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CLEARED FOR TAKE-OFF Decarbonising Aviation: Industry Perspectives - Ascension ...
Decarbonising
       Aviation:
       CLEARED FOR
       TAKE-OFF
       Industry Perspectives

       www.shell.com/DecarbonisingAviation
       #MakeTheFuture

                                                     I N CO LL A BO R ATI O N W ITH

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CONTENTS
                                                     3    Introduction                           49        Decarbonising Aviation:
                                                                                                           a New Approach
                                                     4    Report Objectives
                                                                                                           Inflection Point – Ready for Take-off
                                                     5    Executive Summary
                                                                                                 51

                                                                                                           Solutions
                                                     16   Where We Are Today
                                                                                                 52

                                                                                                           Market and Customer Demand
                                                          The Drive to Decarbonise
                                                                                                 53

                                                     17

                                                                                                           Regulatory Incentives
                                                          Decarbonising Harder‐to‐Abate
                                                                                                 57

                                                     18

                                                          Sectors                                62        Technology Alignment

                                                     19   Carbon Dioxide Emissions in Aviation   67        Clarity on Roles and Decision Making

                                                     28   Ways to Reduce Aviation Emissions      70        Ease of Asset Replacement

                                                     32   The Deadlock: Barriers                 73        Ease of Infrastructure
                                                          to Decarbonisation                               Replacement

                                                     33   Decarbonisation Readiness Factors:     76        The Flight Plan: Accelerating
                                                          Summary                                          Decarbonisation

                                                     36   Market and Customer Demand             77        Decarbonisation Pathway

                                                     40   Regulatory Incentives                  80        Flight Plan to 2030

                                                     41   Technology Alignment                   82        How it All Comes Together

                                                     45   Clarity on Roles and Decision Making   85   85   Acknowledgements
                                                                                                           and Sources
                                                     46   Ease of Asset Replacement

                                                     47   Ease of Infrastructure Replacement

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INTRODUCTION

Aviation connects people, provides global access to goods and services, and has
played a vital logistical role in the fight against COVID‐19. It is fundamental to the
world economy and in 2019, supported $3.5 trillion (4.1%) of the world’s GDP. In the
same year, before the pandemic, 4.5 billion passengers took flights. But it was also a
source of around 3% of global carbon dioxide emissions. And aviation could represent
up to 22% of global emissions by 2050, as other sectors decarbonise more quickly.                                                                                            Carlos Maurer
                                                                                                                                                                             Executive Vice President,
                                                                                                                                                                             Sectors and Decarbonisation
There is a lot at stake when it comes to the         It brings together more than 100 aviation                                                                               Royal Dutch Shell
future of aviation. If the industry is to cut        business leaders and industry experts
carbon emissions at the speed and scale              representing 68 global organisations. I would
needed, it must act together to make change.         like to thank them all for their time, energy and   Take SAF, perhaps the most promising of           This is the third report we have published
The International Air Transport Association,         enthusiasm. The resulting report explores the       today’s solutions for cutting carbon emissions.   with Deloitte on decarbonising sectors where
which represents most of the world’s airlines,       sector’s net‐zero targets and what is needed        There are still many challenges before it can     low‐carbon change is hardest to achieve.
aims to halve net emissions by 2050 (from            to meet them. The report seeks to answer            be deployed at the scale needed. They             All three share a common message: whether
2005 levels). But the industry must go further       three key questions: why the sector should          include the need for greater availability of      you operate exclusively in aviation or have
and faster if it is to achieve net‐zero emissions.   change, how it can change and how fast              raw materials, better supply infrastructure and   a supply chain that also spans road freight
                                                     this change can happen. It is accompanied           clearer policy to encourage production. These     or shipping, it is time for action.
This means not only setting out a clear route        by a report on the actions Shell itself is          elements have to come together – and the
to net‐zero emissions but showing greater            taking. At Shell we are exploring routes to         faster, the better.                               As Executive Vice President of Shell’s
ambition and stronger leadership. Roughly            zero‐carbon aviation, including hydrogen,                                                             Sectors & Decarbonisation business, I believe
half the industry has committed to achieving         sustainable aviation fuels (SAF) and nature-        So, whether your employees would normally         these reports show how much potential there
net‐zero emissions by 2050, including                based solutions.                                    fly for business, or your company transports      is for change if we act quickly enough. The
suppliers such as Shell, but we must all                                                                 cargo by air, or you are an airline hoping to     industry has a chance to reset after the global
do more – and collaboration is critical.             The report shows how a complex industry             use more SAF – we invite you to collaborate       shock of the pandemic. By working together,
                                                     has the potential to make even greater              with Shell. Together, we can work to identify     I believe we can make the aviation sector fit
We have to work together to understand               progress, provided the right parties –              opportunities to lower carbon emissions in        for a net‐zero world.
the challenges, then identify and agree              government, customers, energy companies             your operations and help the sector achieve
on solutions. This report is a starting point.       or airlines – are aligned on the right actions.     net‐zero emissions by 2050.

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REPORT OBJECTIVES
                                                                                                     01 Research participants

                                                                                                      102 aviation executives and experts...

                                                                                                      35 CEOs                   33                       21 Technology             8 Policy and              5 Strategists
This report reflects the perspectives of over 100 executives and experts, representing                and senior                Sustainability           leads and experts         regulation
68 organisations across almost all segments of the aviation sector, complemented with                 executives                leads and                                          specialists
input from 6,000 travellers worldwide, both leisure and corporate. (see Exhibit 01).                                            experts
It aims to:
                                                                                                      ...representing 68 global organisations...

ƒ   Take a comprehensive view.                    ƒ   Accelerate the pathway
    Many decarbonisation studies focus on             to net‐zero. Aviation experts who               18 Com-           6 Airports         9 Shippers 9 OEMs,                  10 R&D             8 Industry        8 Regula-
                                                                                                      mercial                              and cor-   technolo-                and                groups            tors and
    specific challenges or stakeholder groups         participated in this research are at a
                                                                                                      airlines                             porates    gy and in-               financial                             NGOs
    in isolation. Given the interdependency           point where they need to make decisions         and cargo                                       frastructure             institutes
    of factors, the sector needs a more               around decarbonisation. We worked with          airlines                                        providers
    comprehensive view, which includes                them to converge on a set of solutions
    economic, regulatory and organisational           and a flight plan that can help the industry    37 Europe                                  21 North America                           10 Asia & Rest of the World
    factors. This report builds on the existing       act now and clarify the path forward.
    body of knowledge in the market.                                                                  ...and 6,000 travellers worldwide
                                                  This report reflects the insights industry
ƒ   Reflect the voice of the sector.              executives and experts shared with us
    No one stakeholder group can do this          through interviews and working sessions             3,000 leisure travellers                   3,000 corporate travellers                 Across 6 countries:
    alone, and everyone will have a role          with the industry, not the views of Shell or                                                                                              Australia, Canada, China,
                                                                                                                                                                                            Germany, UK and USA
    to play. It is essential to understand the    Deloitte. All engagements with participants
    unique motivations and challenges of          were conducted in a manner that respects
    different groups and locations, for the       competition law boundaries.
    sector to be able to take collective action
    that will make an impact.

                                                                                                     Note: Regions indicate organisations’ headquarters. Most organisations involved operate globally. Aviation executives and
                                                                                                     experts were consulted in individual one-on-one interviews. Travellers were consulted through a detailed survey. OEMs refers to
                                                                                                     original equipment manufacturers.

