Deep dive: Sustainable aviation & shipping — the fastest-moving subsegments to watch

Aviation and maritime shipping together account for nearly 5% of global greenhouse gas emissions, and both sectors face intense pressure to decarbonize before mid-century. Unlike road transport, where electrification offers a clear path forward, these industries must rely on alternative fuels to achieve meaningful emissions reductions. Sustainable aviation fuel (SAF) and green methanol have emerged as the frontrunners in this transition, with production capacities scaling rapidly and regulatory mandates creating unprecedented market pull. This deep dive examines the fastest-moving subsegments in sustainable aviation and shipping, identifies what is working and where bottlenecks persist, and provides a framework for stakeholders navigating these dynamic markets.

Executive Summary

The sustainable aviation fuel market is experiencing explosive growth, valued at $2.06 to $2.72 billion in 2025 and projected to reach $15 to $25.62 billion by 2030, representing a compound annual growth rate (CAGR) of 40 to 65%. Production has reached approximately 1.9 to 2 million tonnes annually, though this covers only 0.7% of total aviation fuel demand. Meanwhile, the green methanol market has grown to $2.07 billion (2024) with projections reaching $19.08 billion by 2032 at a 32% CAGR. Over 450 methanol-capable vessels are now operating or on order, with shipping giant Maersk leading the charge through orders for 25+ methanol-fueled container ships. Key takeaways include:

• SAF capacity is scaling rapidly but remains supply-constrained: Current production of 1.9 to 2 million tonnes meets just 0.7% of aviation fuel demand. The EU ReFuelEU Aviation mandate requires 2% SAF blending from 2025, rising to 70% by 2050, creating guaranteed demand.
• HEFA dominates but alternatives are emerging: Hydroprocessed esters and fatty acids (HEFA) technology accounts for 82% of current SAF capacity. Power-to-liquid (PtL) and alcohol-to-jet pathways are advancing but require massive capital investment.
• Green methanol is reshaping maritime transport: The global fleet includes 60 methanol-capable vessels currently on water with 300+ on order. Green methanol delivers 80 to 95% lifecycle emissions reductions versus conventional marine fuels.
• Regulatory pressure is intensifying: The International Maritime Organization (IMO) has set targets of 20% emissions reduction by 2030 and 70 to 80% by 2040. The EU and UK have implemented binding SAF mandates starting in 2025.
• Cost premiums remain significant: SAF costs 2 to 5 times more than conventional jet fuel, while green methanol carries similar premiums over fossil bunker fuels. Long-term offtake agreements and policy support are essential for project viability.

Why It Matters

Aviation and shipping represent two of the most challenging sectors to decarbonize. Together they emit roughly 2.5 billion tonnes of CO2 annually, equivalent to the combined emissions of Germany, France, and the United Kingdom. Unlike road vehicles, aircraft and ocean-going vessels cannot easily switch to batteries due to the energy density requirements of long-distance travel. A fully loaded Boeing 787 carries over 100 tonnes of fuel for a transatlantic crossing, while a large container ship may bunker 15,000 tonnes for an Asia-to-Europe voyage. Batteries capable of storing equivalent energy would weigh ten times as much and occupy most of the cargo space.

Alternative liquid and gaseous fuels therefore represent the primary decarbonization pathway. SAF can reduce lifecycle emissions by 50 to 80% compared to conventional jet fuel, while green methanol achieves 80 to 95% reductions versus marine fuel oil. Critically, both fuels are "drop-in" or near-drop-in, meaning existing engines and fuel infrastructure can use them with minimal modification. This compatibility accelerates adoption by eliminating the need for new aircraft or ships.

The regulatory landscape has shifted dramatically. The EU's ReFuelEU Aviation regulation mandates 2% SAF blending from January 2025, increasing to 6% by 2030, 20% by 2035, 34% by 2040, and 70% by 2050. Within these targets, a sub-mandate requires synthetic e-fuels to rise from 1.2% in 2030 to 35% by 2050. The UK has introduced parallel requirements, starting at 2% SAF in 2025 and reaching 22% by 2040. Meanwhile, the IMO revised its greenhouse gas strategy in 2023, targeting at least 20% emissions reduction by 2030 (striving for 30%) and 70 to 80% by 2040, relative to 2008 levels. These binding targets have transformed alternative fuels from niche products into regulated commodities with guaranteed demand.

