United Airlines and other companies have started a $100 million fund to invest in jet fuel that produces fewer greenhouse gases.
A flurry of investments, policy changes and technological breakthroughs is giving a jolt of energy to the nascent market for sustainable aviation fuel, a low-carbon alternative to traditional jet fuel made from crude oil.
United Airlines and other companies started a $100 million venture capital fund on Tuesday to invest in the technology.
Boeing said last week that it was doubling its use of sustainable fuel this year. New laws in Europe and the United States are designed to spur investment in the market. And after years of false starts, a handful of start-ups are receiving an influx of funding and expanding operations.
Sustainable aviation fuel is made from used cooking oil and agricultural waste. It produces up to 80 percent fewer planet-warming emissions than conventional jet fuel, according to some estimates. It is currently blended with fossil jet fuel, but the hope is that planes could eventually be powered exclusively with the alternative fuel.
While advances have been made in electric planes, battery weight remains a problem for large aircraft. Sustainable jet fuel is seen by many as the most promising way to reduce greenhouse gas emissions in the aviation sector, which contributes more than 2 percent to global emissions each year, according to the International Energy Agency.
But today, almost no flights are powered by sustainable fuel because of supply and cost. Sustainable fuel can be as much as three times as expensive as conventional fuel. Even at United, the largest consumer of sustainable fuel in the United States, it accounted for less than one percent of its total fuel consumption last year.
Scott Kirby, United’s chief executive, said in an interview that he wanted his airline to be a leader in sustainable fuels. His reasons, he said, are twofold: He believes that’s where the industry is headed, and he’s eager to play a role in reducing global emissions as the planet rapidly warms.
“I am genuinely a nerd about climate change,” he said. “The implications are so dramatic, and there are all these tipping points that once you hit them they’re effectively irreversible.”
Making sustainable aviation fuel mainstream will be difficult and costly to achieve. Sustainable aviation fuels “are currently at various stages of technology readiness, and the scaling of production and deployment faces major technological and economic hurdles,” according to a recent report by the Rhodium Group, an energy sector consulting group.
Only two companies make sustainable aviation fuel that is used by the major airlines at scale. World Energy, a U.S. company, has a plant in Los Angeles where it supplies United and other airlines and is building a new factory in Houston. Neste, a Finnish oil company, produces sustainable jet fuel in Europe.
Others companies are racing to catch up. LanzaTech, based in Chicago, went public this month on the Nasdaq and is valued at nearly $1 billion. The company is building a factory in Georgia where it plans to produce sustainable fuel using ethanol.
Gevo, a start-up based in Denver that is also making sustainable aviation fuel from ethanol, broke ground last year on a plant in South Dakota.
“I’ve been doing renewables for 25 years, and I’m one of the more cynical people in the space,” said Patrick Gruber, the chief executive of Gevo. “But I think there’s been a shift in the last few years. Airlines believe they are going to be held accountable, and their customers are saying they have to change.”
New laws and policy efforts are also giving the industry momentum.
The European Commission has proposed that by 2025 at least 2 percent of jet fuel in use be made from sustainable sources. By 2050, that figure would rise to more than 60 percent.
The Inflation Reduction Act — President Biden’s signature climate legislation, which Congress passed last year — includes tax credits for cleaner jet fuel.
The United fund announced on Tuesday is seeded with initial investments from JP Morgan Chase, Honeywell, Air Canada and Boeing. United expects the fund to grow to as much as $500 million and to make about two dozen investments over the next three years, with the goal of rapidly expanding supply and bringing down cost.
“Our challenge right now with aviation is that we know the solution is sustainable aviation fuel,” Lauren Riley, United’s chief sustainability officer, said. “We just don’t have a marketplace.”
Like many big companies, United Airlines has said it will stop adding more carbon emissions to the environment by 2050. But United has set itself apart by pledging to meet that goal without using carbon offsets, which allow companies to claim credit for actions others have taken to reduce carbon emissions, without actually cleaning up their own operations.
“Carbon offsets have been a bone of contention for me because they’re almost all fraudulent,” Mr. Kirby said.
United, through its in-house venture capital fund, United Airlines Ventures, has already invested in several sustainable fuel companies, including Blue Blade Energy, which makes sustainable fuel from ethanol; Dimensional Energy, which is working on ways to make fuel from carbon dioxide and water; and Fulcrum Bioenergy, which is developing a process to make fuel from landfill waste. Those investments will be transferred to the new fund, which is called the Sustainable Flight Fund.