Explainer: Sustainable aviation & shipping — the concepts, the economics, and the decision checklist

Aviation and maritime shipping together account for approximately 5% of global greenhouse gas emissions—yet these sectors face the steepest decarbonization challenges of any transportation mode. Sustainable Aviation Fuel (SAF) production reached 600 million liters globally in 2024, representing less than 0.2% of total jet fuel consumption, while the International Maritime Organization's 2023 revised strategy now targets net-zero emissions from international shipping by 2050. For U.S. procurement leaders, sustainability officers, and corporate decision-makers, understanding the unit economics, adoption blockers, and emerging regulatory landscape of these hard-to-abate sectors has become essential for credible net-zero commitments and supply chain resilience.

Why It Matters

The decarbonization of aviation and shipping represents one of the most complex challenges in the energy transition, primarily because electrification—the dominant solution for ground transportation—remains technically infeasible for long-haul flights and transoceanic voyages due to battery energy density limitations. A fully loaded Boeing 787 would require batteries weighing approximately 40 times more than the equivalent jet fuel to achieve the same range, making direct electrification impossible with current or foreseeable battery technology.

The regulatory pressure on these sectors intensified dramatically in 2024-2025. The European Union's ReFuelEU Aviation regulation mandates that 2% of jet fuel at EU airports must be SAF by 2025, rising to 6% by 2030 and 70% by 2050. The International Maritime Organization (IMO) adopted the 2023 GHG Strategy, setting indicative checkpoints of 20% emissions reduction by 2030 and 70% by 2040 compared to 2008 levels, with net-zero by or around 2050. The U.S. has responded with the Inflation Reduction Act's SAF tax credit, offering $1.25-$1.75 per gallon for fuels achieving 50%+ lifecycle emissions reductions.

For U.S. companies, the implications extend beyond environmental compliance. Major retailers including Amazon, IKEA, and Walmart have signed the Cargo Owners for Zero Emission Vessels (coZEV) ambition, committing to ship goods exclusively on zero-carbon vessels by 2040. Airlines face mounting pressure from corporate travel programs—Microsoft, Salesforce, and BCG have incorporated SAF requirements into their travel policies. The SEC's climate disclosure rules require Scope 3 reporting for many companies, meaning aviation and shipping emissions in supply chains will face unprecedented scrutiny.

The financial scale is substantial. The global SAF market is projected to reach $16.8 billion by 2030, according to BloombergNEF, while investments in zero-emission shipping fuels and vessels exceeded $3 billion in 2024. U.S. airlines consumed approximately 18 billion gallons of jet fuel in 2024; transitioning even 10% to SAF represents a $5-7 billion annual market opportunity given current price premiums.

Key Concepts

Sustainable Aviation Fuel (SAF) refers to jet fuel produced from sustainable feedstocks—including used cooking oil, agricultural residues, municipal solid waste, and synthesized from captured carbon dioxide and green hydrogen. SAF is chemically similar to conventional jet fuel and can be blended up to 50% with standard Jet A/A-1 without aircraft modifications (a "drop-in" fuel). Current production pathways include HEFA (Hydroprocessed Esters and Fatty Acids), Fischer-Tropsch synthesis, alcohol-to-jet conversion, and power-to-liquid (e-fuels). Lifecycle emissions reductions range from 50% to over 80% compared to conventional jet fuel, depending on feedstock and production method.

IMO Decarbonization Pathway describes the regulatory framework established by the International Maritime Organization to reduce shipping emissions. The 2023 revised strategy introduced the concept of "well-to-wake" emissions accounting—capturing not just combustion but fuel production, bunkering, and distribution emissions. Key mechanisms include the Carbon Intensity Indicator (CII), which rates vessels A through E based on operational efficiency, and the forthcoming global fuel standard and carbon pricing mechanism expected by 2027.

