How to incentivise renewable aviation fuels through the Renewable Energy Directive

While fuel and ticket taxes, an effective emissions trading system, aircraft standards and other policies (discussed in our decarbonisation of aviation briefing) are essential to lower aviation emissions, sustainable, advanced low-carbon fuels will likely have to contribute too. This paper outlines how supply of sustainable fuels could be encouraged through the Renewable Energy Directive (REDII) in the period 2020-30.

For T&E, a prerequisite for any incentives within the REDII is that biojet or other low-carbon alternatives to kerosene are produced from wastes and residues and subject to robust sustainability criteria and that their climate impact is significantly better than a fossil fuel. Power-to-liquids (PtL) produced using new sources of renewable electricity could also make a contribution.

Partially as a result of kerosene being exempt from excise duty and VAT, sustainable alternatives are significantly more expensive. A mandate may therefore be required to encourage their supply into the aviation sector, as a multiplier as part of the REDII results in additional costs being met by the road sector. However, such a mandate should not increase the total volumes of renewable fuels supplied through the REDII as the proposed Commission target (3.6%) is already very stretching. Indeed, our analysis shows is cannot be met sustainably.

Instead, T&E therefore supports the idea developed by MEP Bas Eickhout that suppliers to the aviation sector are required to supply renewable fuels in the same proportion to their current supply of road and aviation fuels. However, aviation fuels should not count towards the denominator of the total volume of fuel to be supplied so no additional demand is created.