to reduce its carbon footprint. Sustainable Aviation Fuel (SAF) is produced from sustainable feedstocks, and it has the potential to reduce lifecycle emissions by 80% compared to traditional jet fuels.
Industry Challenges
The SAF market encounters difficulties in tracking the provenance and sustainability characteristics of materials because of co-mingling and intricate production procedures, which may cause complications for certification standard compliance, ensuring data integrity and traceability along the supply chain. A simplified, regulated, and auditable procedure is also required for the issuance, trading, transfer, and claim of SAF credits and certificates to address issues related to expensive transaction costs due to intermediaries, manual paperwork and fraudulent SAF sustainability claims.
In addition, several major obstacles stand in the way of the broad adoption of Sustainable Aviation Fuel (SAF) such as high expenses of its production and use, complex regulatory landscape that SAF producers must navigate. Below points summarizes various challenges experienced at various stages of the SAF value chain.
Issues with Data Integrity and Traceability of SAF Sustainability Data: Ensuring data accuracy, integrity, and traceability throughout the SAF lifecycle is a significant challenge. For instance, siloed data for SAF emissions is difficult to reconcile and trust.
High Transaction Costs: Intermediaries and manual processes can lead to high transaction costs and inefficiencies in the SAF value chain. For instance, intermediaries and manual processes in SAF certificates/credits marketplace account for 10% of transaction cost.
Regulatory and Compliance Complexity: Adhering to various regulatory and certification standards can be complex and time-consuming. For instance, audit and regulatory reporting for retirement and sustainability claims as per certification schemes such as ISCC CORSIA, RSB CORSIA is inefficient and error prone as of today.
Lack of Trust and Credibility: Building trust in SAF sustainability certifications and credits can be difficult due to concerns about double counting and lack of transparency. For instance, SAF suppliers may claim credits for the same fuel in multiple markets, leading to inflated sustainability claims.
Lack of Standardization and Transparency in SAF marketplace: The industry lacks standardized processes and transparent pricing mechanisms for SAF, making it difficult to compare and evaluate different options.
Limited Market Adoption: The adoption of SAF is still limited, hindering the development of a robust and efficient market.
Establishing SAF Traceability with Decentralized Blockchain Network
To effectively tackle industry challenges, sustainable aviation fuel (SAF) and related sustainability documents (such as proof of sustainability), must be meticulously tracked throughout the entire SAF supply chain. The SAF supply chain begins at the farm, followed by refining, blending, storage and distribution. Airlines can either choose to use physical SAF and claim sustainability benefits through linked SAF credits or can purchase SAF certificates from marketplace based on availability of SAF.
By offering transparency, traceability, and efficiency, blockchain has the potential to transform the SAF market, leading to a more sustainable future for the aviation industry. Blockchain technology offers promising solutions to address the challenges at various stages of the supply chain:
– Monitoring material flows and SAF sustainability characteristics through mass balance accounting (upstream value chain)
– Trading SAF certificates in decentralized marketplace
– Transferring SAF credits along with physical fuel to claim sustainability benefits (downstream value chain)
Each event and corresponding transactions are documented in Blockchain ledger, establishing an immutable and verifiable record of the journey of SAF from production to consumption.
SAF Mass Balance Accounting
The SAF production process includes sourcing feedstock from farms, processing it at refineries, blending it with conventional jet fuel, and supplying it to SAF distributors. Blockchain captures, reconciles and shares data for material movement, sustainability attributes, and Proof of Sustainability (POS) documents to guarantee transparency, traceability, and adherence to sustainability standards across the SAF supply chain from farm to plane. Smart contracts can be designed to enforce the compliance rules, ensuring that SAF producers, refineries and other stakeholders meet requirements aligned to ISCC CORSIA, RSB CORSIA, and other certification schemes.
SAF Certificate and SAF Credits Tracking
a) SAF Certificate (SAFc) Tracking: A Sustainable Aviation Fuel certificate (SAFc) represents the environmental attributes of SAF, decoupled from the actual physical volume of SAF. It can be utilized to transfer claims for reductions in direct (scope 1) emissions. Therefore, an airline can utilize certificates to decrease its direct emissions (scope 1), even if it does not have physical access to physical SAF at the airports it services. Corporates (business travelers) can utilize SAFc to decrease their indirect emissions (scope 3), even if the flights transporting their passengers and freight do not use physical SAF.
