4 February 2023

GreenAir News

Reporting on aviation and the environment

Singapore investigates offtake mechanisms to drive long-term deployment of SAF at Changi International

Singapore has commenced a study of options to enable and drive the long-term use of sustainable aviation fuel at Changi International Airport. Among the measures being considered are SAF blending mandates and government incentives to encourage SAF production and use. The Civil Aviation Authority of Singapore (CAAS) has invited tenders from consultancy services to study and develop a “structural offtake mechanism” to support the adoption of SAF at Changi and strengthen its competitiveness as a sustainable aviation hub. The Singapore government says it is committed to establishing a sustainable air transport hub by adopting a broad range of measures, in the air and on the ground, including the use of zero emission fuels, sustainable energy production and use at Changi Airport, and reform of air traffic management.

“SAF is the key pathway for the decarbonisation of the aviation sector,” commented Han Kok Juan, Director-General of CAAS. Setting up an offtake mechanism, he said, “will encourage greater SAF adoption at Changi Airport, help create a long-term, predictable demand to incentivise capital-intensive investments in SAF production and help drive down price over time.”

Last year, the government commissioned and received the report of a 20-member Independent Advisory Panel (IAP), which it established to guide the sustainable hub process. The panel members included representatives of the International Air Transport Association (IATA), Airports Council International (ACI), Civil Air Navigation Services Organisation (CANSO), World Economic Forum (WEF), Airbus and Boeing. Among its comments, the IAP report said: “As a vibrant hub, Singapore needs to take a proactive stance in adopting offtake mechanisms to promote the use of SAF.”

The consultancy assessment on SAF offtake mechanisms is expected to begin in the first quarter of this year and take about four months to complete. The terms of reference include examining and shortlisting models for SAF mechanisms, considering “sustainability goals, air hub competitiveness and level playing field”. The consultancy is expected to develop offtake mechanism scenarios including participation options, the scope of the mechanism, funding and charging. It must also develop an economic model which reflects the impacts on air traffic growth, traffic mix and costs to the air hub, airlines and passengers, based on different targets and pace of implementation. 

In its report to the CAAS, the IAP highlighted measures already being explored or implemented elsewhere, including ticket surcharges by Air France and KLM to fund their use of SAF, voluntary carbon offset programmes by airlines to help travellers compensate for their travel emissions, blending mandates by the European Union and specific nations, and financial incentives by the US government to encourage both the supply and use of SAF.

“One of the fundamental design features of a SAF offtake mechanism is whether participation is voluntary or mandatory,” stated the IAP.  

“An example of a voluntary option is to offer incentives for the use of SAF. However, such incentives are usually transitional to assist companies in tiding over the initial high-cost barriers of adopting SAF. These incentives could be expensive and challenging to sustain in the long run. On the other hand, SAF mandates could provide long-term demand certainty, since fuel suppliers would be obligated to purchase a certain amount of SAF for their sales to airlines to meet the targets. The blend ratio could be adjusted to chart out a progressive adoption of SAF over time.

“Nonetheless, mandates could distort competition with other airports with less ambitious or even no mandates, resulting in an uneven playing field. That said, these options are not binary and a combination of these could be utilised to achieve optimal benefits.”

The advisory panel concluded airline-level offtake mechanisms, such as ticket surcharges to fund SAF, or voluntary carbon offset programmes, could have limited impact in cutting emissions and compromise airline competitiveness. It also said “a route level mechanism, or green corridor”, arising from government-to-government or airline-to-airline deals, would also make little difference due to its reduced scale.

“Comparatively,” the IAP added, “an airport-level mechanism has the highest potential for reducing carbon emissions while ensuring a level playing field among all airlines operating at that airport.”

The IAP said the high cost of buying SAF, currently three-to-five times the price of conventional aviation fuel, made funding a key consideration in choosing a SAF offtake mechanism.  “Broadly, three main groups of stakeholders could contribute: passengers, through higher ticket prices or SAF offsets; airlines, in the form of higher operating costs; and the government through possible incentives or other transitional funding support. All stakeholders would likely have to co-share the cost of adopting SAF, considering the current substantive price difference between SAF and fossil jet fuel.”

As well, the IAP believes Singapore’s status as a major transit hub further complicates the economics and application of a SAF offtake mechanism, and could require different treatment of passenger groups.

“For Changi Airport, its competitiveness is closely linked to its status as a transfer hub,” said the report. “Therefore, imposing a lower share of cost on transfer passengers could help to moderate the impact on competitiveness.”

The CAAS expects to publish a Sustainable Air Hub Blueprint this year that will incorporate the recommendations from the IAP. It will provide a decarbonisation roadmap with medium-term 2030 and longer-term 2050 targets “and tangible pathways for achieving them”.

Initial steps towards the introduction of SAF in Singapore were taken last year when CAAS partnered with Singapore Airlines, the state investment company Temasek, ExxonMobil and renewable fuels producer Neste, in a pilot programme to test delivery and use of the fuel at Changi Airport. The first batch of blended SAF was delivered to the airport in July and 1,000 SAF credits offered for sale to corporations, individual travellers and freight companies to help them to compensate for the emissions of their flights, while also boosting demand for the fuel.

The Singapore government has also signed aviation cooperation agreements with New Zealand, the US and most recently Japan, which collaborate on measures including greater use of sustainable aviation fuel and studies of the viability of ‘green travel lanes’ in which travellers are encouraged to use flights powered by SAF, in return for benefits such as expedited passage through airport ‘green lanes’.

Photo: Changi Airport Group