Key Concepts and Market Fundamentals

Sustainable Aviation Fuel (SAF)

SAF refers to aviation fuels derived from non-petroleum feedstocks that achieve at least 50% lifecycle emissions reduction compared to conventional jet fuel. Multiple production pathways exist:

HEFA (Hydroprocessed Esters and Fatty Acids): The dominant technology, representing 82% of current capacity. HEFA processes vegetable oils, used cooking oil, and animal fats through hydroprocessing to produce a synthetic paraffinic kerosene. Neste, the world's largest SAF producer, operates HEFA facilities in Finland, the Netherlands, and Singapore with a combined capacity exceeding 1.5 million tonnes annually. The pathway is commercially proven but constrained by sustainable feedstock availability.

Power-to-Liquid (PtL) or e-SAF: Combines green hydrogen from electrolysis with captured CO2 via Fischer-Tropsch or methanol-to-jet synthesis. PtL delivers the deepest emissions reductions (up to 95%) and does not compete for agricultural feedstocks. However, conversion efficiency is low (only 20 to 30% of input energy reaches the final fuel) and capital costs are substantial. European projects totaling 2.8 million tonnes of annual capacity are in development, though none have reached final investment decision.

Alcohol-to-Jet (AtJ): Converts ethanol or isobutanol into jet fuel. This pathway can utilize a variety of feedstocks including agricultural residues and municipal solid waste. LanzaJet, backed by major airlines and fuel companies, is scaling AtJ technology in the United States.

Gasification and Fischer-Tropsch: Converts biomass or waste into synthesis gas, then into liquid fuels. Projects are under development but face high capital costs and feedstock logistics challenges.

The global SAF market reached $2.06 to $2.72 billion in 2025 and is projected to grow to $15 to $25.62 billion by 2030, reflecting a CAGR of 40 to 65%. Production has reached 1.9 to 2 million tonnes annually, approximately 0.7% of global jet fuel consumption of roughly 300 million tonnes. This gap between supply and mandated demand creates significant market opportunity but also price pressure, with SAF currently costing 2 to 5 times more than conventional jet fuel.

Green Methanol for Shipping

Green methanol is produced from renewable hydrogen and captured CO2 (e-methanol) or from biomass gasification (bio-methanol). It is liquid at ambient temperature and pressure, making it easier to store and handle than ammonia or hydrogen. Methanol-fueled engines have been commercially available for a decade, and dual-fuel vessels can switch between methanol and conventional fuel oil.

The green methanol market was valued at $2.07 billion in 2024 and is projected to reach $19.08 billion by 2032, growing at a 32% CAGR. Driving this growth is the maritime sector's urgent need for low-carbon fuels. Green methanol delivers 80 to 95% lifecycle emissions reductions compared to heavy fuel oil, depending on the carbon source and hydrogen production method.

The global fleet now includes over 450 methanol-capable vessels: approximately 60 are currently operational, with 300+ on order. This represents a dramatic shift from 2019, when fewer than 10 methanol-fueled ships existed. Maersk has ordered 25+ methanol-fueled container ships, with the first vessels entering service in 2024. Stena Bulk operates methanol-ready tankers, while CMA CGM and MSC have announced methanol-capable newbuild programs.

IMO Regulations and Market Catalysts

The International Maritime Organization's revised 2023 strategy sets binding targets: at least 20% emissions reduction by 2030 (striving for 30%) and 70 to 80% by 2040, relative to 2008 levels. These targets apply to international shipping and cover roughly 90% of global maritime emissions. To achieve them, the IMO is developing a basket of measures including a carbon levy on marine fuels and a global fuel standard.

Parallel regional regulations add urgency. The EU's FuelEU Maritime regulation requires ships calling at European ports to progressively reduce the greenhouse gas intensity of their energy use, starting in 2025. The Carbon Border Adjustment Mechanism and inclusion of shipping in the EU Emissions Trading System further increase costs for fossil fuel use.

Fast-Moving Subsegments to Watch

HEFA Capacity Expansion

HEFA remains the workhorse of SAF production, with major investments underway. Neste has expanded its Singapore refinery to produce 1.3 million tonnes annually of renewable diesel and SAF, with SAF-specific capacity of 500,000 tonnes. TotalEnergies is converting its Grandpuits refinery near Paris to produce 210,000 tonnes of SAF by 2025. Phillips 66 and bp have announced HEFA expansions in the United States and Europe. The challenge is feedstock: used cooking oil and waste fats are finite resources, and sustainability certification requirements limit the pool of acceptable inputs.

