Sustainability Atlas
Mobility & Built Environment·14 min read··...

Deep dive: Sustainable aviation & shipping — the fastest-moving subsegments to watch (Trade-offs & Unit Economics)

What's working, what isn't, and what's next — with the trade-offs made explicit. Focus on unit economics, adoption blockers, and what decision-makers should watch next.

Global sustainable aviation fuel (SAF) production doubled from 0.5 million tonnes in 2023 to 1 million tonnes in 2024, yet this still represents only 0.3% of total jet fuel consumption (IATA, 2024). Meanwhile, alternative-fueled ship orders surged 50% in 2024, with 600 new vessels ordered as the maritime industry races to meet the IMO's newly approved Net-Zero Framework mandating $100 per tonne CO2 pricing from 2028 (Lloyd's Register, 2025). These parallel revolutions in aviation and shipping decarbonization represent the most capital-intensive—and highest-stakes—subsegments of the broader transport transition. This article examines the trade-offs, unit economics, and adoption blockers that will determine which technologies scale and which stall.

Why It Matters

Aviation and maritime shipping together account for approximately 5% of global greenhouse gas emissions, a share projected to triple by 2050 under business-as-usual scenarios as other sectors decarbonize faster (International Council on Clean Transportation, 2024). Unlike road transport, where battery-electric vehicles have achieved cost parity in many markets, these sectors face fundamental physics constraints: energy density requirements for long-haul flights and transoceanic voyages preclude simple electrification for most use cases.

The economic stakes are substantial. The SAF market alone is projected to grow from $2.06 billion in 2025 to $25.62 billion by 2030—a 65.5% compound annual growth rate (MarketsandMarkets, 2025). In shipping, the Global Maritime Forum estimates that the industry will require $1-1.4 trillion in cumulative investment through 2050 to achieve net-zero, with approximately 87% of that capital needed for fuel production and bunkering infrastructure rather than vessels themselves.

Regulatory pressure is accelerating. The EU's ReFuelEU Aviation mandate now requires 2% SAF blending as of January 2025, rising to 70% by 2050. The IMO's approved GHG Fuel Intensity Standard creates mandatory compliance requirements for ships over 5,000 gross tonnage—vessels that emit 85% of total maritime CO2—beginning January 2028. Companies that move early can capture first-mover advantages in supply agreements, infrastructure positioning, and regulatory credits; laggards face stranded asset risk and competitive disadvantage.

Key Concepts

Sustainable Aviation Fuel (SAF) Pathways

SAF encompasses multiple production technologies with vastly different feedstock requirements, costs, and scalability profiles:

HEFA (Hydroprocessed Esters and Fatty Acids): Currently dominates with approximately 82% of global SAF capacity. Uses waste fats, used cooking oil, and animal fats. Mature technology with proven drop-in compatibility, but feedstock limitations cap long-term scalability. Cost premium: 2-3x conventional jet fuel.

Alcohol-to-Jet (AtJ): Converts ethanol or other alcohols to jet fuel. Expands feedstock options to agricultural residues and purpose-grown crops. Higher production costs but better scalability potential than HEFA.

Fischer-Tropsch (FT): Synthesizes jet fuel from syngas derived from biomass, waste, or captured CO2 plus green hydrogen. Enables true carbon-negative fuels when combined with direct air capture (DAC), but capital intensity remains prohibitive at scale.

Power-to-Liquid (PtL) / e-fuels: Creates synthetic hydrocarbons from green hydrogen and captured CO2. Theoretically unlimited scalability but requires massive renewable electricity buildout. Current costs: 5-10x conventional fuel.

Maritime Alternative Fuels

Green Methanol: Approximately 60 methanol-capable vessels now operate with 300+ on order. Handling characteristics similar to conventional fuels, enabling retrofit of existing infrastructure. Lower energy density requires more frequent bunkering. February 2025 cost: $1,955/mt VLSFO equivalent versus $560/mt for conventional fuel (3.5x premium).

Green Ammonia: Zero carbon emissions during combustion but significant safety challenges due to toxicity (lethal at 300 ppm concentrations). 39 ammonia-capable ships on order with first deliveries expected late 2025. First dedicated ammonia bunkering vessel ordered for Japan delivery in 2027. Cost comparable to green methanol at 3.5x conventional fuel.

