Why airlines need a pooled clean skies fund to decarbonise effectively
Airlines will get more bang for their buck if they combine their climate funds
In a nutshell
We’re now only 27 years away from our 2050 net zero goal. That’s less than the average lifespan of a commercial aircraft.
As the effects of global warming are felt more and more, there will be, as Rome Airports boss Marco Troncone puts it, less tolerance of industries perceived to be polluters — such as aviation.
We need to speed up decarbonisation efforts and think of more radical measures that move us away from incremental steps like improving the CO2 efficiency of fossil fuel-powered aircraft.
A joint clean skies fund could be one of those measures.
The challenge at hand
We’re currently writing a book, due to be released around COP28, about sustainable aviation pioneers. While doing so, it’s apparent that the single biggest barrier to decarbonising aviation can be summed up in one word — money.
In that light, the recent announcements by Emirates and Qantas about setting up their own climate funds are welcome.
But we believe what’s truly required is going a further step ahead: airlines pooling these resources to create a giant fund on the scale of Amazon’s Climate Pledge Fund or Bill Gates’s Breakthrough Energy.
Aviation’s $4 trillion decarbonisation bill
Building a new aircraft from scratch can take years. You need to design it, hire talent, test it, certify it, sort out production — and all this before you have a licensed product to sell. What’s more, during this time you are burning cash for a product that may or may not come to life as originally conceived.
“Probably the best filter that knocks out most companies is capital.”
That’s from Archer CEO Adam Goldstein who said last year that you can’t build a new aircraft (in Archer’s case an eVTOL), “for less than $500 million, but the number is probably closer to $1 billion.”
Listen to our podcast episode with Adam Goldstein for more.
Unless you have raised an awful lot of money like Archer and Joby have, or you have a big parent company — like Eve Air Mobility, which was spun off by Embraer — your aircraft won’t see the light of day.
That’s the cost of a clean sheet aircraft — the $1 billion figure is one we hear quite a lot.
Let’s turn to SAF
In Europe alone, Sky NRG estimates that 150 new refineries will be needed to meet the continent’s 2050 net zero target. The cost? €250 billion.
That’s not all. There are other things that need to be funded:
The electrification of ground equipment.
More efficient electrolysers that extract H2 from water.
The infrastructure needed at airports to service hydrogen aircraft.
Airport micro-grids to charge electric aircraft.
Battery development to move energy density from 300 Wh/KG to 500 Wh/KG (as Chinese company CATL claims to have done) or even 1000 Wh/KG.
The list goes on.
Overall, ICAO puts the bill for aviation decarbonisation at $4 trillion.
Are airline climate funds isolated islands of effort?
This puts Emirates’ commitment of $200 million and the AUD 400 million (US $266 million) commitment by Qantas into perspective.
On its own, each fund could probably foster some research, jump-start an early-stage project, or be a minor investor in a wider larger funding round. But beyond that, the scope is limited given the sums actually required.
These isolated islands of effort are also likely to result in inefficiencies and duplication of effort. There’s a good chance that each fund will, for example, put money into similar areas. After all, every airline will grapple similar issues such as SAF supply and cost issues.
The alternative — a Clean Skies Fund
Here’s how it could work:
Each airline would put its $200 or $300 million into one pot, which could be called the ‘Clean Skies Fund’, or something similar.
This fund, which would have billions, not hundreds of millions, at its disposal, would be independently run.
It would also have a board of airline members who set the overall direction, define priorities and sign off on investments.
The advantages are clear — pooled resources and a lack of duplication will make more of an impact.
At the end of the day, the overall industry needs to decarbonise, not just one airline with an outsize money pool at its disposal.
Moreover, each airline could still get PR benefits from the fund, for example by being early testers of a promising new technology.
Investing for impact
When we first proposed this idea, one criticism we received was that innovation comes from outsiders, the Steve Jobs of this world.
Yes, we always need more innovation, and there will still be angel investors and climate tech funds willing to make early-stage, speculative investments.
But with the window in which the industry needs to decarbonise getting ever smaller, there’s another argument — that we need to concentrate on what’s actually going to move the needle.
Bill Gates’s Breakthrough Energy Ventures follows a similar philosophy with four investment criteria, three of which aviation should follow:
With time running out, any investment needs to have the potential to make a real difference. Breakthrough Energy says there needs to be scope to remove 1% of 2050 emissions.
Breakthrough will only invest if the venture has the potential to attract other investors, which is important given the huge amount of money required.
The technology in question needs to be able to scale.
(The fourth criterion, that Breakthrough invests in areas ignored by other investors is probably not so applicable here.)