In this episode of our ‘Sustainability in the Air’ podcast, Jonathon Counsell, Group Head of Sustainability at International Airlines Group (IAG), speaks with SimpliFlying CEO Shashank Nigam and discusses the airline group’s sustainability strategy that relies heavily on sustainable aviation fuels (SAF).
IAG is the parent company of 5 major airlines – British Airways, Iberia, Vueling, Aer Lingus and LEVEL. IAG plays a critical role in setting the sustainability strategy and targets for its subsidiary airlines, and collaborates with governments and investors to realise these goals.
IAG was the first aviation group to commit to net zero emissions. Their decarbonisation strategy comprises four pillars: operational efficiencies and new aircraft, SAF, carbon removals and market based measures and offsets. Of these, the airline group believes SAF will play the most important role, especially in the near term. IAG has committed to a target of 10% SAF for all fuel needs by 2030, and was the first European airline group to do so.
Here are the key highlights of the conversation:
How IAG’ sets sustainability goals for its subsidiaries (2:09)
IAG’s sustainability roadmap (10:02)
IAG’s SAF journey and commitments (12:52)
The challenges with SAF (14:40)
The role of investor engagement in driving sustainability policies (26:35)
The potential of eSAF in aviation decarbonisation (28:43)
Who pays the green premium? (32:31)
Why collaboration and good governance is important (38:32)
Rapid Fire! (42:16)
Keep reading for a quick overview of the episode.
Why collaboration and good governance matters?
Counsell emphasises the crucial role of effective governance and collaboration in sustainable aviation. At IAG, this is exemplified by a strong sustainability community of around 40 professionals, with seven core members responsible for SAF procurement. This centralisation of SAF procurement is strategic, considering the technical complexity of the area.
Counsell also notes that strategies and goals for sustainability are developed collectively, not imposed by IAG on its airlines. Regular monthly virtual meetings and quarterly two-day workshops facilitate cross-learning and communication among the airlines. This approach of nurturing inter-airline collaboration and shared learning has been key in advancing IAG’s sustainability efforts.
5 key takeaways from IAG’s approach to sustainability
1. The challenges with SAF
One of the primary challenges in the widespread adoption of SAF is its distribution and the current deficit in global supply.
The geographical challenge in distributing SAF efficiently underscores the importance of establishing local production facilities to meet the demands of various airlines, including those under groups like IAG.
Currently, the global supply of SAF is limited, creating a gap between the ambitious targets set by airlines and actual availability. This situation calls for an acceleration in SAF production and a strategic approach to distribution to ensure that airlines can access SAF wherever they operate.
2. Global policy variations for SAF incentives
Counsell acknowledges the difficulties in attaining global policy alignment, especially with varying approaches to carbon pricing and mandates across different countries.
In the US, states like California have implemented attractive policy incentives that have driven the production of SAF. These incentives include both state and federal benefits that stack together, making SAF production financially viable.
Conversely, in the UK and Europe, the approach includes carbon pricing mechanisms, such as the EU Emissions Trading Scheme and free allowances, which incentivise airlines to adopt SAF.
These regional policy differences play a crucial role in shaping the SAF landscape, impacting both production and utilisation.
3. How interactions with investors can push for better policies aviation decarbonisation
Counsell highlights the importance of investors’ involvement in discussions around sustainability, especially considering the significant capital required for setting up SAF plants.
With growing awareness around climate change, investors are looking for robust plans from airlines and aviation groups for addressing carbon emissions. These expectations from investors not only push airlines to formulate concrete strategies but also influence government policies.
“I’m talking to investors every week... they want to see a robust and credible plan for addressing carbon emissions.”
4. Who pays the Green Premium?
The transition to SAF also raises questions about who bears the financial burden of this shift, as SAF is 3-5 times more expensive than jet fuel.
Counsell believes that this “green premium” will be borne by the airline customers. This approach is seen as fundamental to the economics of carbon reduction.
However, there is a need to manage this transition in a way that does not create competitive disadvantages among airlines. The challenge is to balance the costs while ensuring a level playing field for all industry players.
“Ultimately, the customer of the carbon intensive product has to pay for it. …The important piece, though, is that we manage it in an optimised transition, and that there’s no competitive distortion [among airlines].”
5. Is CORSIA enough?
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) represents the aviation industry’s primary global mechanism for carbon pricing.
Initiated in 2016, CORSIA was a significant step forward but is seen as just the starting point. There is a growing consensus that CORSIA needs to be strengthened and expanded to effectively address the aviation industry’s carbon emissions. This would involve extending its timeline, covering all emissions rather than just those over a baseline, and incorporating technologies for greenhouse gas removal.
“We felt it was much more important to have a global agreement to get the thing started, and then you have a mechanism to ratchet it up and strengthen it. So, we all agree that CORSIA needs to be strengthened. And that’s why there is that inbuilt mechanism where every three years it is reviewed, to look at how we can strengthen it.”
‘Sustainability in the Air’ is the world’s leading podcast dedicated to sustainable aviation. Through in-depth conversations with top aviation leaders, we break through the clutter and provide a clear roadmap for a net-zero future.