Green Shipping Corridors are specific trade routes where zero-emission shipping solutions are demonstrated and scaled. The Clydebank Declaration, signed by 24 countries including the United States, commits to establishing at least six green corridors by 2025. These corridors concentrate infrastructure investment (green bunkering facilities, shore power) and regulatory coordination to overcome chicken-and-egg challenges where ships need fuel and ports need ships.

Life Cycle Assessment (LCA) quantifies the total environmental impact of a fuel or technology across its entire lifecycle—from raw material extraction through production, transport, use, and disposal. For SAF and marine fuels, LCA determines whether claimed emissions reductions are genuine or merely shift emissions to different stages of the value chain. The ICAO Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) establishes standardized LCA methodologies for aviation fuels.

Additionality refers to whether emissions reductions would have occurred without a specific intervention (such as purchasing SAF or carbon credits). In the context of sustainable aviation and shipping, additionality questions whether SAF purchases genuinely drive new production capacity or simply redirect existing supply. Book-and-claim systems—where a company pays for SAF to be produced and used somewhere, receiving credit without physical delivery—raise particular additionality concerns that procurement teams must navigate.

What's Working and What Isn't

What's Working

Corporate SAF Offtake Agreements: Long-term purchase commitments from major corporations have proven essential for financing new SAF production capacity. In 2024, United Airlines signed a 10-year agreement to purchase 1.5 billion gallons of SAF from Alder Fuels, while Delta partnered with Gevo for 75 million gallons annually. These agreements provide the revenue certainty that enables capital-intensive facility construction. Microsoft's agreement with Neste for book-and-claim SAF credits demonstrated that companies can begin accounting for SAF benefits even before physical supply reaches their specific flights.

Waste-to-Fuel Pathways: SAF production from used cooking oil (UCO), animal fats, and municipal solid waste has achieved commercial scale faster than other pathways because feedstock costs are low or negative (waste disposal fees). World Energy's facility in Paramount, California—the first dedicated SAF refinery in the United States—produces 42 million gallons annually from waste fats and oils, supplying Los Angeles International Airport. The economics work: waste-based SAF commands premium pricing while avoiding the feedstock cost volatility that challenges crop-based biofuels.

Methanol as a Marine Transition Fuel: Methanol-powered vessels have emerged as the leading near-term solution for shipping decarbonization, with 212 methanol-capable ships on order as of late 2024, including major orders from Maersk, CMA CGM, and MSC. Methanol's advantages include existing bunkering infrastructure (used industrially for decades), simpler storage than hydrogen or ammonia, and a clear pathway to green production via renewable electricity and captured CO2. Maersk's first methanol-powered container vessel, Laura Maersk, entered service in 2023 and has operated successfully on the Europe-Asia route.

Blended Finance for First-Movers: Public-private partnerships have successfully de-risked early investments in sustainable fuels infrastructure. The U.S. Department of Energy's Loan Programs Office committed $2 billion to SAF production projects in 2024, including guarantees for Gevo's Net-Zero 1 facility in South Dakota. The Climate Investment Funds' Blue Bonds initiative has mobilized $500 million for port decarbonization and green corridor development. These mechanisms address the "valley of death" where technologies are proven but lack commercial-scale financing.

What Isn't Working

SAF Price Premiums Remain Prohibitive: Despite progress, SAF costs 2-5 times more than conventional jet fuel, with HEFA-pathway SAF averaging $4-6 per gallon compared to $2-2.50 for Jet A in 2024. Power-to-liquid (e-fuel) SAF costs $8-12 per gallon at current production scales. Airlines operate on thin margins (3-5% net profit margin industry-wide), making voluntary SAF adoption economically challenging without mandates or carbon pricing that levels the playing field. The price gap has closed only marginally since 2020 despite scaling efforts.

Feedstock Competition and Sustainability Questions: Waste-based SAF faces fundamental supply constraints—global used cooking oil production can satisfy perhaps 5-10% of aviation fuel demand. Expansion requires agricultural residues, energy crops, or synthetic pathways, each raising different sustainability concerns. The EU's Renewable Energy Directive explicitly limits crop-based biofuels due to indirect land-use change concerns, while residue availability varies regionally and seasonally. There is no single feedstock solution at aviation scale.

