Airlines’ emissions ambitions spur BP to spend $30m on rubbish

November 8, 2016 Updated: November 8, 2016 05:20 PM

BP says it will invest US$30 million in Fulcrum BioEnergy, which makes biofuel from rubbish, in a new partnership designed to curb aircraft pollution.

The London-based oil-producer also signed a 10-year deal to buy 500 million gallons, or 1.9 billion litres, of biofuel from Fulcrum’s North American plants, the oil major said on Tuesday. BP will distribute the aviation fuel to planes through its unit Air BP, which sells about 7 billion gallons of aviation annually.

Airlines facing pressure to clean up their pollution last month brokered a landmark deal in Montreal. Their accord created a global system that requires them fund environmental initiatives from 2020 that may cost as much as $24 billion annually by 2035.

"We have a deep understanding of our customers’ challenges to achieve their lower carbon goals," said Jon Platt, the Air BP chief executive. "Securing this supply helps secure the future competitiveness of Air BP, and our place as a leader in the industry."

This deal is Fulcrum’s fourth major corporate investment, following similar agreements with United Airlines, Waste Management and Cathay Pacific Airways, according to Fulcrum.

"Entering into this strategic relationship with a global oil and gas company enhances the value of Fulcrum’s waste to fuel platform," said E James Macias, Fulcrum’s president and chief executive officer, in the statement.

The airline industry’s plan to ease its impact on global warming hinges on fuels made from vegetable oil, corn and household rubbish. The hitch: nobody has ever been able to produce the stuff in the volumes needed.

A UN deal was agreed by 191 countries in Montreal on October 6, which adopts an offsetting approach to constraining aviation emissions. Starting from 2021, airlines that have opted in to the measure will have to purchase offsets to balance their emissions growth above 2020 levels. More than 65 countries representing over 85 per cent of global air traffic have said they will participate from the beginning. More countries can opt to join in after 2024 or 2027, by which point the scheme will be mandatory for all but the smallest countries. The scheme will be reviewed every three years.

JetBlue Airways, United Continental and Richard Branson’s Virgin Group have begun blending eco-friendly substitutes into traditional jet fuel made from kerosene. Even with that backing, there is still only a handful of producers of the fuels. They lack the capacity to crank out the billions of gallons needed to supply the global aviation fleet, and the pace of investment is slowing.

Even so, airlines are staking their low-carbon future on renewable fuels. The aviation industry is responsible for more than 2 per cent of greenhouse gases. Cutting that, ultimately, means burning less fossil fuel. With electric planes still experimental, airlines and aerospace companies say biofuels are their best bet.

"There is a tremendous amount of determination to make biofuel work because we just don’t have any alternative," said Julie Felgar, Boeing’s managing director of environmental strategy and integration.

The biofuel industry currently has enough factories to produce as much as 100 million gallons of jet fuel annually, said Claire Curry, an analyst at Bloomberg New Energy Finance. That barely registers next to the more than 83 billion gallons airlines consume each year.

Investments in biofuel, meanwhile, are at a record low, with US$322 million in backing globally during the first six months of 2016, according to BNEF. That’s off 64 per cent from the first half of 2015 and down 98 per cent from a decade ago, when ethanol production for automobiles took off.

"This is still a pipe dream," Ms Curry said. "No one has figured out how to make these fuels at scale yet. The technologies are really complicated. They often don’t work. And the plants can cost half a billion dollars to build."

Advocates for renewable jet fuel say the industry will develop after the UN accord takes effect and drives up demand, just as ethanol production boomed in the United States after policymakers passed the Renewable Fuel Standard in 2005. Patrick Gruber, the chief executive of Gevo, said its jet fuel works and scaling up is "cookie cutting".

"We know how to do this," Mr Gruber said. "We just have to make more production lines."
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