The Exchanges

Q one of the things that we've seen in a lot of other sectors is like booming, growing businesses that have a lot of profits can spend a lot of money on decarbonization. Why is it that Stripe and Shopify and, uh, Uh, Microsoft are the ones buying all the carbon removal credits. It's because they can afford to. So what is the, what is the situation with airlines these days?

A Well, the airlines are really regrouping right now after the, the COVID 19 traffic downturn. So something that's been really fascinating is, is just over the past two years, um, how the, you know, the overall posture of the airlines has changed relative to climate change. So If we go back to late 2019, there was a bunch of energy around this issue. You'll recall that, uh, Greta Thunberg, uh, went by catamaran to the UN General Assembly meeting. Um, I was actually in Montreal in October of 2019, and, uh, Greta led a demonstration of 500,000, uh, Canadians in the streets of Montreal. Literally walked right past the front of the UN agency that regulates, uh, aviation emissions, and at that time, there was, there's kind of a feeling like there was going to be a sea change on, uh, you know, aviation and climate change, and then COVID hit, uh, and the business models went crazy. A lot of airlines were literally on the brink of bankruptcy last year, and so climate change sort of slipped to the background, and now it's roaring back, uh, as traffic has recovered and the, the economic conditions have Airlines have improved. So, um, it's a really interesting time right now. Um, we are starting to see the airlines come out with more net zero commitments looking out. Uh, we're also starting to see some really interesting short and midterm commitments, either on emission reductions or for th…

AI assessment note: “airlines are really regrouping right now after the, the COVID 19 traffic downturn.”

Q Can you put that in like dollars per gallon or dollars per kilogram terms?

A Uh, yeah, um, I'm used to thinking about this in euros per liter, believe it or not. So let me think dollars. I mean, uh, fossil jet fuel today in the US is a little more than two dollars per gallon. So when you're talking about a three to four multiple, it would be like six to eight dollars per gallon. Um, in terms of the buckets, uh, I, I'd say that there are four main ones, and I'm, I'm going to introduce them a little bit out of order here. Um, but, uh, the first are what we call waste fats, oils, or greases. So these would be things like used cooking oil, or beef tallow, or yellow grease. Um, you know, wastes that can easily be converted into a jet fuel, um, Um, and have good life cycle emissions. So we do think that once you account for all of the energy used to produce them, and also things like, um, land use impacts, we, we expect that these fuels can reduce emissions by 40 to 50% on a life cycle basis. Um, the, those are the cheapest and the most available today, but the supply is relatively limited. So we think, um, overall maybe about two percent Of overall jet fuel use could be met by diverting these waste fogs from existing uses to, to aircraft. So that's one bucket. Um, second bucket are what we call advanced biofuels. Uh, so those would be things like cellulosic fuels or municipal solid wastes. Um, uh, and even, there's even some technology that can convert, um, …

AI assessment note: “So when you're talking about a three to four multiple, it would be like six to eight dollars per gallon.”

Q Okay, so sustainable aviation fuels, category one, category two, hydrogen, category three, electrification, battery-powered planes. What's the state of affairs there?

A This is where the storyline gets a little grim, I'm afraid, um, and, and it, it goes back to just the fact that, I mean, if you've, if you've picked up a battery recently, like, if you've changed the twelve-volt battery in your car, um, you, you'll recognize that batteries are just really heavy, uh, and that's something that, Is not a big issue for cars, for example, um, but it's a huge issue for aircraft. And we, we actually have to deal with it on a couple of different levels. First of all, there's the fact that the fuel itself, um, is much, much heavier. So the battery is, um, you know, 40, 50 times less energy dense on a mass basis than the jet fuel. Um, but the battery also stays with the plane the entire length of the operation. One of the, uh, one of the nice things about jet fuel is as you fly, you burn it off, and you get rid of that mass over the course of a flight. The battery is with you when you take off, it's with you when you land, and so there's a mass penalty of the battery throughout the entire flight. So, you know, there's, there's a fair amount of bullishness, I think, right now about electrification, uh, Um, but by our analysis, you know, it's really a market for commuter flights, and for flights of, you know, 300 kilometers or less, um, for the foreseeable future, just because of the, the, the underlying mass penalties of the technology.

