Growing global and local demand for sustainable aviation fuel (SAF) could spell good news for Australian agriculture, with the country’s farmers well placed to provide low-emissions feedstock to be used in future production, according to new industry research.
In a two-part report on opportunities for Australian agriculture in the production of SAF, global agribusiness banking specialist Rabobank said as the world’s airlines strive along the path to decarbonisation, the largest contribution to cutting aviation emissions over the next decade will come from transitioning to the use of sustainable aviation fuel - commonly produced from agricultural products and by-products.
And this could ultimately lead to a structural change in demand for Australian agricultural products according to report author, RaboResearch Australia and New Zealand general manager Stefan Vogel.
The Rabobank report says while the future development of a local SAF-production industry in Australia is still far from certain, SAF will be big globally.
“Developing an Australian SAF industry would be beneficial for agriculture, as it could provide another demand outlet for canola, sugar, bagasse (a sugarcane production residue), tallow and potentially grains,” Mr Vogel said.
“And the development of the global SAF industry can further benefit Australian farmers who may become feedstock suppliers to these export markets.”
In addition, the report said, another big benefit for farmers – if legislation and value chain settings are right – can come in assisting in their transition to lower-emission farm production.
“The lower the carbon footprint these agricultural feedstocks have, the higher the price premium they are likely to be able to command,” Mr Vogel says, potentially providing “a key accelerator” for farmers and the supply chain to produce lower carbon products.
Mr Vogel said within two years, there is planned capacity to produce 17 million tonnes of sustainable aviation fuel around the globe, growing to over 25 million tonnes by 2030.
“The good news for growers in Australia, and around the world, is this announced SAF capacity will often require agricultural products as feedstock – with three quarters of the announced global production capacity expected to use a technology that requires fats such as vegetable oil, animal fat, or used cooking oil and almost 10 per cent requiring ethanol derived from sugarcane or grain,” he said.
He said farmers may want to think about the future of SAF as a potential next wave of demand, similar to what we have seen globally over the past two decades for road transport biofuel.
“Australian farmers have benefitted directly from European Union (EU) demand for canola for biofuels, with the EU having long been Australia’s largest market for canola. And farmers have also benefitted indirectly, through price, from the additional demand created around the world for other biofuel feedstocks especially grain prices due to the US ethanol industries’ demand for grains.”
Indeed, the report says, with the biofuel industry likely facing volume reductions in several regions of the world in coming years – due to a higher share of electric and other alternative-fuel vehicles on the road – Australian agricultural sector needs a ew demand driver.
“SAF could offset these volume reductions in road transport biofuels to help keep farmgate prices for feedstocks, like canola and oilseeds in general, but also grain and sugar, at positive farm margin levels,” Mr Vogel said.
Most promising
Currently, the Rabobank report says, vegetable oil and sugar cane are the most economically-attractive feedstocks in Australia – in terms of both cost per litre of fuel and also cost per unit of emissions reduction.
“And these might become even more attractive as carbon capture and reduced-emission farming practices cut the emissions intensity of these feedstocks,” Mr Vogel said.
Grain and ethanol also hold promise as SAF feedstocks, while, in the long-term future, “municipal waste (household rubbish) and cellulosic materials (such as sawdust) could also pull their weight if the economics of converting those feedstocks into SAF improve”, the report says.