Power-to-Liquid E-SAF Projects

PtL represents the long-term scalable solution, but projects are capital-intensive and slow to reach final investment decision. Europe hosts 41 announced e-SAF projects with combined capacity of 2.8 million tonnes per year. Each facility requires EUR 1 to 2 billion in investment. HIF Global's facility in Chile, Porsche's e-fuels project in Patagonia, and Norsk e-Fuel in Norway are among the most advanced. Watch for first commercial deliveries in 2025 and 2026, though volumes will remain modest compared to HEFA.

Methanol-Fueled Container Shipping

Maersk's strategic bet on methanol has catalyzed the sector. The company has ordered 25+ methanol-capable vessels, including 16 large container ships of 16,000+ TEU capacity. The first vessel, Laura Maersk, entered service in September 2024. Maersk has secured offtake agreements for green methanol from European Energy (Denmark), WasteFuel (United States), and Proman (Trinidad and Tobago). This integrated approach, combining newbuild orders with fuel supply agreements, provides a template for industry decarbonization.

Green Methanol Production at Scale

European Energy's Kassø Power-to-X facility in Denmark demonstrates commercial-scale e-methanol production. Three 52 MW electrolyzers convert solar-generated hydrogen and biogenic CO2 into 42,000 tonnes of e-methanol annually. The facility supplies Maersk's vessels and will provide feedstock to Lego and Novo Nordisk. In China, Geely and CIP have announced plans for a 100,000-tonne green methanol facility in Inner Mongolia. Watch for additional announcements as shipping demand crystallizes.

Ammonia as a Marine Fuel

While methanol leads current adoption, ammonia is emerging as a competitor for zero-carbon shipping. Ammonia carries no carbon atoms, eliminating CO2 emissions at combustion. However, challenges remain: ammonia is toxic, requires cryogenic or pressurized storage, and current engine technology is limited. Pilot projects are underway, including MAN Energy Solutions' two-stroke ammonia engine and Wärtsilä's four-stroke development program. By 2030, expect to see the first commercial ammonia-fueled vessels, but methanol will likely dominate the near term.

What's Working

Regulatory Mandates Drive Investment

Binding SAF mandates in the EU and UK provide demand certainty that unlocks project financing. Airlines facing compliance obligations are signing long-term offtake agreements, giving producers the revenue visibility needed to secure debt and equity capital.

Integrated Supply Chains

Maersk's model of combining vessel orders with fuel supply agreements de-risks both sides of the transaction. Shipping companies provide guaranteed demand; fuel producers secure anchor customers. This integration accelerates the buildout of green methanol capacity.

Technology Maturation

HEFA technology is commercially proven at scale. Methanol dual-fuel engines have logged millions of operating hours. These technologies reduce execution risk for new projects.

Cross-Sector Collaboration

SAF and green methanol serve multiple industries. E-methanol from the Kassø facility supplies shipping, chemicals, and plastics. This demand aggregation improves project economics and accelerates scale-up.

What Isn't Working

Feedstock Constraints for HEFA

Used cooking oil and sustainable fats cannot scale indefinitely. Competition from renewable diesel for road transport further constrains supply. HEFA alone cannot meet 2030 SAF mandates; alternative pathways must accelerate.

Capital Intensity of PtL

E-SAF projects require EUR 1 to 2 billion each and face long construction timelines. High electricity costs, electrolyzer availability, and CO2 sourcing add complexity. Most projects remain at feasibility or early engineering stages.

Price Premiums Deter Voluntary Adoption

At 2 to 5 times the cost of fossil fuels, SAF and green methanol are purchased primarily to meet mandates, not for voluntary sustainability. Without policy support, demand would be minimal.

Slow Infrastructure Build-Out

Bunkering infrastructure for methanol remains limited to a handful of ports. Airlines need SAF at major hubs worldwide, yet production is concentrated in Europe and North America.

Real-World Examples

Neste's Global SAF Leadership

Neste, headquartered in Finland, is the world's largest SAF producer. The company operates renewable fuel refineries in Porvoo (Finland), Rotterdam (Netherlands), and Singapore, with combined SAF capacity exceeding 1.5 million tonnes annually. In 2024, Neste supplied SAF to over 30 airlines globally, including Lufthansa, KLM, and United Airlines. The company has invested over EUR 3 billion in capacity expansion and expects to reach 2.2 million tonnes of SAF production by 2026. Neste's model demonstrates that HEFA SAF is commercially viable at scale when backed by strong offtake agreements and policy support.

