A Roadmap to Building a SAF Supply Chain in Canada

June 22, 2023

Written By Ian Michael

The Canadian Council for Sustainable Aviation Fuels (C-SAF) recently launched a Roadmap for the country's aviation sector to remain competitive as it transitions to a net-zero future by 2050. C-SAF also published yesterday an open letter signed by the chief executives of almost 20 key players in Canada's aviation and aerospace industry calling on the federal and provincial governments in Canada to urgently assist in the development of the domestic supply of SAF.

C-SAF's Roadmap report charts a pathway and a strategy to produce truly sustainable and affordable SAF with Canadian feedstock and clean energy, using made-in-Canada solutions that aim to promote Canadian technology. C-SAF collaborated with The Transition Accelerator and the Energy Futures Lab to plan, design and develop the Roadmap.

Building a feedstocks-to-fuels SAF supply chain in Canada envisions a target of 1 billion litres of SAF by 2030. By 2035, Canada should be ready to produce SAF to meet 25 percent of total jet fuel demand. This would reduce emissions by 15-20 percent for departures from Canada. However, to unlock SAF production and use in Canada, policies are needed to stimulate demand while keeping costs manageable and are competitive with the policies of other countries, such as the United States.

SAF is an essential part of decarbonizing aviation. Canada has a unique opportunity to be a leading producer of the fuel, with the companies and the infrastructure positioned in all parts of the renewable fuels value chain.

The Roadmap looks at the three things Canada must do to compete and capture the SAF economic value chain:

• Decarbonize now: maximize SAF now from commercial ready pathways.
• Feedstock activation: establish commercial pathways for all Canada’s feedstocks.
• Innovation drive: launch demonstrations with homegrown technology in multiple pathways.

The report breaks down the supply chain into five action areas that need to advance in unison. Below is a closer look at the first two such action areas.

Policy Program

A successful Canadian SAF market will be one where policies and incentives differentiate it from renewable diesel (RD)—and provide a credible demand signal to drive investment.

One of the biggest challenges for SAF production is competition for feedstocks and refinery capacity with renewable diesel RD. Currently, low carbon fuel standards and regulations primarily target using RD (and other low-carbon ground transportation fuels) for compliance. Since SAF is more expensive to produce than RD, specific incentives for SAF are needed to stimulate production.

In the absence of a mandate, there are two options to build Canada's SAF market:

• A supply side option: support, such as a carbon contract for difference that guarantees a credit amount from uncertain markets.
• An industry option: a mechanism to share costs and price risk across refiners and airlines.

To address these issues, the Roadmap says the SAF ecosystem needs a Canadian policy package with four elements: to generate stable credits in fuel standards markets, exclusion from the carbon tax, a SAF-specific productive incentive and federal procurement.

SAF Production Capacity

When it comes to Canada's SAF capacity, the Roadmap's near-term goals are to close the production gap and secure the investments needed to meet the 2030 targets.

Although publicly announced SAF facility proposals could deliver about 500 million litres of hydro processed fatty acids (HEFA)-based SAF, these projects have not yet reached final investment decisions. Additional incentives and policies are needed to secure real SAF production investment commitments. There is also the question of what feedstocks and pathways will produce the additional SAF that Canada needs.

To advance projects that will accelerate learning and investment, funds for first-of-a-kind and other plants at earlier technology readiness plants are needed. Existing funding instruments are not a good fit for these. To be a market leader and secure a place in global supply chains, quick action is needed to catalyze learning through deployment.

The U.S. Inflation Reduction Act has two tax credits that apply to SAF. These create a major competitiveness vulnerability for Canadian SAF refining. Without similar incentives, Canada may be reduced to a feedstock provider, with all value-add processing occurring in the United States. Project permitting timelines also require urgent attention in Canada.

The bottom line is that to build valuable processing capacity here in Canada, refiners need additional incentives and funding programs that take an active role in supporting the SAF supply chain.

The other three Action Areas of the Roadmap—Sustainability, Feedstock and Technology & Innovation—are explored in the full report.

Bennett Jones Aviation and Infrastructure & Project Development Groups

Bennett Jones' experience in aviation and energy infrastructure projects is unparalleled in Canada. Our strength lies in advising clients with an understanding of their short, medium and long term business goals. We provide practical business law advice, focused on our clients' needs.

If you have any questions about the C-SAF Roadmap or the SAF industry in Canada, please contact the author of this blog or the Bennett Jones Aviation group or Infrastructure & Project Development team.

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