Ammonia Safety and Infrastructure Gaps for Shipping: While green ammonia (produced from renewable hydrogen and nitrogen) offers the best energy density and production economics for zero-emission shipping, significant safety and infrastructure challenges remain. Ammonia is toxic and corrosive, requiring specialized handling that few ports currently support. The engine technology is maturing, with MAN Energy Solutions and WinGD developing ammonia-capable engines, but commercial deployment lags methanol by 3-5 years. The first ammonia-powered transoceanic vessel is not expected until 2027-2028.

Scope 3 Accounting Complexity: Companies attempting to account for aviation and shipping emissions in their supply chains face methodological challenges that undermine credibility. Should a shipper using book-and-claim SAF credits receive the same emissions reduction benefit as one with physical SAF in tanks? How should companies allocate emissions for shared container vessels or codeshare flights? Standards bodies including the GHG Protocol and Science Based Targets initiative are working on guidance, but current practices vary widely, creating greenwashing risks.

Key Players

Established Leaders

Neste is the world's largest SAF producer, with 1.5 million tons of renewable aviation fuel capacity across facilities in Finland, the Netherlands, and Singapore. Their 2024 expansion of the Rotterdam refinery specifically targets U.S. West Coast markets through supply agreements with United Airlines and Alaska Airlines.

Maersk leads the shipping industry's decarbonization efforts, having ordered 25 large methanol-powered container vessels and established the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping, a public-private research initiative with $100 million in funding.

United Airlines has made the largest SAF commitments of any U.S. carrier, with 3.4 billion gallons of SAF purchase agreements signed through 2035 and the United Airlines Ventures fund investing directly in SAF producers including Cemvita Factory and Svante.

World Energy operates the first and largest dedicated SAF refinery in North America at Paramount, California, with plans to expand production capacity to 340 million gallons annually by 2026.

CMA CGM has ordered 76 LNG-powered and methanol-powered vessels, invested in methanol producer CM Blue Energy, and established the CMA CGM Foundation's $1.5 billion energy transition fund.

Emerging Startups

Twelve develops power-to-liquid technology that converts captured CO2 and renewable electricity into SAF and other fuels, with a commercial-scale facility under construction in Washington State and offtake agreements with Alaska Airlines and Microsoft.

Infinium produces e-fuels using captured CO2 and green hydrogen, operating the world's largest e-fuel facility in Texas and supplying Amazon Air with ultra-low carbon fuel for cargo operations.

Amogy has developed ammonia-to-power technology for maritime applications, demonstrating the first ammonia-powered semi-truck in 2023 and signing agreements with shipping companies to retrofit existing vessels.

Prometheus Fuels uses direct air capture and renewable electricity to produce carbon-neutral gasoline, diesel, and jet fuel, with backing from BMW and Maersk Growth.

Fleetzero is developing container-ship-scale battery swapping systems to enable electric propulsion for short-sea shipping routes, with pilot programs planned for U.S. coastal routes.

Key Investors & Funders

Breakthrough Energy Ventures has invested over $500 million in SAF and shipping decarbonization companies including Infinium, ZeroAvia, and Koloma.

The U.S. Department of Energy Loan Programs Office has committed $4 billion to clean fuels projects, including major SAF production facilities from Gevo and Montana Renewables.

TPG Rise Climate manages $7.3 billion in climate-focused investments, with significant allocations to sustainable transportation fuels and logistics decarbonization.

Amazon Climate Pledge Fund has invested in multiple SAF producers including Infinium and electric aviation company BETA Technologies.

Aramco Ventures has invested in multiple SAF pathways as Saudi Arabia positions itself as a future hydrogen and e-fuels exporter.