Decentralized SAF certificate registry and marketplace with support for different SAF certificate standards allow buyers and sellers of SAF certificates to trade in a seamless and trusted manner Smart contract based bid matching algorithm enables automation post which SAF certificates are transferred from suppliers to airlines. Blockchain technology is essential for tracking and verifying the ownership and transfer of SAF certificates. In addition, it can enable seamless tracking of lifecycle of SAF certificates until retirement.
b) SAF Credits Tracking: A Sustainable Aviation Fuel (SAF) credit represents the environmental attributes of SAF. An airline who is using physical SAF can utilize SAF credits to reduce its direct emissions (scope 1) and the corporates (business travelers) can reduce their scope 3 emissions.
In the SAF Credit Transfer use case, SAF suppliers register their SAF fuel with authorized registry. Based on the registered SAF, SAF credits are issued to the suppliers. Subsequently, both the physical SAF, corresponding SAF credits and proof of sustainability (POS) documents are transferred to airlines.
Blockchain enables transparency, traceability, proof of integrity of SAF credits from supplier to end consumers. Smart contracts can streamline and automate the issuance, transfer, and retirement of SAF certificates or credits, thus reducing transaction and operational costs. Double counting can be avoided by guaranteeing that each credit/certificate is issued and retired only once. In addition, the technology ensures verifiable record of SAF journey from farm to corporate customer and adherence to standards and compliances.
Value Proposition
1. Enhanced Transparency and Traceability: Real-time visibility into the lifecycle of SAF, ensuring transparency and trust throughout the value chain. For instance, the blockchain can track the entire lifecycle of SAF certificates/credits, GHG emission data across the entire SAF value chain, ensuring transparency and traceability.
2. Improved Efficiency and Cost Reduction: Streamlined process and reduced transaction costs through the use of blockchain technology, leading to increased operational efficiency. For instance, smart contracts can automatically trigger payments or verify the authenticity of sustainability credits based on predefined conditions, eliminating the need for intermediaries and reducing transaction time.
3. Mitigated Compliance Risks: Adherence to sustainability standards and certification requirements, helping to avoid compliance risks and maintaining stakeholder trust. For instance, Blockchain can automatically verify SAF sustainability credits are generated in accordance with established standards and certification requirements, which ensures that the credits are legitimate, and the associated environmental benefits are real, reducing the risk of non-compliance.
4. Data-Driven Decision Making: Access to valuable insights and data analytics to support informed decision-making and optimize sustainability efforts. For instance, Blockchain can provide real-time data on the volume of SAF sustainability credits being traded, the prices being paid for these credits, and the types of feedstocks being used to produce the SAF, which can help stakeholders to identify trends, make informed decisions about investments in SAF production and consumption, and optimize sustainability efforts.
5. Increased Trust and Credibility: The use of blockchain technology provides a secure and tamper-proof ledger, ensuring the authenticity and integrity of SAF sustainability credits. For instance, the blockchain’s immutable ledger can prevent fraudulent activities such as double counting of SAF certificates/credits or the creation of fake certificates/credits, which helps to ensure the authenticity and integrity of SAF sustainability credits, building trust among stakeholders and promoting their acceptance in the market.
Rapid growth in sustainable aviation fuel (SAF) market, from merely 500 flights in 2016 to 490,000 in 2023 reflects industry’s dedication towards minimizing carbon emissions. Sustainable Aviation Fuel (SAF) is expected to contribute approximately 65% of the emissions reduction required for the aviation sector. SAF production is projected to increase to 449 billion liters to meet the rising demand for the IATA Fly Net Zero goal by 2050.towards Net Zero emissions by 2050. With the regulations like ReFuelEU Aviation, Renewable Energy Directive (RED III) (EU), US Sustainable Sky Act, Inflation Reduction Act (US), Renewable Diesel and Sustainable Aviation Fuel Parity Act (US), Energy Policy Act (US), Climate Change Law (Spain).
To summarize, we understand that the need for transparent and efficient solutions for tracking and verifying SAF transactions becomes increasingly critical. Technology improvements for data collection, reconciliation and sharing at ecosystem level can support and guide this revolutionary transition towards decarbonization. Blockchain based decentralized aviation network from farm to corporate users can enable transparent, traceable, trusted, integrated, audit read SAF sustainability transactions across different stages of SAF production, distribution, and usage, resulting in reduced transaction costs, reduced frauds and improved regulatory compliance.