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Executive
Summary
CLEARED FOR TAKE-OFF Decarbonising Aviation: Industry Perspectives - Ascension ...
Aviation is fundamental to the world economy,
supporting $3.5 trillion (4.1%) of the world’s
GDP1. It helps foster cultural exchange and
provides global access to goods and services.          02 Research highlights
Throughout the COVID‐19 pandemic, the
industry has provided vital logistical support in
the fight against the virus: empty planes have                            1. Aviation has often been considered a          3. Long-term customer demand, enabled by recognition mechanisms and
been modified to carry personal protective                                sector that will decarbonise later than          differentiated propositions, will play a fundamental role in providing the
equipment (PPE), vaccines and other essential                             others, because of the complexity involved       funding and incentives for airlines to invest in lowering their emissions.
                                                       Why should the     and the view that aviation accounts for “just
cargo. The sector also connects people around          sector change?     3% of global emissions”. But there is a need     4. Country- and region-based policy incentives relating to supply and
the world. The lockdowns of the past two years                            to act now.                                      demand will accelerate the adoption of SAF and regulation at regional and
have accentuated the need for human contact,                                                                               global level.
and aviation allows people to fly to see
                                                                                                                           5. Offsets can play an essential role in funding the early stages of
friends, relatives and business relations.                                                                                 decarbonisation. But for this to happen, they must be made more transparent
                                                                                                                           and verifiable. They need to be more emotionally appealing to
But aviation is also a source of around 3% of                                                                              passengers, and their impact should be clearer.
global carbon dioxide (CO₂) emissions, and as          Can the sector
                                                       change?                                                             6. Choosing SAF as the primary means of decarbonisation will have
the global economy continues to develop in the                            2. The sector is facing several barriers to      a disproportionate impact on lowering emissions, because there is no need to
coming years ‒ with new parts of society joining                          decarbonisation, mainly:                         redesign aircraft. As a result, investments and R&D efforts can focus mainly
                                                                           targets are insufficiently                      on scaling production and lowering cost.
the middle class ‒ aviation volumes will grow. The                           ambitious, unsupported by local
pandemic may have caused some changes to                                     regulation, and constrained by the            7. Collaboration with other sectors is essential to the successful deployment
the future of air travel, as people find new ways to                         perceived need for international alignment;   of SAF. It can drive down the cost of required technologies, such as
                                                                           cost of Sustainable Aviation Fuel              hydrogen production, direct air capture and biomass conversion, and ensure
meet virtually and work remotely. But the long‐term                          (SAF) is prohibitively high, with             effective use of scarce resources.
forecasts suggest that overall, COVID‐19 is unlikely                         many in the sector expressing uncertainty
to have a lasting impact on aviation volumes. If                             about how to reduce it and concerns           8. The pathway to decarbonisation needs to be more ambitious and
                                                                             about the availability of feedstock;
nothing is done, emissions are expected to more        How fast can the                                                    investments need to start sooner to address societal expectations, reach sufficient
                                                                           leisure passengers are reluctant
than double by 2050 (from 2019 levels).                                                                                    SAF volumes and bring down cost to the levels required for large-scale adoption
                                                       sector change?        to absorb the cost of lower emission          within 15 years.
                                                                             solutions; and
                                                                           concerns about offsets relating to
Through our engagement with over                                                                                           9. Individual initiatives should be integrated into comprehensive
                                                                             quality, transparency and communications
100 executives and experts across the global                                                                               plans representing all points along the value chain – from energy producers to
                                                                             lead to limited uptake.
                                                                                                                           end-customers. These plans should be systematically deployed in areas with
aviation industry, we have broken down what                                                                                favourable policies, market conditions, and access to SAF.
is often seen as an insurmountable problem
into manageable components. We did that by
focusing on three core questions: Why should
the sector change? Can the sector change?
How fast can the sector change? This produced
nine main research highlights (see Exhibit 02).

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To make meaningful progress in reducing
                                                     emissions in the next 20‐30 years, the aviation
                                                     sector must make more use of the options
1. RESEARCH HIGHLIGHT                                available now.

Aviation has often been considered a                 One of the most important of these options
sector that will decarbonise later than              is sustainable aviation fuel (SAF). It comes
others, because of the complexity involved           in a variety of forms, the large majority of
and the view that aviation accounts for              which have lower life‐cycle greenhouse gas
“just 3% of global emissions”. But there             emissions than conventional fossil fuels. All
is a need to act now. ​                              forms of SAF have the further advantage of
                                                     being drop‐in fuels, meaning they can be used
                                                     without the need for major changes to aircraft
                                                     design or supporting airport infrastructure.

     Aviation has been excluded from some major      Offsets are another option that is
     efforts to tackle climate change, because       available now. They allow passengers and
     decarbonising the sector is perceived as        other people in the aviation industry to
     complex and it currently accounts for 3% of     compensate for the emissions by buying
     global emissions. For example, aviation was     carbon credits generated by projects that
     excluded from the Paris Agreement on climate    either reduce the global stock of greenhouse
     change and partly excluded from the EU          gases ‒ for example, by using plants to
     Emission Trading System (ETS), which only       absorb CO₂ ‒ or avoid adding to it ‒ for
     counts flights within the EU.                   example, by preventing deforestation.
                                                     The result can be net‐zero emissions, such
     “Policymakers and those within the sector       as when the CO₂ emitted by a flight is
     use the proportionately low emissions as an     cancelled out by the greenhouse gas
     excuse to defer action,” said one NGO.          absorbed by the offset project.
                                                                                                          changing to them will be much harder than        large share of their respective markets. This
     But, as other sectors decarbonise, aviation’s   Interviewees suggested that these two options        switching from kerosene to SAF. By starting to   concentration of market share and influence
     share of total emissions will increase. Many    should be the priority to reduce emissions in        develop alternative propulsion technologies      means decisions can be made relatively
     participants in this research said that it is   the short term. At the same time, the sector         now, they could become viable for some           quickly and have a global impact. But the
     now time to increase the global focus on        must work to continue improvements in aircraft       applications by the late 2040s and 2050s.        sector’s long investment horizons and fleet
     aviation decarbonisation. We have a chance      and operational efficiency, and develop the                                                           renewal cycles mean that aviation must act
     to redefine the way we fly; to break the link   alternative propulsion technologies, such as         Aviation is a highly concentrated industry,      now to sufficiently reduce emissions by 2050.
     between aviation and emissions.                 batteries and hydrogen. These technologies           meaning that a relatively small number of
                                                     offer the possibility of zero‐emission flying, but   manufacturers, airlines and airports have a

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2. RESEARCH HIGHLIGHT

The sector is facing several barriers to
decarbonisation, mainly:

ƒ   Targets are insufficiently                    this would equal an increase of 30–200%         ƒ   Leisure passengers are reluctant               ƒ   Concerns about offsets relating
    ambitious, unsupported by local               of airline operating costs or ticket prices.        to absorb the cost of lower                        to quality, transparency and
    regulation, and constrained                   Within decades this could break even, as            emission solutions, because they                   communications lead to limited
    by the perceived need for                     supply and demand grows and the cost of             have come to expect cheap air fares                uptake. Some offsets are perceived
    international alignment. This                 carbon increases. Bio‐SAF, which is made            and do not feel personally responsible             to be of low quality and the market is
    creates a widespread wait‐and‐see             from plant or animal material, such as crops,       for emissions. “It will be very difficult to       fragmented with many standards and
    approach across the sector. “Targets          forestry or agricultural waste, is currently        pass on extra cost for sustainability to           project types. Many relate to projects that
    without incentives – or without clarity       the cheapest form of SAF available, but its         passengers who choose the cheapest                 have happened in the past, in places far
    on when those incentives will come –          supply is structurally constrained and costs        seat,” said an interviewee from a research         removed from where emissions occurred,
    paralyse the industry participants,” said     are likely to increase as readily available         and development (R&D) organisation.                and with no clear link between the
    an airline representative.                    feedstocks are exhausted. Synthetic SAF is          Although 85% of surveyed leisure                   payment and the reduction of greenhouse
                                                  made using hydrogen obtained from low‐              passengers say they are willing to pay             gases. “People expect that when they
ƒ   Cost of SAF is prohibitively                  emission sources and CO₂ captured from              to offset emissions, less than 1% do in            pay for offsets, actual trees are planted
    high, with many in the sector                 other industrial processes or captured from         practice. At the same time, corporate              somewhere in the world, and it’s still
    expressing uncertainty about how              the air. The technology behind synthetic            travel is likely to reduce in share after          questionable whether that is happening
    to reduce it and concerns about               SAF is less developed than that for bio‐            the pandemic, putting more pressure on             or not,” said an aircraft operator. As
    the availability of feedstock. SAF            SAF, so production costs are considerably           airline margins, which might impact ticket         a result, offset uptake is limited, which
    today is two to eight times more expensive    higher. Synthetic SAF also competes with            prices for all passengers.                         makes it difficult for the aviation sector to
    than traditional jet fuel, depending on       other sectors for hydrogen supplies, but it                                                            compensate for its emissions during the
    the feedstock. If all kerosene on a typical   is thought that towards 2050 it could be                                                               period when it is developing other ways
    long‐haul flight were replaced with SAF       cheaper and produced in bigger volumes                                                                 to decarbonise.
    tomorrow, without any policy incentives,      than bio‐SAF.

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These four barriers were mentioned most           across the sector, and the tendency to work        03 Barriers to decarbonising aviation¹
frequently by interviewees, but they also         on many scattered and small‐scale initiatives,
identified barriers relating to all six of the    instead of approaching the problem in an
readiness factors listed in the Exhibit 03. One   integrated way.                                         Readiness                                Why should the sector          Can the sector                      How fast can the
manufacturer said: “If you don’t have the                                                                 questions                                change?                        change?                             sector change?
assets, infrastructure, political support and     Overall, while aviation is a hard‐to‐abate

                                                                                                                                                                                                                                      Ease of infrastructure
                                                                                                                                                                                               Clarity on roles and
the customers’ willingness to move, you will      sector, drop‐in fuels will reduce the need for

                                                                                                                                                   customer demand
                                                                                                      Readiness factors

                                                                                                                                                                                               decision making
not proceed. All these elements have to be in     new aircraft and infrastructure. Sectors like
place, and everyone has to be aligned – and       road transport will need to change the asset

                                                                                                                                                                                                                      Ease of asset
                                                                                                                                                                                                                      replacement

                                                                                                                                                                                                                                      replacement
                                                                                                                                                   Market and

                                                                                                                                                                                  Technology
                                                                                                                                                                     Regulatory

                                                                                                                                                                                  alignment
we have to work on all those together.” As        fleets, produce the alternative energy carriers

                                                                                                                                                                     incentives
the manufacturer’s comment might suggest,         like batteries and hydrogen, and set up the
“softer” barriers are also preventing the         infrastructure required to supply them. Aviation
industry from making progress, such as an         can take advantage of existing aircraft and
incremental mindset, a lack of co‐operation       refuelling infrastructure.                                                                       60%               90%          30%           30%                   30%              60%

                                                                                                                                                   Major             Major        Major         Major                 Major            Major
                                                                                                                                                   barrier           barrier      barrier       barrier               barrier          barrier
                                                                                                                                                   100%              100%         100%          100%                  100%             100%

                                                                                                      Participants’ view on severity of barriers
                                                                                                                                                      Aviation

                                                                                                                                                   Minor             Minor        Minor         Minor                 Minor            Minor
                                                                                                                                                   barrier 0%        barrier 0%   barrier 0%    barrier 0%            barrier 0%       barrier 0%

                                                                                                     Notes: 1) Based on SAF drop-in solution. Ease of asset replacement and ease of infrastructure replacement will be more of a barrier for
                                                                                                     battery electric and hydrogen aircraft

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4. RESEARCH HIGHLIGHT

                                                                                                                                                        Country‐ and region‐based policy
                                                                                                                                                        incentives relating to supply and demand
                                                                                                                                                        will accelerate the adoption of SAF
                                                                                                                                                        and regulation at regional and global level.​

                                                                                                                                                  Net‐zero targets need to be set for 2050,
                                                                                                                                                  with ambitious interim steps for 2030, to
                                                                                                                                                  align aviation with the rest of the energy
                                                                                                                                                  system, and to create the urgency to act
                                                                                                                                                  now. Targets should be underpinned by
                                                                                                                                                  policy measures. On the supply side, fuel
                                                                                                                                                  producers can be triggered to invest in
                                                                                                                                                  producing SAF through blending mandates,
                                                                                                                                                  contracts for difference, tax credits and
                                                                                                                                                  market‐based incentives like California’s
                                                                                                                                                  Low‐Carbon Fuel Standard. On the demand
                                              Large corporate flyers like big tech,               SAF and offsets creates a market pull that      side, incentives around buying choices can
                                              financial institutes and consultancies, and         incentivises airlines to act.                   be created by route restrictions, pricing
                                              cargo shippers like food and electronics                                                            mechanisms and fossil‐fuel taxation ‒ for
3. RESEARCH HIGHLIGHT                         manufacturers need to lead in creating              Leisure passengers must also be encouraged      example, a carbon tax or an emissions
                                              demand for lower‐emission aviation. Their           to play their part, through offers related      trading scheme.
Long‐term customer demand,                    own net‐zero ambitions require them to              to SAF and offsets that reward customers
enabled by recognition mechanisms and         reduce emissions from employee travel and           for supporting decarbonisation. These           The sector does not need to wait for global
differentiated propositions, will play        transporting goods. Many of these customers         rewards can either be functional, such as       regulatory alignment – country‐ and region‐
a fundamental role in providing the funding   are less price‐sensitive than leisure passengers,   priority boarding or meal upgrades, or more     based policies that target key transportation
and incentives for airlines to invest in      because air travel typically accounts for           emotional, such as dedicated seats or waiting   hubs and flagship routes will go a long way
lowering their emissions. ​                   a relatively small proportion of their costs.       areas. One airline said: “We started offering   to creating momentum. Examples can be
                                              Aggregating the corporate demand for                more loyalty points for customers who use       found in recent announcements in the UK to
                                                                                                  offsets, and adoption grew well beyond the      include aviation in the national footprint2,
                                                                                                  1% industry average.”                           and Germany’s synthetic‐SAF roadmap3.