Maersk's Methanol-Fueled Fleet Transformation

Maersk, the world's second-largest container shipping company, has ordered 25+ methanol-capable vessels, representing an investment exceeding $10 billion. The first vessel, Laura Maersk, began operations in September 2024, initially powered by bio-methanol. Maersk has secured green methanol supply agreements totaling over 500,000 tonnes annually by 2027, including from European Energy's Kassø facility and WasteFuel's projects in the United States. The company targets carbon neutrality by 2040, ten years ahead of IMO targets. Maersk's integrated strategy demonstrates how a major shipping line can lead sectoral transformation while maintaining competitiveness.

European Energy's Kassø Power-to-X Facility

European Energy's Kassø facility in Denmark is Europe's largest power-to-methanol plant. The facility uses three 52 MW electrolyzers powered by dedicated solar capacity to produce 42,000 tonnes of e-methanol annually. CO2 is sourced from a nearby biogas upgrading plant, ensuring biogenic carbon inputs. The facility produced its first commercial batches in early 2025 and will supply Maersk's vessels, Lego's plastic production, and Novo Nordisk's pharmaceutical manufacturing. Kassø demonstrates that e-methanol can be produced commercially in Europe, though economics remain challenging without policy support.

Action Checklist

• Assess regulatory exposure: Map your operations against EU ReFuelEU, UK SAF mandates, and IMO targets. Quantify future fuel costs under different compliance scenarios.
• Secure early SAF or green methanol supply: Engage with producers like Neste, TotalEnergies, European Energy, and emerging suppliers. Long-term offtake agreements provide price certainty and support project financing.
• Evaluate fleet or aircraft renewal: For shipping, consider methanol-ready or dual-fuel newbuilds. For aviation, ensure aircraft can accept certified SAF blends (currently up to 50%).
• Monitor infrastructure development: Track bunkering availability at key ports and SAF supply at hub airports. Coordinate with fuel suppliers and port authorities to ensure access.
• Engage in policy advocacy: Participate in industry associations and regulatory consultations to shape mandates, incentives, and infrastructure investment frameworks.

FAQ

Q: Why is SAF so much more expensive than conventional jet fuel? A: SAF production requires either expensive feedstocks (used cooking oil, sustainable fats) or energy-intensive conversion processes (power-to-liquid). HEFA feedstocks compete with renewable diesel for road transport, driving up prices. PtL requires large amounts of renewable electricity, green hydrogen, and captured CO2. As production scales and electrolyzer costs decline, SAF premiums are expected to narrow, though significant gaps will persist through 2030.

Q: Can green methanol really decarbonize shipping? A: Yes, green methanol produced from renewable hydrogen and biogenic or captured CO2 can reduce lifecycle emissions by 80 to 95% compared to heavy fuel oil. However, scaling production to meet global shipping demand (approximately 300 million tonnes of fuel annually) will require massive investment in electrolyzers, renewable electricity, and carbon capture. Methanol is well-suited for near-term decarbonization because engine technology is proven and bunkering infrastructure is relatively straightforward.

Q: What role will ammonia play in maritime decarbonization? A: Ammonia is a promising zero-carbon fuel for shipping because it contains no carbon atoms. However, technical and safety challenges remain: ammonia is toxic, engines are still in development, and bunkering infrastructure is limited. Most analysts expect ammonia-fueled vessels to enter commercial service around 2027 to 2030, with methanol dominating the earlier transition years.

Q: How can airlines and shipping companies manage fuel cost volatility? A: Long-term offtake agreements with fuel producers provide price certainty and hedge against volatility. Some agreements use index-linked pricing tied to renewable electricity or feedstock costs. Airlines are also exploring fuel surcharges for passengers and cost pass-through mechanisms. Policy instruments like contracts for difference (CfD) can reduce producer risk and stabilize prices.

Sources

• Grand View Research: Sustainable Aviation Fuel Market Size Report 2024-2030
• International Air Transport Association (IATA): SAF Fact Sheet 2024
• International Maritime Organization: 2023 IMO GHG Strategy
• Maersk: Green Methanol and Dual-Fuel Vessel Program
• European Energy: Kassø Power-to-X Facility
• Transport & Environment: E-SAF Projects in Europe 2024
• Neste: Sustainable Aviation Fuel Production Capacity
• Fortune Business Insights: Green Methanol Market Analysis 2024-2032