Jonathan Counsell, Group Head of Sustainability at IAG International Airlines Group – parent firm of Iberia and British Airways, Vueling and Aer Lingus – discusses IAG’s response to the governance and regulation of sustainable aviation fuel.
Counsell has been in the airlines industry for over 35 years, and cites climate change as the biggest priority today for IAG. “88% of our sustainability efforts are focused on climate change, which include sustainable aviation fuels (SAF), for two main reasons; it’s the only real opportunity to reduce our emissions within the decade and viable solution for long-haul travel,” he explains. Long haul travel represents 70% of IAG’s emissions, so SAF is the only viable solution here.
“We believe SAFs are the only real opportunity to reduce our emissions in this decade.”
Jonathan Counsell, Group Head of Sustainability, IAG International Airlines Group
Ambitious targets, mandates and incentives
IAG has been working with EU, US, and UK governments to uncover the most appropriate policy. “We believe mandates are the best option for IAG because they send a very strong demand signal to the supply industry,” says Counsell. IAG’s main reservation is around potential competition distortion. “That’s why we spend time with governments supporting their activities, to ensure we avoid those worse aspects of mandates,” he continues.
IAG has been actively sourcing SAF in support of the SAF mandate, whereby starting 2025, fuel uplift at EU airports must have at least 2% SAF, increasing to 6% by 2030, 20% by 2035, and eventually 70% by 2050. Counsell has been closely involved with the development of the UK mandate. Its targets are 2% by 2025 but 10% by 2030. No 2050 target has been set because they want to see how the industry develops,” he explains.
Currently IAG has entered into five pay contracts for SAF, securing 33% of their 2030 volume commitment (330,000 tonnes) with the intention of securing 100% by 2027.
“We’ve made a public commitment to SAF – 10% by 2030. That’s one million tonnes per year.”
Jonathan Counsell, Group Head of Sustainability, IAG International Airlines Group
There are other frameworks for global airline companies like IAG to consider, including the US and India. “Ideally we want a globally harmonized policy, not just on SAF but all climate change areas,” continues Counsell. “We work with the International Civil Aviation Organization (ICAO), and we also have a global carbon offsetting scheme, Corsia, hoping to strengthen our SAF incentives,” he adds. Global collaboration among 196 is a barrier, however. “So, we accept that in the transition, you to need to supplement that with regional or national policies,” he adds.
Unlike Europe the US has just a set of incentives at both state and federal level. “It will be almost impossible for the federal government to implement a mandate because of the nature of the politics.” Whereas mandates have become the default globally, with 12 countries implementing or having already implemented a mandate.
SAF supply and demand pressures
Sourcing SAF may become increasingly difficult over the years as targets increase. “There’s an imperative for airlines to source SAF early and get ahead of the curve, preferably through pay contracts which help SAF suppliers attract capital,” says Counsell.
While jet fuel contracts typically last 12 months, SAF contracts need to be for at least 5 years or more. “We entered into a 14-year deal with a US power-to-liquid company, Twelve – which they needed to secure the capital to build their first plants,” he explains. “Getting internal approval for a product that doesn’t exist takes time – you have to build that case,” he continues.
As they become more common, SAF pricing deals will become less reliant on jet fuel price because the cost drivers producing them aren’t related to fossil fuels. “Our overall strategy is diversification, with different feedstocks, geographies and technologies, in order to minimize our risk – because some of these companies won’t survive past start-ups,” Counsell explains.
Counsell believes mandates need to be supplemented by incentives to drive investment. “The EU has a healthy package of incentives, but IAG would like it to do more,” he says. “Airlines struggle because SAF is currently three-to-five times the price of jet fuel, while suppliers need that capital to grow their businesses,” he continues.
Incentives include the EU’s 20-million-euro SAF allowances, which helps airlines bridge the price gap between fossil and sustainable fuels; the Emissions Trading Scheme’s (ETS) 2-billion-euro innovation funds to support suppliers; and the UK’s CONSIDERING a guaranteed price strike INSTRUMENT to minimise the downside risk for investors.
Industry input into government policy
Counsell chairs the SAF delivery Group at the Jet Zero Council, which looks to facilitate a more coordinated approach to SAF policy, bringing together key government departments and aviation CEOs to develop and accelerate policies for SAF and zero-emission technologies.