     10    DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
Offsets have an immediate role to play in        communicate the important role they can play    Interviewees flagged “insetting” – where
                                               helping aviation to reduce its net emissions.    in decarbonisation. It must make sure that      funds raised are used directly within the
                                               They will be particularly important during       all offsets are subject to rigorous standards   sector – as an example for how the industry
5. RESEARCH HIGHLIGHT                          the time it takes to fully develop other ways    and assurance mechanisms, and that              could keep investments within the sector to
                                               to decarbonise the sector.                       customers know this. Offsets can be made        promote R&D and SAF production.
Offsets can play an essential role in                                                           more emotionally appealing to customers
funding the early stages of decarbonisation.   Offsets will probably also play a role in the    by including more projects that remove
But for this to happen, they must be made      longer term, while SAF supply and demand         CO₂ rather than those that avoid emitting it,
more transparent and verifiable.               scales, and to address the remaining             as well as more projects that are closer to
                                                                                                                                                      6. RESEARCH HIGHLIGHT
They need to be more emotionally               20–40% of emissions relating to bio‐SAF.         passengers’ homes and businesses. The way
appealing to passengers, and their                                                              offsets are marketed and sold should also be
                                               With this in mind, the sector must address the   improved ‒ for instance, by moving towards            Choosing SAF as the primary
impact should be clearer. ​
                                               concerns about offsets. Aviation must better     an opt‐out rather than an opt‐in approach.            means of decarbonisation will have
                                                                                                                                                      a disproportionate impact on lowering
                                                                                                                                                      emissions, because there is no need to
                                                                                                                                                      redesign aircraft. As a result, investments
                                                                                                                                                      and R&D efforts can focus mainly on
                                                                                                                                                      scaling production and lowering cost. ​

                                                                                                                                                Using SAF as the main way to decarbonise
                                                                                                                                                in the next 20 to 30 years creates focus. By
                                                                                                                                                converting a few production sites to bio‐SAF
                                                                                                                                                around key hub airports, entire routes and
                                                                                                                                                even regions can be decarbonised relatively
                                                                                                                                                quickly. By investing early in synthetic SAF to
                                                                                                                                                move production from small quantities in labs
                                                                                                                                                to sustained scale production, widespread
                                                                                                                                                SAF use can be made possible. Towards
                                                                                                                                                2050, research participants expect bio‐ and
                                                                                                                                                synthetic SAF to contribute to over 60% of the
                                                                                                                                                reductions in emissions from aviation.

                                                                                                                                                Demand for SAF can be significantly
                                                                                                                                                accelerated by increasing transparency
                                                                                                                                                around feedstock, reducing friction in

      11    DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
the purchasing process, greater use of              and shipping as well. Synthetic SAF requires
      certification, simplicity in communications,        significant improvements in large-scale
      and using “book and claim” mechanisms to            electrolysers that can produce zero-carbon
      open up access to those who are far from            “green hydrogen” by using renewable
      points of supply.                                   electricity to split water into oxygen and
                                                          hydrogen. The steel, road freight, shipping
      New financing mechanisms should also be             and fertiliser sectors also need green
      developed to create clarity on returns. An          hydrogen to help their decarbonisation efforts.
      indexed investment fund could help investors        More efficient technologies are also needed
      spread technology risk across multiple              for capturing CO₂, which will be required to
      projects and help attract institutional investors   produce synthetic SAF. These technologies
      in the early stages of the transition.              include carbon capture storage and utilisation
                                                          (CCSU), where CO₂ comes from other
                                                          industrial processes, such as steelmaking,
                                                          and direct air capture (DAC), where CO₂
                                                          would be extracted directly from the air. These
7. RESEARCH HIGHLIGHT                                     technologies will also have wide‐ranging
                                                          applications beyond aviation.
Collaboration with other sectors is
essential to the successful deployment of SAF.            Companies across different sectors should
It can drive down the cost of required                    pool their resources and direct them to
technologies, such as hydrogen                            the most promising R&D projects. Those
production, direct air capture and biomass                companies or organisations operating across
conversion, and ensure effective use of                   these sectors like energy providers, financiers
scarce resources.                                         and research institutes will need to play a
                                                          critical coordination role. In this way, the
                                                          required technologies are likely to develop
                                                          more quickly than if each sector worked
      Many of the technological developments              on them alone. While collaboration will be
      needed to produce SAF at scale and lower            critical to accelerate progress, cross‐sector
      its costs will also be useful for other sectors.    coordination and policy measures will be
      For example, bio‐SAF requires exploration of        needed to help ensure limited feedstocks
      new bio‐feedstocks and innovation in new            are directed to where they can have the
      production pathways – both of which can             largest impact.
      help decarbonise sectors such as chemicals                                                            Shell’s Energy and Chemicals Park Rheinland, Germany, home to Refhyne European consortium PEM
                                                                                                            hydrogen electrolyser.
                                                                                                            Photo credit: © Dieter Jacobi/welcome for Shell International Ltd.

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04 Decarbonisation pathway – sector sentiment                                                                                              Comparison with typical                               Main differences compared
                                                                                                                                                 industry report                                       with typical industry report
      2,200       Aviation net CO₂
                  emissions (Mt)                                                                                                    Efficiency        Efficiency gains taken for granted                  1   Net zero by 2050
      2,000                                                          Emissions at 2019 efficiency
                                                                                                                                    gains
                                                                                                    2                                                                                                   2   Efficiencies not taken for granted
                                                                                                                              3                      Additional operations and infrastructure
      1,500                                                                                                                                          improvements                                       3   Bio-SAF potential limited
                                                                                                                                    Bio-SAF
                  CORSIA Carbon-neutral
                  growth off 2019 baseline                                                                                                                                                              4   Synthetic SAF scale-up sooner
                                                                                                                                                     Significant deployment of bio-SAF
      1,000                                                                                                                   4
                                                                 5    High-quality
                                                                                                                                    Synthetic                                                           5   High-quality carbon offsets and
                                                                      offsets and insets                                                              Major adoption of new propulsion
                                                                                                                                    SAF                                                                     insets
        500                                                                                                                                           technologies
                                                                                                                                    H₂, e
                                                               Goal on path towards net zero            1                                             Target -50% by 2050 compared
           0                                                                                                                                          with 2005 (IATA)
            2010          2015          2020          2025           2030         2035          2040          2045          2050

      Sources: interviews; ATAG (2020); IATA (2021); ICAO (2019); Shell Energy Transformation Scenarios (2021); Deloitte analysis

                                                                         One airline executive said: “Society does not                      The pathways for decarbonising                      sustainable feedstock for bio‐SAF ‒ especially
                                                                         accept aviation’s special status anymore. We                       aviation are directionally right,                   in the long term. Investing in both types of SAF
                                                                         need to decarbonise, as do all other sectors,                      but the details need changing.                      will make it possible to scale‐up production
8. RESEARCH HIGHLIGHT                                                    to remain credible.”                                                                                                   and bring down cost to the levels required
                                                                                                                                            Airline executive
                                                                                                                                                                                                for large‐scale adoption, which can already
The pathway to decarbonisation                                           A net‐zero target will require a significant                                                                           happen within 15 years.
needs to be more ambitious and                                           acceleration of efforts, now (see Exhibit 04).                     Firstly, many interviewees said the sector
investments need to start sooner to address                                                                                                 should stop taking efficiency improvements          Thirdly, aviation must significantly increase
societal expectations, reach sufficient SAF                              Investment must be significantly accelerated ‒                     resulting from better aircraft design or            the uptake of offsets and ensure that they all
volumes and bring down cost to the levels                                or front‐loaded ‒ compared with typical                            operations for granted. They are an important       meet rigorous quality standards. This will be
required for large‐scale adoption within                                 plans, and need to span all currently feasible                     way to reduce fuel usage and emissions, but         especially important in the short term, while
15 years.​                                                               decarbonisation options – efficiency, bio‐                         will become increasingly difficult to achieve.      SAF is still being fully developed.
                                                                         SAF, synthetic SAF and offsets. No single
                                                                         option alone can reduce net emissions                              Secondly, energy companies and other                Finally, continued investment in alternative
                                                                         by the required amount and the options                             aviation stakeholders must accelerate               propulsion technologies is needed, to prepare
      Most research participants take it for granted                     themselves should be approached differently                        developing synthetic SAF sooner and at larger       the sector for a truly decarbonised future ‒
      that a net‐zero emissions target will soon be                      than at present.                                                   scale than previously assumed, because              even if such technologies will make limited
      adopted for aviation.                                                                                                                 there is uncertainty about the availability of      contributions before 2050.