LNG as Transition Fuel: 87 new LNG vessel orders in 2025 alone. Offers 20-25% CO2 reduction versus heavy fuel oil but methane slip during combustion undermines climate benefits. Increasingly viewed as a bridge rather than destination technology.

Key Performance Indicators by Sector

MetricAviation Target (2030)Shipping Target (2030)Current Status (2025)
Alternative fuel uptake10% SAF blend (EU mandate)5-10% zero/near-zero fuels (IMO)Aviation: 0.6%; Shipping: <1%
GHG intensity reduction20% vs 2019 baseline20-30% vs 2008 baselineAviation: 3-5%; Shipping: ~10%
Green premium toleranceAirlines paying 2-5xShipowners paying 3-4xBoth facing margin pressure
New order conversion15% of fleet renewal25% of newbuilds alternative-fuelAviation lagging; Shipping accelerating
Infrastructure coverage50+ airports with SAF100+ ports with alt-fuel bunkeringAviation: ~35; Shipping: ~40

What's Working

SAF Production Scale-up in the United States

U.S. SAF production capacity increased 15-fold in 2024 alone, from approximately 2,000 barrels per day to over 27,000 barrels per day. Phillips 66's 10,000 b/d Rodeo, California facility and Diamond Green Diesel's 15,000 b/d Port Arthur, Texas plant came online in late 2024, with additional capacity from New Rise Renewables in Nevada (3,000 b/d) beginning February 2025. The combination of federal tax credits (up to $1.75/gallon under the Inflation Reduction Act), state-level Low Carbon Fuel Standard credits, and airline offtake agreements has created a viable—if narrow—economic corridor for HEFA-pathway producers.

Methanol as First Mover in Maritime

Ship owners are increasingly favoring methanol over ammonia for near-term orders due to its superior safety profile and retrofit compatibility. A recent voyage using 20% green methanol blended with 80% conventional methanol achieved 31% CO2 equivalent emissions reduction versus very low sulfur fuel oil (VLSFO), demonstrating that partial decarbonization can begin immediately while green methanol supply scales. Maersk now operates multiple methanol dual-fuel vessels with plans for nearly 20 by end of 2025, proving operational viability at commercial scale.

Regulatory Coordination Creating Investment Certainty

The EU's complementary approach—combining ReFuelEU Aviation mandates with FuelEU Maritime requirements and carbon pricing through ETS expansion—has created sufficient policy certainty to unlock major infrastructure investments. Twenty-five fuel suppliers now serve 33 EU airports across 12 member states with SAF, and Rotterdam, Singapore, and major Asian ports are advancing green fuel bunkering infrastructure. The IMO's approval of $100/tCO2 pricing from 2028, expected to generate $11-13 billion annually for clean fuel development, provides a global baseline that reduces arbitrage risk.

Airline Corporate Venture Capital Accelerating Innovation

United Airlines' $200+ million Sustainable Flight Fund, the Oneworld Alliance's $150 million BEV Fund (managed by Breakthrough Energy Ventures), and IAG's newly launched €200 million venture arm represent a new model of strategic capital deployment. These funds combine patient capital with offtake commitments, addressing the chicken-and-egg problem that has historically plagued SAF scale-up.

What's Not Working

SAF Production Falling Short of Projections

Despite capacity additions, actual SAF production in 2024 reached only 1 million tonnes—significantly below initial 1.5 million tonne projections. Facility delays, commissioning challenges, and feedstock procurement difficulties have slowed ramp-up. IATA warns that production growth is actually slowing despite capacity increases, with 2025 output now projected at 1.9 million tonnes versus earlier estimates of 2.1 million tonnes. The gap between announced capacity and operational production remains concerning.

Green Fuel Availability Constraints

For both aviation and shipping, the fundamental challenge is green fuel supply. Green methanol comprises only a small fraction of total methanol production; airlines with SAF commitments frequently cannot procure sufficient quantities at any price. The dependency on HEFA pathways creates a ceiling effect: waste fat and used cooking oil feedstocks are already fully utilized in many regions, and food-versus-fuel concerns constrain purpose-grown feedstock expansion.

