Singapore green jet fuel levy on travellers ignites funding debate

SINGAPORE, Feb 19 — Singapore today said travellers would need to bear the cost of the transition toward green jet fuel, announcing plans for a levy that would lift ticket prices on departing flights as the aviation industry searches for a viable funding model.

Introduced by Singapore’s transport minister at an industry summit on the eve of the Singapore Airshow, the city-state said it aimed for all departing flights to use 1 per cent sustainable aviation fuel (SAF) from 2026 and planned to raise that to 3-5 per cent by 2030, subject to global developments and the wider availability and adoption of SAF.

“It will hurt our air hub and our economy, and raise the cost of travel for passengers if we are overly ambitious with our sustainability goals,” Transport Minister Chee Hong Tat said of the need to give modest targets initially.

Aviation produces about 2 per cent of the world’s emissions but is considered one of the hardest sectors to decarbonise.

European regulators have to date been the most active in trying to boost the use of SAF, introducing rules that force airlines to meet minimum requirements for its use such as 2 per cent in France by 2025 and 5 per cent by 2030.

Under the European model, the carrier pays for the SAF and decides whether to pass the cost onto passengers in the ticket price.

Singapore’s levy will vary based on factors such as the flight’s distance and travel class.

For example, in 2026 the price of an economy class ticket on a direct flight from Singapore to Bangkok, Tokyo and London by an estimated amount of around S$3 (US$2.23 or RM10.67), S$6 and S$16 respectively to pay for the SAF, said the Civil Aviation Authority of Singapore, which developed the plan in consultation with industry and other stakeholders.

SAF, which can be made either through synthetic processes or from biological materials like used cooking oil or wood chips, currently accounts for 0.2 per cent of the jet fuel market and costs up to five times more than conventional jet fuel.

“A big challenge that we are facing that is contributing to the high costs is actually securing bio-derived feed,” said Ong Shwu Hoon, Asia Pacific fuels vice president at ExxonMobil Asia Pacific.

High costs

Singapore’s only current SAF producer Neste NESTE.HE has the capacity to produce up to 1 million metric tonnes of the fuel annually at its refinery in the country that started operating last year, a company representative said, more than 10 times the volume required for the target of 1 per cent by 2026. Neste produced 251,000 tonnes of SAF globally in 2023, according to its most recent financial report.

The aviation industry says SAF use needs to rise to 65 per cent by 2050 as part of a plan to reach “net zero” emissions by then, though that will require an estimated US$1.45 trillion to US$3.2 trillion of capital spending.

“There will be a cost associated with transitioning to net zero. And ultimately, that cost will have to be reflected in the ticket prices that we charge our customers, which will have a dampening effect on the level of growth,” IATA Director General Willie Walsh said at the Singapore summit.

IATA, which represents about 320 airlines, estimates the global airline industry will grow at about 3.3 per cent a year over the next 20 years, significantly lower than between 2010 and 2019, because of environmental challenges and supply chain issues, Walsh said.

He said there were risks that taxation to pay for aviation sustainability measures would not reduce the number of flights but it could price some people out of flying and lead to empty seats, which is not good for the environment.

“It’s got to be a conversation: economics and viability, and environment sustainability,” Walsh said.

Luis Felipe de Oliveira, director general of Airports Council International, said governments needed to invest in new SAF refineries to help bring down the cost.

“The solution is not capacity restrictions, the solution is not taxation, the solution is finding ways that you can work together to increase production which then will be used by the airlines in the system,” he said.

Sustainability will be a key theme of events at Asia’s largest aviation gathering, the Singapore Airshow, which opens tomorrow.

During the show, Airbus will fly its A350-1000 widebody aircraft with a 35 per cent blend of SAF supplied by Shell Aviation from used cooking oil and tallow.

Singapore Airlines Chief Sustainability Officer Lee Wen Fen said while the industry waits for SAF production to ramp up, using efficient modern planes to replace older ones that use more fuel is the most effective option. — Reuters