      13       DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
Industry stakeholders identified 15 solutions, or                     in SAF production ‒ particularly in regions             SAF use more economically viable. Standards,
                                                                            recommendations for action, to overcome the                           with the most favourable policy and customer            certification and reporting will make it easier
                                                                            barriers to decarbonisation and accelerate                            environment, for example in USA and North‐              to track progress. Progress will also need to be
9. RESEARCH HIGHLIGHT                                                       aviation’s progress. Some of these are already                        western Europe. Policymakers and financiers             made around electric and hydrogen aircraft to
                                                                            being investigated. Others are new, or provide                        should support initial investments with                 accelerate the development of technologies
Individual initiatives should be                                            a more efficient way to overcome a specific                           targeted incentives.                                    which can enable zero‐emission aviation.
integrated into comprehensive plans                                         barrier (see Exhibit 05).                                                                                                     Putting these solutions in place by 2030 will
representing all points along the value chain –                                                                                                   The “accelerate” phase (2025‐2030)                      allow the sector to lay the foundation required
from energy producers to end‐customers.                                     In the short term (2022‐25), the focus should                         follows. Net‐zero targets for 2050 are likely           to decarbonise by 2050.
These plans should be systematically                                        be on solutions that “unlock” progress.                               to be widely adopted. R&D and supply
deployed in areas with favourable policies,                                 This phase includes demand commitments from                           partnerships will be formed to enable                   Although each solution is important on its
market conditions, and access to SAF.                                       corporate and cargo customers, developing                             more SAF to be produced, at lower cost.                 own, the true value lies in their combined
                                                                            offers for leisure passengers that support                            Operational efficiencies from fleet renewal             deployment, applying the principle of
                                                                            sustainability, and improvements around offsets.                      and optimising the use of airspace will enable          “think big, start small, scale fast.”
                                                                            This stage should see large‐scale investments                         further reductions in fuel consumption, making

      05 The "flight plan" for decarbonising aviation                                                                                                                                         Technology              Regulatory             Customer related
                                                                                                                                                                                             related solutions       related solutions      solutions

       Corporate and cargo customers’ demand for SAF

       Offers and rewards encouraging customers to make choices that support sustainability

       Airports extending influence to promote SAF uptake and fleet upgrades                                                                     Collaboration with other sectors on SAF R&D

       Focused “green” financing to support more investment in decarbonisation                                                                  Airports and airspace optimisation to reduce operational emissions

       Bio-SAF production                                                                                                                      Aircraft efficiency improvements and accelerated fleet renewal

       Synthetic SAF production                                                                                                                R&D of electric and hydrogen aircraft

       Supply-side mandates, incentives and feedstock allocation                                                                               Net-zero targets and aligned plans

       Demand-side emission taxation, restrictions and incentives                                                                              Standards, certification and reporting to assure the quality of carbon reductions from SAF and offsets

       Carbon offset improvements

                                                         Unlock (2022 – 2025)                                                                                                    Accelerate (2025 – 2030)

      Note: Timing of solution is related to period in which most activities are expected; however, most solutions require effort across short, medium and/or long term

      14      DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
We cannot wait for a technical                    We just need to have one
                                                      salvation, we must act now                        systematic sustainable flight
                                                      using all the options that are                    route that operates daily, and
                                                      available today.                                  very quickly others will follow –
                                                      Travel agent                                      because they will have to.
                                                                                                        Energy expert
                                                      The first net-zero value chains and regularly
                                                      scheduled net-zero routes can be created          Interviewees recognise that the challenge of
                                                      relatively quickly in some places. They           decarbonising aviation is too large for any
                                                      will require favourable factors such as           one organisation or even one stakeholder
                                                      supportive regulation, a strong connection        group to solve alone. But a joint effort will
                                                      between airports, a significant proportion of     allow aviation to launch specific solutions in
                                                      environmentally conscious business travellers,    the short term, and hit crucial targets in the
                                                      and an ability to increase the production         long term. First movers are likely to reap the
                                                      of SAF. Such an environment could allow           benefits of early access to insights that set
                                                      airlines to use SAF and high‐quality offsets      them apart. They are likely to be able to share
                                                      to launch their first regular net‐zero flights.   risks and investments, and influence outcomes
                                                      Beyond having a marketing effect, such            in their favour. Engaging with their customers
                                                      connections would create scale in demand,         and others in the aviation sector during the
                                                      which would make it cheaper to produce            early phases of the transition will pay dividends
                                                      SAF. They would allow airlines to test            for such relationships in the future. As these
                                                      customer offers that support sustainability       early initiatives expand, momentum will build,
                                                      before putting them on other routes in the        and more companies will join to create the
                                                      expectation that they will gradually become       necessary scale and impact across the sector.
                                                      industry standard. These net‐zero value
                                                      chains should be systematically expanded          In this way, decarbonising aviation will be
                                                      as technologies mature and market                 cleared for take-off.
                                                      conditions improve.

15   DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
Where We
Are Today
THE DRIVE TO DECARBONISE

The 2015 Paris Agreement defined a bold
ambition to limit global warming to below two
degrees Celsius above pre‐industrial levels
and pursue efforts to limit it to 1.5 degrees
Celsius. This is to be achieved partly by
getting the world to net‐zero greenhouse
gas emissions (carbon neutrality) by 2050.
In response, many countries, industries
and individual organisations set goals and
began developing plans to limit their carbon
emissions. Action is being taken at global,
national, regional and sector levels. There are
many positive signs, but the United Nations
Environment Programme still says: “On current
unconditional pledges, the world is heading
for a 3.2 degrees Celsius temperature
rise.” Clearly, more needs to be done.
Decarbonisation must be accelerated using
more focused approaches that produce real
action. Such approaches often need to be
adopted by whole sectors. Sometimes ‒ for
example, when different sectors face similar
difficulties ‒ a more unified, cross‐sectoral
approach may be needed.

17    DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
06 Global CO₂ emissions by sector (2019)
DECARBONISING HARDER‐
TO‐ABATE SECTORS

                                                                                                                            Six harder-to-abate sectors account for
                                                                                                                            a total of 32% of global CO₂ emissions

There are six harder‐to‐abate sectors: road       Although most emission‐reduction targets,
freight; iron and steel; cement; chemicals;       including the Paris Agreement, focus on
shipping; and aviation. These sectors             carbon emissions that contribute to global
accounted for around 32% of global                warming, there are also non‐CO₂ emissions                                       8% Road freight
CO₂ emissions in 2019, according to               that affect global climate. With aviation, these
                                                                                                                                                      7% Iron and steel
the International Energy Agency (IEA)             include nitrogen, sulphur, soot particles and
(see Exhibit 06). They share common               the formation of contrails. Their impact on
characteristics, such as long asset lifespans,    climate is complex, and there is uncertainty
high energy dependency and being difficult        about how to quantify it4. As a result,                                                             7% Cement
to electrify. As a result, decarbonising these    while recognising that we need a deeper
sectors might be more technically demanding       understanding of everything that contributes
and costly than other parts of the energy         to global warming, this research focuses                                                            4% Chemicals
system. As decarbonisation happens more           on how to reduce the aviation sector’s
rapidly elsewhere, pressure and focus on          CO₂ emissions – in other words, how to                                                              3% Shipping
harder‐to‐abate sectors will probably increase.   decarbonise it.
                                                                                                                                                      3% Aviation = 1,019 Mt CO₂