Ammonia Safety and Infrastructure Barriers

Despite significant progress on engine technology (Hyundai's four-stroke engine has achieved multi-class approval), ammonia faces persistent adoption headwinds. Toxicity at 300 ppm concentrations requires extensive safety systems, specialized crew training, and port infrastructure investments that extend timeline and cost. Nitrous oxide emissions from combustion—a greenhouse gas 273 times more potent than CO2 over 100 years—present underappreciated climate risks if not effectively controlled.

Electric and Hydrogen Aviation Stalling

While Heart Aerospace, Joby Aviation, and other electric aircraft developers have attracted significant investment ($8.2 billion in electric aviation in 2024), commercial deployment timelines continue to slip. Battery energy density improvements remain incremental, limiting electric aircraft to sub-regional routes (under 500 km). Hydrogen propulsion faces even longer development timelines, with commercial viability unlikely before the mid-2030s for any meaningful route segments.

Cost Premium Persistence

Despite production scale-up, SAF cost premiums remain stubbornly high at 2-10x conventional jet fuel. In mandated markets, airlines are paying up to 5x conventional fuel prices, with the industry collectively paying $2.9 billion in SAF premiums for 1.9 Mt of fuel in 2025. Green maritime fuels show similar economics at 3.5x conventional fuel costs. Without sustained policy support or dramatic technology breakthroughs, these premiums will continue to burden early movers and slow voluntary adoption.

Key Players

Established Leaders

Neste (Finland): The world's largest producer of renewable diesel and SAF, with its Singapore refinery expansion creating one of the largest SAF production hubs globally. Neste's integrated supply chain from waste fat collection through refining provides competitive advantages in HEFA pathway economics.

Maersk (Denmark): The global container shipping leader has made the most aggressive methanol commitments, with multiple dual-fuel vessels in operation and 25+ on order. Maersk's first ammonia-powered container ship, the Laura Mærsk, launched in February 2025, demonstrates willingness to lead technology adoption.

Boeing and Airbus: Both manufacturers have committed to 100% SAF-capable aircraft certifications by 2030, with all current production aircraft already approved for 50% SAF blending. Their involvement in engine testing and fuel qualification provides critical technology validation.

Emerging Startups

Air Company (United States): Converting atmospheric CO2 to jet fuel using electrolysis and catalytic synthesis. Raised $69 million Series B in February 2025 from Alaska Airlines and JetBlue. Represents the carbon-negative fuel pathway if renewable electricity is used.

Corvus Energy (Norway): Maritime lithium-ion battery systems are installed in over 50% of zero-emission vessels globally. Their technology enables hybrid propulsion systems that reduce fuel consumption 10-30% even on vessels that cannot fully electrify.

Bound4blue (Spain): Raised $30.2 million for wind-assisted propulsion systems (wingsails) that can reduce fuel consumption 10-30% with minimal vessel modification. Represents pragmatic near-term emissions reduction while alternative fuel infrastructure develops.

Key Investors and Funders

Breakthrough Energy Ventures: Bill Gates-founded fund managing the $150 million Oneworld Alliance SAF fund and backing numerous aviation decarbonization startups including ZeroAvia (hydrogen electric) and Twelve (CO2-to-fuel).

Shell Ventures: Active in maritime decarbonization since 1996, with investments in Corvus Energy (battery systems) and Value Maritime (CO2 capture from ship exhaust). Their dual position as fuel producer and investor provides unique market intelligence.

United Airlines Ventures: The $200+ million Sustainable Flight Fund has attracted 22+ external co-investors, creating a coalition model that de-risks SAF production investments through guaranteed offtake.

Examples

1. Phillips 66 Rodeo Renewed (Aviation)

Phillips 66 converted its Rodeo, California petroleum refinery to a 50,000 barrel-per-day renewable fuels facility completed in 2024, with approximately 10,000 b/d dedicated to SAF production. The conversion leveraged existing infrastructure (tanks, pipelines, marine terminals) while completely eliminating crude oil processing. California's Low Carbon Fuel Standard credits, combined with federal tax credits and long-term airline offtake agreements, created sufficient economic returns despite SAF's price premium. The project demonstrates that brownfield conversions can accelerate SAF deployment versus greenfield construction.