Examples

Alaska Airlines and Neste at Seattle-Tacoma International Airport: Beginning in 2024, Alaska Airlines sources 10 million gallons of SAF annually at Seattle-Tacoma International, representing approximately 5% of its fuel consumption at the hub. The partnership with Neste established dedicated SAF supply infrastructure including blending facilities and quality assurance protocols. Alaska reports that corporate customers—including Amazon, Microsoft, and Starbucks—have purchased 3 million gallons of SAF credits through the airline's SAF program, paying a $1.50-$2.00 premium per gallon. The program demonstrates that B2B SAF procurement can work at scale, though Alaska acknowledges that corporate demand alone cannot close the price gap with conventional fuel.

Port of Los Angeles Green Shipping Corridor with Shanghai: In 2023, the Port of Los Angeles launched the Trans-Pacific Green Shipping Corridor with the Port of Shanghai—the world's first green corridor connecting the two largest container ports. The initiative targets deploying zero-emission container vessels by 2030, with intermediate milestones including shore power for 60% of container berths by 2025 (already achieved) and green methanol bunkering capability by 2027. Partner shipping lines Evergreen, MSC, and CMA CGM have committed specific vessels to the corridor, while the U.S. Maritime Administration provided $5 million in planning grants. The corridor model addresses infrastructure coordination failures by concentrating investment where vessels actually operate.

Delta Air Lines and SAF at Los Angeles International Airport: Delta operates the largest SAF program at LAX, consuming 20 million gallons annually—approximately 10% of its fuel use at the airport. Through partnerships with World Energy and Chevron, Delta receives SAF produced from waste fats and agricultural residues blended directly into the airport's fuel hydrant system. Delta's corporate customers, including American Express, Deloitte, and Nike, participate in a corporate SAF program that allows them to claim Scope 3 emissions reductions for business travel. Delta reports that SAF usage at LAX reduces well-to-wake emissions by approximately 75% compared to conventional jet fuel, translating to 150,000 metric tons of CO2 equivalent avoided annually.

Action Checklist

• Inventory your organization's aviation and shipping emissions across Scope 1 (owned/operated assets), Scope 2 (purchased logistics), and Scope 3 (supply chain) to understand exposure and prioritize intervention points.

• Evaluate SAF procurement options including direct purchase agreements, book-and-claim certificates, and airline-specific SAF programs—each offers different cost structures, additionality claims, and verification requirements.

• Review shipping contracts for existing environmental provisions and opportunities to specify low-carbon carriers, green corridor routes, or methanol-powered vessels where available.

• Assess supplier readiness by surveying key logistics providers on their decarbonization roadmaps, fuel transition timelines, and willingness to share emissions data at the shipment level.

• Establish clear LCA boundaries for fuel and technology comparisons—well-to-wake for maritime, well-to-wheel for aviation—to avoid misleading claims that ignore upstream emissions.

• Engage with industry coalitions including the Sustainable Aviation Buyers Alliance (SABA), coZEV, and the Getting to Zero Coalition to access collective procurement power and shape emerging standards.

• Build SAF and green shipping premiums into financial planning by modeling cost scenarios at 5%, 10%, and 25% sustainable fuel blend rates to understand budget implications.

• Track regulatory developments including EU mandates, IMO fuel standards, and SEC disclosure requirements that will affect baseline expectations and competitive positioning.

• Develop internal expertise on additionality, LCA methodologies, and book-and-claim systems to evaluate vendor claims critically and avoid greenwashing risks.

• Set time-bound targets for sustainable fuel adoption aligned with Science Based Targets initiative criteria and your organization's overall net-zero pathway.

FAQ

Q: What is the realistic timeline for SAF to reach cost parity with conventional jet fuel? A: Industry consensus, supported by BloombergNEF and the International Air Transport Association, suggests HEFA-pathway SAF may reach cost parity in the early 2030s as production scales and feedstock supply chains mature. However, this timeline assumes continued policy support including the IRA tax credit extension beyond 2027, successful scaling of multiple production pathways, and jet fuel prices remaining in the $2-3 per gallon range. Power-to-liquid (e-fuel) SAF, which offers the most scalable long-term solution, will likely remain more expensive until green hydrogen costs fall below $2/kg—projected for 2035-2040 in favorable regions. Procurement teams should plan for a 5-10 year premium period.