                                                                                                                                  68% Other

                                                                                                     Source: IEA (2021)

18    DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
CARBON DIOXIDE
EMISSIONS IN AVIATION

Where we are: Aviation is fundamental to           18 million indirectly, such as in fuel provision
the world economy, global prosperity and           and construction8.
national development.
                                                   Aviation also provided vital logistical support
Aviation greatly assists the socio‐economic        in the fight against COVID‐19. Empty aircraft
growth of nations. The sector supports             were modified to move personal protective
$3.5 trillion (4.1%) of the world’s GDP5. If       equipment (PPE), vaccines and other
aviation were a country, its GDP would             essential cargo across the world to help
be the 17th biggest in the world6. For             combat the pandemic.
decades, there have been year‐on‐year
increases in aviation volume, measured in          The disruption caused by the pandemic has
revenue passenger kilometres (RPK) ‒ the           dramatically expanded the possibilities of
distances travelled by paying passengers.          remote working. Lockdowns, though, have
These increases have been caused by the            also made many acutely aware of the need
globalisation of business and rising economic      for human contact and the way air travel can
prosperity in much of the world.                   reunite them with friends and relatives.

In addition to the benefits described above,       Some groups challenging the sector, such
aviation has enabled the emergence of a            as the flight‐shaming movement, give the
global tourism industry, which contributes         impression that the way to reduce aviation’s
around 10% of global GDP7. The aviation            contribution to global warming is to stop flying
sector connects people around the world,           altogether. These movements tend to ignore
fosters cultural exchange, and provides            the significant economic and social benefits
global access to goods and services. It            that aviation brings to individuals and nations.
supports 11 million jobs directly ‒ for example,   Research participants indicated that the
in airlines and airports ‒ and another             unintended consequence of focusing so much

19    DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
attention on flight avoidance, may be less        Trains may offer a viable and more                    07 Global aviation volume and emissions (2019)
focus given to developing solutions required      environmentally sustainable alternative to short
to reduce emissions associated with flying.       flights in some countries. Some governments
                                                                                                               Passenger volume                                       Cargo volume
                                                  have recently introduced regulation to
                                                                                                               8,680 billion RPK¹(85% of total)                       1,580 billion RPK, or 253 billion CTK² (15% of total)
Where we are: medium‐ and long‐haul               encourage such switches to alternative modes
flights drive 87% of passenger aviation           of transport, known in the industry as “modal
                                                                                                                                                                               1,580 (15%)
volume and 81% of emissions.                      shift”. For example, France introduced a ban
                                                                                                                                                                               Cargo
                                                  on short‐haul domestic flights where there
Around 11% of the world population – some         are high‐speed train alternatives. Austria and                                                                                        344 (3%)
800 million people – fly9. On average, each       Germany have also announced plans to shift                                                                                            Passenger Regional
person takes between five and six flights         some short‐haul domestic flight operations to                                                         Volume
a year, which means that aviation carries         the railways.                                                                                        (billion RPK)
around 4.5 billion passengers per year. These                                                                                                          10,260 total
                                                                                                           3,764 (37%)                                                                  4,572 (45%)
passenger flights account for 85% of aviation     But in most lower‐income countries – and                 Passenger Wide-body                                                          Passenger Narrow-body
volume in terms of emissions and RPK10 (see       many higher‐income ones – the rail network
Exhibit 07). Cargo flights account for the        is not developed enough to support a switch
remaining 15% of emissions.                       from flying to train travel. High‐speed trains are
                                                  only an option on a small number of routes in
Short‐haul flights – those under 1,000 km –       a handful of places, such as Japan, China and
                                                                                                                      Passenger emissions                             Cargo emissions
account for 13% of passenger air travel (see      parts of Western Europe.12
                                                                                                                      869 Mt CO₂ (85% of total)                       150 Mt CO₂ (15% of total)
Exhibit 08) and 19% of emissions. The emission
intensity of short‐haul flights is the highest,   The longer the distance, the fewer the
because with each departure, a significant        alternatives to aviation. Shifting from air to rail                                                                          150 (15%)
amount of energy is required for the climb,       might, optimistically, only reduce emissions                                                                                 Cargo
accounting in many cases for more than            by around 45 Mt CO₂13, or around 5% of
                                                                                                           372 (36%)                                                                    62 (6%)
half the total energy needed for the flight11.    passenger emissions globally. One airline
                                                                                                           Passenger Wide-body                                                          Passenger Regional
However, the majority of emissions – 81% ‐        said: “Modal shift receives a lot of attention                                                       Emissions³
originate from medium and long‐haul flights.      in certain countries, but its global impact will                                                      (Mt CO₂)
                                                  be negligible.”                                                                                       1,019 total
                                                                                                                                                                                        435 (43%)
                                                                                                                                                                                        Passenger Narrow-body

                                                                                                        Source: ICCT (2020); IEA (2021); Deloitte analysis
                                                                                                        Notes: 1) RPK = Revenue Passenger Kilometres, indicates number of kilometres travelled by paying passengers; 2) CTK = Cargo
                                                                                                        Tonne Kilometres, estimated based on a passenger equivalent freight mass (PEFM) of 160 kg, one tonne divided by 160 kg is 6.25,
                                                                                                        therefore, 6.25 RPK is the equivalent of one CTK (Chandra et al., 2014), including belly freight and excluding luggage; cargo flights
                                                                                                        not allocated to specific aircraft class; 3) Metric megatonnes of CO₂

20    DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
08 Passenger flights volume (RPK) by flight distance (2019)

                                   Potential for modal shift

                                              Short-haul                                      Medium-haul                                           Long-haul
                                         1,097 billion RPK (13%)                           4,285 billion RPK (49%)                             3,298 billion RPK (38%)
                                           163 Mt CO₂ (19%)                                  386 Mt CO₂ (44%)                                    320 Mt CO₂ (37%)
     Passenger RPK, billions
                            2,500

                            2,000                                                            217

                                                                                                                         401
                             1,500                           106

                             1,000
                                                             1,182                           1,806                       1,404                   1,536
                                                                                                                                                                              1,504
                               500

                                                             230                             98                          16                      181
                                   0

 Flight distance (km)                           0–1,000                       1,001–2,000                  2,001–4,000             4,001–8,000                 8,001–15,000
                                                                                                                                                                                                Total
 Route example                              London – Berlin                  London – Rome                London – Beirut        London – New York            London – Jakarta

 RPK (billion)                                   1,097                             2,222                      2,063                    1,790                       1,508         Passenger volume = 8,680 billion RPK

 Emissions (Mt CO₂)                                163                              210                         176                    170                          150           Passenger emissions = 869 Mt CO₂

 Emission intensity                               149                               95                          85                      95                           99
 (g CO₂ / kRPK¹)                                                                                                                                                                                            Wide-body

                                                                                                                                                                                                            Narrow-body

                                                                                                                                                                                                            Regional

Source: ICCT (2020); IEA (2021); Deloitte analysis
Notes: 1) g CO₂/kRPK stands for grams of CO₂ per thousand revenue passenger kilometres

21     DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
Where we are heading: Aviation                     09 Drivers of air travel volume (2019, 2030 projected)
volume is expected to more than double
by 2050, driven by population and
economic growth.