2. Maersk's Methanol-First Strategy (Shipping)

Maersk committed in 2021 to ordering only dual-fuel vessels capable of running on green methanol, despite limited green methanol availability. By 2025, the company operates nearly 20 methanol dual-fuel vessels, initially running on conventional or blended methanol while green supply scales. This "vessel-first" approach creates demand signals that unlock production investment and positions Maersk to capture green fuel as it becomes available. The 31% emissions reduction achieved with 20/80 green/conventional methanol blends demonstrates that partial decarbonization can begin immediately.

3. Port of Rotterdam Green Hydrogen Hub (Infrastructure)

Rotterdam is developing Europe's largest green hydrogen import terminal, designed to receive green hydrogen (and hydrogen derivatives like ammonia and methanol) from production sites in regions with superior renewable resources—including Morocco, Chile, and Australia. The port is simultaneously advancing ammonia bunkering infrastructure, completing large pilot transfers in 2025. This infrastructure-first approach addresses the chicken-and-egg problem: fuel production investment requires credible distribution pathways, while distribution investment requires credible fuel supply. Rotterdam's bet is that serving as the primary green fuel hub for Northwest European shipping will generate port revenues exceeding conventional fuel margins.

Action Checklist

  • Assess Scope 3 exposure: Calculate aviation and shipping emissions in your supply chain using carrier-specific emissions factors rather than industry averages; many carriers now publish vessel/route-level data
  • Secure SAF offtake agreements: Lock in 2026-2028 SAF supply now while volumes remain available; airlines with committed volumes are receiving priority allocation
  • Evaluate maritime contract structures: Review shipping contracts for fuel adjustment clauses and emissions-linked pricing; the $100/tCO2 IMO price from 2028 will materially impact freight costs
  • Map alternative fuel infrastructure: Identify which ports and airports in your network have or plan green fuel availability; route optimization opportunities may emerge
  • Engage pilot programs: Several carriers offer SAF certificate programs allowing shippers to claim emissions reductions; evaluate cost-benefit versus internal carbon pricing
  • Monitor regulatory timelines: EU mandates (2% SAF in 2025, 6% by 2030) and IMO compliance (2028 mandatory) create procurement and capital planning requirements

FAQ

Q: When will SAF reach cost parity with conventional jet fuel? A: Current forecasts suggest cost parity is unlikely before 2035-2040 for most pathways. HEFA-based SAF may approach parity earlier (2030-2032) as feedstock collection efficiency improves and carbon pricing increases conventional fuel costs. Power-to-liquid and Fischer-Tropsch pathways require significant renewable electricity cost reductions and capital cost learning to achieve parity. Policy support through mandates and tax credits will remain essential for the foreseeable future.

Q: Is ammonia or methanol the better bet for shipping decarbonization? A: Methanol offers lower near-term risk due to simpler handling, existing port infrastructure compatibility, and proven vessel operations. However, ammonia may offer superior long-term economics for deep-sea routes due to higher energy density and potentially lower green production costs. Most analysts recommend fuel-agnostic vessel designs where possible, with dual-fuel capability allowing flexibility as relative economics evolve.

Q: How should companies think about SAF certificates versus physical offtake? A: SAF certificates (book-and-claim systems) allow companies to fund SAF production without physical delivery, useful when SAF is unavailable at departure airports. However, certificate programs face scrutiny over additionality claims, and some stakeholders view physical offtake as more credible. The optimal approach depends on reporting requirements, stakeholder expectations, and aviation route structure.

Q: What's the timeline for electric or hydrogen aircraft commercialization? A: Battery-electric aircraft for sub-regional routes (up to 19 passengers, 500 km range) may enter commercial service by 2028-2030, with Heart Aerospace targeting 2028 for its 30-seat hybrid-electric aircraft. Hydrogen propulsion for regional aircraft (50+ passengers) is unlikely before 2035. For long-haul routes, SAF and next-generation efficient aircraft designs remain the only viable pathways through mid-century.

Q: How will the IMO's $100/tCO2 price affect shipping costs? A: Initial estimates suggest the $100/tCO2 price will add approximately $40-60 per TEU (twenty-foot equivalent unit) to trans-Pacific container shipping costs and $15-25 per tonne to bulk commodity freight. These costs will be passed through supply chains, creating incentives for modal shift where feasible and accelerating buyer pressure for lower-carbon shipping options.

Sources

Topics

sustainableaviationScope 3fleet electrificationMRVtraceabilityheat pumps

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