Most airlines talk happily about becoming carbon neutral by 2050. But in almost all cases, that optimistic goal relies heavily on using offsets to top up any difference between real reductions and actual emissions.
Let's forget about the dubious nature of many offset plans (not to mention the future competition for available offsets, both within the industry and more widely), but just talking of offsets could deter investors from more realistic methods like SAFs which require massive up-front capital.
As time passes the aviation industry will be under increasing pressure to reduce its carbon footprint and combat climate change. The pressure isn’t overpowering yet and most airlines are talking pie in the sky and greenwashing (nicely of course). But changing to paper straws just won't cut it with climate activists. Or, for that matter, regulators. There’s a cold awakening coming.
By the mid-2030s there are futuristic solutions like electric or hydrogen powered aircraft. But today there are really only three ways airlines can respond to the need to reduce emissions:
Buy new more fuel efficient aircraft;
Use SAFs, Sustainable Aviation Fuels;
Apply offsets.
The first two don’t happen overnight and they cost big money. So, many airlines have turned to carbon offset programmes as a quick fix to meet sustainability targets.
Whatever you think about offsets as a realistic solution – and many people don’t think much of them - the reliance on offsets could have nasty side effects.
In particular it has the potential to undermine the economics of investing in SAFs, a more effective long-term solution to aviation's environmental challenges.
For potential investors, this issue raises concerns about the allocation of resources and the prioritisation of investments in the aviation sector.
Carbon offsets allow airlines to invest in environmental projects that reduce emissions elsewhere, effectively balancing out their own carbon output. While offsets can play a role in the short-term strategy of reducing net emissions, they don’t address the root cause of aviation emissions.
Instead, they risk providing a "licence to pollute," and simply encourage continued reliance on fossil fuels while genuine sustainable practices, like the development and use of SAF, are sidelined.
SAFs, made from renewable resources, can significantly reduce lifecycle carbon emissions compared to conventional jet fuel. But developing and producing SAFs at scale is going to require substantial investment in technology, infrastructure, and supply chains.
And the economic viability of SAF is a crucial factor, as it competes with cheaper, traditional jet fuel and the less expensive option of purchasing carbon offsets.
Add to that the availability and easy – almost no cost - appeal of carbon offsets, it’s just too easy for airlines to opt for the financially less burdensome path of buying offsets rather than investing in SAF. There’s no upfront capital or long-term commitments to altering fuel supply chains.
In short, the preference for offsets could actively slow the growth of the SAF market, delaying advancements in production efficiency and cost reductions that come with scale.
Most importantly, the preference for carbon offsets over SAF investment sends mixed signals to the market, deterring potential investors and financial institutions from backing SAF projects, if they see a lack of commitment from airlines to transition to sustainable fuels.
For what’s already a fairly risky long term investment his could limit the necessary funding for research and development in SAF technologies.
Regulators can tilt the balance
Like it or not, regulatory bodies are going to have to make calls on which way they want the market to go.
If regulators see carbon offsets adequate for airlines to achieve emissions targets, there will be less incentive to create policies that support the development and integration of SAF. Unless regulators encourage - or mandate - the shift to SAFs, the industry will simply depend on offsetting mechanisms that don’t contribute to decarbonisation.
And reliance on offsets instead of investing in SAF undermines the industry's ability to achieve genuine sustainability. Offsets are inherently limited, as there are only so many projects that can provide meaningful carbon reductions. Aviation isn’t the only industry that is looking to that quick and easy fix!
In contrast, developing SAF could potentially lead to a sustainable and renewable energy source that could serve the aviation industry indefinitely, contributing to a circular economy.
Even with the best will in the world, and a flock of eager investors, SAFs are anyway going to be only a partial solution, where the most optimistic projections look at providing 10% of needs by 2030.
That’s an issue for another day, but meanwhile anything that reduces the attractiveness of investing in them is potentially a massive stumbling block to achieving the sort of emission reductions the industry is going to need.
Carbon offsets might offer a temporary fix to the aviation industry's environmental impact, but their use could undermine the economics of investing in SAF by diverting funds, focus, and regulatory momentum away from sustainable fuel development.
The industry needs both offsets and SAFs to get where they want to be, but the big question is – do they mix?
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