The growth in aviation volume has been the                                                                                                                                                            Air traffic
                                                                                                                   Air traffic per                                                                     volume
fundamental cause of the sector’s increasing                                                                                                                                                                                                     CAGR
                                                                                                                   capita¹                                                                            (passengers
emissions. Aviation volume has historically                              GDP per                                   (passengers                              Population                                carried,                                = compound
developed in step with population growth                                 capita (USD)                              carried)                                 (millions)                                thousands)                           annual growth rate
and economic activity. Corporate and
leisure travel have both increased in the past                                                    65,298                                    2.8                                      328                                       927
                                                                 US                                                                                                                                                                                0.3%
                                                                                                  61,719                                    2.7                                      355                                       957
30 years, when many people have risen
from poverty to the middle class ‒ especially
in Asia.                                                     Euro                                 38,920                                    1.8                                      347                                       634
                                                                                                                                                                                                                                                    3%
                                                             Area                                 44,479                                    2.5                                      350                                       859
Air travel reduced significantly during the
COVID‐19 pandemic, but this is not expected
to have a lasting effect on aviation volume.                                                      16,620                                    0.5                                      1,420                                     660
                                                            China                                                                                                                                                                                   15%
                                                                                                  25,461                                    2.0                                      1,441                                     2,942
Most observers expect aviation volume to
grow in the coming decades, as global
economic development restarts after the                                                           2,100                                     0.1                                      1,369                                     167
pandemic (see Exhibit 09). The growth in                     India                                                                                                                                                                                  19%
                                                                                                  4,429                                     0.8                                      1,513                                     1,138
aviation volume is likely to be greatest in Asia
and Africa, where population and economic
growth are most pronounced.14                                                                     1,900                                     0.1                                      1,308                                     168
                                                            Africa                                                                                                                                                                                  7%
                                                                                                  2,126                                     0.2                                      1,688                                     357

There will be growth in all                                                                       11,433                                    1.5                                      7,674                                     4,397
                                                          World²                                                                                                                                                                                    12%
regions for the decades to                                                                        16,074                                    1.7                                      8,551                                     14,557
come, especially in places
with a growing middle class.
Engine manufacturer                                                                                                                                                                                                                                           2019

                                                                                                                                                                                                                                                              2030

                                                   Sources: African Economic Outlook (2021); Bloomberg (2019); OECD (2021); Statista (2021); World Bank (2021); Deloitte analysis
                                                   Notes: 1) Air traffic per capita projection based on average historic trendline across all countries; 2) World average for GDP and air traffic per capita, and world total for population and air traffic volume

22    DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
10 Expected aviation volume development (indexed, 2019 = 100)

                                                                                                            Global economic growth, population growth                                                      Global population
       Volume vs 2019 (%)
250                             historic     forecast                                                       in Africa and Asia, spending power                                                             Global GDP

                                                                               x 2.2                        ~22,000 billion RPK¹                                                                           Passengers
200
                                                                                                            Impact of COVID-19 (short-term); reduced business travel                                       Cargo
                                                                                                            due to remote working; and modal shift (short-haul)                                            Possible impact on lower
150                                                                                                                                                                                                        and upper bounds
               10,260 billion RPK
        Index = 2019
100

 50

                                                                                                            Sources: Shell Energy Transformation Scenarios (2021); Deloitte analysis
     0                                                                                                      Notes: 1) Assuming only small ticket price increases; Including cargo – Cargo Tonne Kilometres are converted into RPK assuming an
      ’00    ’05       ’10   ’15       ’20         ’25        ’30      ’35      ’40      ’45      ’50       equivalent of 6.25 RPK per CTK

A relatively conservative view is that in the            Corporate travellers are expected to be                more than double by 2050, as aviation                               emissions by 2050 relative to 2005 levels.
next 30 years, passenger traffic will more than          relatively slow to return to flying, having            volume increases. Industry targets will be                          This would be equivalent to a 65% reduction
double from 2019 levels, to around 22 trillion           grown accustomed to remote working and                 missed and net‐zero will be way off.                                in net emissions compared with 2019.
RPK by 2050 (see Exhibit 10). “Developed”                digital meetings during the pandemic. Leisure
and “developing” countries are both expected             travellers are expected to be much quicker to          The aviation industry has set two                                   Many interviewees said these targets did
to contribute to this growth; developed                  start flying again. “People are keen to travel.        internationally applicable emissions‐                               not go far enough, given society’s growing
countries have yet to show signs of saturation,          Once the vaccines kick in and restrictions             reduction targets.                                                  expectations around energy transition. They
and in developing countries, people are                  are lifted, many parts of the world could be                                                                               thought the aviation sector should be pursuing
starting to fly at lower income levels.                  back to normal next year,” said one industry           The UN’s International Civil Aviation                               full carbon‐neutrality, (net‐zero), by 2050,
                                                         association executive. As COVID‐19 travel              Organization (ICAO) has set an ambition                             similar to many other sectors.
Long‐term projections of aviation volume vary.           restrictions are lifted, accumulated demand in         to have carbon‐neutral growth from 2020.
For example, the IEA predicts 15.6 trillion              the leisure segment is likely to help the sector       This is to be achieved through the global                           Historically, the main motivation for efficiency
RPK by 2050, while the Air Transport Action              quickly recover to pre‐pandemic levels, or             Carbon Offsetting and Reduction Scheme for                          improvements in aviation has been economic.
Group (ATAG) estimates 20 trillion RPK. The              even exceed it on some routes.                         International Aviation (CORSIA)15.                                  Reduced fuel consumption meant lower
difference between these forecasts is primarily                                                                                                                                     operating costs. Reductions in emissions
down to differing expectations of how the                Where we are heading: Unless the sector                The International Air Transport Association                         tended to be seen as a welcome by‐product
pandemic will affect passenger behaviour.                takes action, emissions are expected to                (IATA) has made a commitment to halve net                           of the efficiency gains. The main way of

23      DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
achieving efficiency improvements has
                                                      traditionally been fleet renewal – changing
                                                      an airline’s fleet of aircraft. For example, the
                                                      Boeing 787 Dreamliner is 20‐25% more
                                                      fuel‐efficient than predecessors such as the
                                                      767, because of improved aerodynamics,
                                                      lightweight construction and more
                                                      efficient engines16.

                                                      But interviewees said efficiency improvements
                                                      will have less impact on total emissions in the
                                                      coming decades, because their effects will
                                                      be outweighed by rising aviation volume. At
                                                      current efficiency levels, and in the absence of
                                                      fundamental changes to the fuel mix, absolute
                                                      emissions from aviation are expected to more
                                                      than double in next 30 years compared
                                                      with pre‐COVID levels (see Exhibit 11). One
                                                      airport operator said: “Fuel efficiencies have
                                                      been outpaced by growth. It is an absolute
                                                      emissions game, not a relative one.”

                                                      If we compare net‐zero with business‐as‐usual
                                                      levels of emissions, the gap in 2050 could be
                                                      as large as 2,180 Mt CO₂. To put that figure
                                                      in perspective, it would be similar to India’s
                                                      carbon footprint in 2018 (2,650 Mt CO₂),
                                                      which is the country with world’s third‐largest
                                                      carbon footprint after China and the USA17.
                                                      It is believed that aviation needs to achieve a
                                                      35% reduction in absolute net emissions and
                                                      a 50% reduction in net emission intensity by
                                                      2030 if it is to reach net‐zero by 2050.

24   DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
11 Aviation emission projection and goals (indexed 2019, Mt CO₂ = 1,019)

                                                                                                                                                                                                                To meet net zero, a 50% reduction in
                                                                                                                                                                                                                net emission intensity will be needed
                                                                                                                                                                                                                by 2030.