Q: How should companies evaluate book-and-claim SAF programs versus physical SAF delivery? A: Book-and-claim systems allow companies to purchase SAF environmental attributes without physical delivery to their specific flights—the SAF is produced and used somewhere in the aviation system, and the buyer receives transferable credits. This approach enables immediate participation before physical supply infrastructure expands. However, credibility depends on robust verification. Look for programs certified by RSB (Roundtable on Sustainable Biomaterials) or ISCC (International Sustainability and Carbon Certification), with transparent chain-of-custody documentation and third-party auditing. Physical SAF delivery provides stronger additionality claims but requires airports and airlines with SAF blending infrastructure. A hybrid approach—physical SAF where available, verified book-and-claim elsewhere—balances practicality with credibility.

Q: What shipping decarbonization options are available for U.S. importers today? A: Immediate options include selecting carriers with newer, more efficient vessels (CII ratings of A or B), specifying shore power use where available (major U.S. ports including Los Angeles, Long Beach, and Seattle offer shore power), and consolidating shipments to reduce voyages. Medium-term options emerging in 2025-2027 include booking cargo on methanol-powered vessels now entering Maersk and CMA CGM fleets, and participating in green corridor routes like LA-Shanghai. Companies can also purchase carbon removal credits or verified emissions reductions to offset current emissions while infrastructure develops. The coZEV commitment provides a framework for progressive ambition—beginning with cargo preferences for lower-carbon vessels and scaling to zero-emission requirements by 2040.

Q: How do SAF and shipping emissions factor into SEC climate disclosure requirements? A: The SEC's final climate disclosure rules require large accelerated filers to report Scope 1 and Scope 2 emissions, with Scope 3 disclosure required if material to the company or if the company has set Scope 3 targets. For most consumer goods companies, retailers, and manufacturers, transportation—including aviation and shipping—represents a significant portion of Scope 3 emissions. Companies must establish consistent measurement methodologies, preferably using carrier-specific emissions factors rather than industry averages. SAF purchases that meet additionality requirements can reduce reported Scope 3 emissions, but verification and documentation requirements are stringent. Companies should work with auditors to establish defensible accounting practices before the first reporting deadlines in 2026.

Q: What role does hydrogen play in aviation and shipping decarbonization? A: Hydrogen's role differs significantly between sectors. In aviation, hydrogen faces fundamental challenges: liquid hydrogen requires cryogenic storage (-253°C), has low volumetric energy density requiring 4x the tank volume of jet fuel, and would require entirely new aircraft designs. Hydrogen-powered aviation is realistic only for short-haul regional flights (<1,000 km) where smaller tanks are feasible, with commercial deployment not expected before 2035. In shipping, hydrogen serves primarily as a feedstock for green ammonia and methanol production rather than direct use. While hydrogen fuel cells can power harbor craft and short-sea vessels, long-haul shipping will use hydrogen derivatives (ammonia, methanol) that offer better storage and handling characteristics. The hydrogen economy matters enormously for sustainable transport fuels, but indirectly—through the fuels it enables rather than direct combustion.

Sources

• International Air Transport Association, "Net Zero 2050: Sustainable Aviation Fuels Fact Sheet," October 2024
• International Maritime Organization, "2023 IMO Strategy on Reduction of GHG Emissions from Ships," July 2023
• BloombergNEF, "Sustainable Aviation Fuel: Market Outlook 2024-2035," March 2024
• U.S. Department of Energy, "Sustainable Aviation Fuel Grand Challenge Roadmap," September 2024
• International Council on Clean Transportation, "Zero-Emission Shipping and the Paris Agreement," January 2024
• Maersk Mc-Kinney Moller Center for Zero Carbon Shipping, "Maritime Decarbonization Strategy 2024," June 2024
• Science Based Targets initiative, "Guidance for the Transport Sector," November 2024
• GHG Protocol, "Scope 3 Calculation Guidance for Transportation and Logistics," 2024