                                                                                                                                                                                                              Absolute net              Net emission
                                                                                                                                                                                                                emissions                intensity
                                                                                                                                                                                                               CO₂ vs. 2019            CO₂/RPK vs. 2019
      Emissions and goals vs 2019 (%)
250                                                                                                                                                                          Mt CO₂
                                                                                                                                                                                                             2030         2050          2030         2050
                                                                                                                                                                             (% of 2050 emissions)
                                                           historic      forecast
                                                                                                            x 2.2
                                                                                                                                                                             2,180 (100%)                    +30%         +114%           0%           0%
200
                                                                          At 2019 efficiency levels, emissions could
                                                                                                                                                                             Emissions at 2019
                                                                          more than double by 2050, directly
                                                                                                                                                                             efficiency¹
                                                                          following volume
150

                                                                                                                                                                             1,019 (47%)                       -0%         -70%          -23%         -53%
          Index = 2019              1,019 Mt CO₂
100                                                                                                                                                                          Carbon-neutral growth
                               10,260 billion RPK                                                                                                                            (CORSIA)

                                                                                                                                                                             325 (15%)                         -0%         -90%          -23%         -85%
 50                                                                               -35% in 2030
                                                                                towards net zero                                                                             -50% by 2050 (IATA)²
                                                                                                                                                                             compared to 2005
   0                                                                                                                                                                         0 (0%)                           -35%         -100%         -50%         -100%
    ’00             ’05             ’10            ’15             ’20              ’25           ’30             ’35             ’40             ’45            ’50
                                                                                                                                                                             Net zero³

Sources: IATA (2021); ICAO (2019); Shell Energy Transformation Scenarios (2021); Deloitte analysis
Notes: 1) Emissions at 2019 efficiency directly follow volume; 2) IATA target starting from 2035 due to parallel commitment to CORSIA carbon-neutral growth until 2035; 3) Pathway towards net-zero target assumed to start from 2022 emission levels to prevent
intensified burden to emission reductions at a later stage

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Where we are: Aviation is a highly                Many study participants said this                  12 Market shares in aviation
concentrated industry, which makes it easier      concentration can help aviation to
to make progress around decarbonisation.          decarbonise. On the supply side, the high
                                                  market shares of key engine and aircraft
                                                                                                                  Engine                    Aircraft
If we examine the global aviation fleet,          manufacturers, airports and airlines mean                                                                               Airlines                  Airports
                                                                                                               manufacturers              manufacturers
we find that:                                     decisions can be made relatively quickly
                                                  and have significant global impact.
ƒ    the top two engine manufacturers                                                                                 ~75%                      90%+                        46%                        45%
     account for around 75% of the market;        On the demand side, emissions are                                    Top 2                     Top 2                     Top 25                     Top 25
ƒ    the top two aircraft manufacturers have      concentrated among frequent flyers.
     an over 90% market share;                    Out of around 800 million air passengers                                                                                 1,000+                    4,000+
ƒ    the top 25 airlines account for almost       worldwide, 150 to 300 million individuals                                                                                 other                     other
                                                                                                                      2 other
     half of global volume; and                   account for about half of all aviation emissions                                              3 other
                                                  (see Exhibit 13).                                                  Aircraft                   Aircraft                  RPK¹ (%)               Passengers (%)
ƒ    of the 100,000 airports globally, the
                                                                                                                   engines (%)               deliveries (%)
     top 25 account for almost half of RPK
                                                  The financial and behavioural support
     and emissions.
                                                  of this group of passengers will have
This means that aviation is a highly              a particularly significant role in helping         Source: IATA (2020) WATS+; ICAO (2016) Air Navigation Report; ICAO (2019) Annual Report; RoutesOnline (2019) Busiest Routes
                                                                                                     in the World; Statista (2020) Engine Manufacturer Market Share; Statista (2020) Number of Jets Delivered to Global Fleet by
concentrated industry, in terms of manufacture,   aviation to decarbonise.
                                                                                                     Manufacturer; ICCT (2020); Deloitte analysis
asset ownership and emissions (see Exhibit 12).                                                      Notes: 1) Including cargo – Cargo Tonne Kilometres are converted into RPK assuming an equivalent of 6.25 RPK per CTK

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13 Concentration of passengers and emissions – ILLUSTRATIVE

                                ~800 million                                              ~150 to 300 million frequent                             Aviation represents almost
                                individuals fly                                            flyers make up about half of                               half of the frequent flyers’
                                                                                               aviation emissions                                  individual carbon footprint

                                 7.9B
                            people globally                                                       1,019 Mt CO₂                                      16 t CO₂e per person²
Frequent flyers                      2–4%
(5+ flights p.a.)
                                    7–9%

                                                                                                                                                                                    Aviation
                                                                                                                                                                                    Emissions from flights taken
                                                                                                       ~50%                                                   45%

Occasional flyers
(less than 5 flights
p.a.)¹

                                                                                                                                                                                    Other travel
                                                                                                                                                               9%                   Emissions from a small petrol car, driven 2 to 5
                                     89%                                                                                                                                            hours per week
                                                                                                                                                                                    Home
0 flights p.a.                                                                                                                                                                       Emissions from energy consumption for heating,
                                                                                                                                                              18%
                                                                                                       ~35%                                                                         appliances, etc.

                                                                                                                                                                                    Food
                                                                                                                                                              13%                   Emissions from diet, consumption at restaurants and
                                                                                                                                                                                    take-outs and food waste

                                                                                                                                                                                    Goods
                                                                                                    15% Cargo                                                 16%
                                                                                                                                                                                    Emissions from clothes and footwear, beauty and
                                                                                                                                                                                    health products, appliances and other products
                               Share of global                                               Total aviation emissions                            Emission of aviation in personal
                              population flying                                                                                                     footprint of a frequent flyer
                                                                                                                                                       (5 flights per year)

Sources: Centre for Aviation (2015); Gössling and Humpe (2020); ICCT (2019); UNFCCC (2020); WWF Footprint calculator (2021); Deloitte analysis
Notes: 1) Occasional flyers include individuals that take flights every few years; 2) Based on UK citizen, in tonnes of CO₂ equivalent

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WAYS TO REDUCE
AVIATION EMISSIONS

Where we are: The sector knows how                take decades, and may be impossible in
to reduce emissions from aviation, and            some cases.
must increase the use of options available
today. Otherwise, it will fail to do enough       With electric power, battery weight and
in the time left to tackle climate change.        volume constraints would need to improve
                                                  dramatically to deliver the same energy as jet
Industry stakeholders expect SAF, efficiency      fuel. This may make it impractical to transport
improvements and significant increases in         an aircraft full of passengers on medium‐ and
the use of high‐quality offsets to play key       long‐haul routes. Similarly, hydrogen requires
roles in reducing emissions before 2050 (see      four times the volume of jet fuel even when
Exhibit 14).                                      compressed to liquid form and stored at
                                                  ‐250 degrees Celsius18. One manufacturer
Changing to alternative propulsion                said: “Hydrogen handling and storage is a
technologies such as batteries or hydrogen        serious challenge. Fuel cells simply cannot be
will be much harder than just switching from      scaled to support long‐haul flights, and direct
kerosene to SAF. “It will take decades to re‐     combustion will take years to develop.”
fleet aircraft and switch to new zero‐emissions
technologies,” said one aircraft manufacturer.    One industry association executive said
                                                  passenger and regulator concerns may also
It took more than 50 years to reach the           slow the adoption of the new technology:
current levels of performance and reliability     “Even if a new technology is ready, it might
in kerosene‐based aircraft systems. Achieving     not be socially accepted or approved by
similar performance and reliability with new      regulators because of safety considerations.”
systems based on batteries or hydrogen will

28    DECARBONISING AVIATION: CLEARED FOR TAKE - OFF
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