AI assessment note: “it's really a market for commuter flights, and for flights of, you know, 300 kilometers or less”

Q So we've talked about Boeing and Airbus already, but we haven't really talked about the airlines and the airline industry. What is their level of commitment here, do you think, and to what?

A Right. Uh, so this is changing quickly. Uh, you know, a number of first airlines, then airline groups, and now sort of the Global Trade Association have, have come out in favor of net zero emissions by 20 50. So, uh, that's a really high goal to hit, uh, and just to put this in context Airlines globally first made a climate commitment back in 2009, uh, and it was to have carbon neutral growth from 20 20 and then to reduce emissions by half in 20 50 based upon a 2005 baseline. If you look what happened after that goal was announced, emissions actually increased faster in the decade after they announced the goal than in the decade before it. So that goal that was first announced had literally no impact Um, the emissions trajectory and very little impact on the technologies. Um, we'll see where this recent commitment goes. Um, what's different this time is that individual airlines are starting to announce commitments, especially for sustainable aviation fuels. So a number of groups have come out and say, look, we're going to get 10% SAF fuel supply by 2030. So that's different from where we were a decade ago, where it was kind of a, um, An industry-wide aspirational goal. Um, so we'll see. I mean, the, the, the, the, The dialogue has definitely shifted, um, but we will see, I guess, how much money the airlines will actually devote to this.

AI assessment note: “come out in favor of net zero emissions by 20 50”

Q Google flights. Now, if you search a flight, uh, tells you the expected emissions from your trip on that flight. And, you know, you could, you could make a decision based on a route or a seat that should have less emissions. There's, you know, similar things from kayak and other places like that. Do you put any stock in those efforts in terms of, you know, actually decarbonizing aviation?

A I mean, it, it, it gives you another pull for these new technologies. So again, it's, it's not end all and be all, uh, in and of itself. I mean, we've, we've looked at this pretty in depth and, um, any market you look at, there's a substantial difference already today between the carbon intensity of both airlines and the flights that they operate. So in the US, if you have good emissions estimates, you could choose a ticket that is somewhere between 20 and 60%, uh, um, less carbon intensive, um, for flights within the United States. So it is significant today, and as you start to introduce SAFs or hydrogen or electric aircraft, that's an additional lever that you could put into the model. So I think it's really positive that Google and Kayak and others are, are, Are starting to provide this data. There are definitely gaps. The data can be spotty. We need to work more on standardizing both the estimates and then also how they're, um, how they're displayed for the consumer. And then finally, this non CO two climate impact overlay is a tricky one, but I think it's, um, it's definitely something to keep your eye on and, and something that I hope is refined and expanded as we go forward.

AI assessment note: “I think it's really positive that Google and Kayak and others are, are, Are starting”

Q off by talking about some fun futuristic projects. Air aviation stuff. Um, there is plenty of excitement out there around, I guess, two category, like areas of next generation aviation. The first would be VTOLs or specifically EVTOLs. So the flying air taxi kind of thing. Second category, supersonic aviation making its, uh, triumphant return. So from your perspective, thinking about decarbonization, how do you think about each of those?

A Yeah, I mean, I, I think they're both really marginal plays at best. And again, eVTOLs in particular are a little bit outside of my own area of expertise. Um, but one thing to, to think about when you're thinking about commercial aviation is airplanes are mass transit. So it's, it's like an Airbus, right? It's a bus in the air. Um, whereas these eVTOLs, you're talking more about two, three, four seaters, um, that are being pitched, you know, as ride sharing or air taxis. So it's, it's fundamentally a different market, potentially a new market. So you may have caught that United is making this investment into, um, WISC, I think. Um, That is an eVTOL, um, startup to, as a way to get some of their customers to the airport, um, in urban areas. So that's kind of its own market. I don't think it will really decarbonize the, the existing fleet in any meaningful way. Uh, supersonics is a really interesting area, and, uh, there are a lot of different opinions on this. Um, I will say, uh, Kind of the, the basic problems, the basic economic challenges, uh, the fact that you cannot currently operate, uh, aircraft over land in most of the, sorry, supersonics over land in most of the world. Uh, and then this environmental concern, not only, uh, noise and ozone depletion, but now climate change. I mean, that's, that makes it really hard to see supersonics as a viable, you know, mass market fo…

AI assessment note: “I think they're both really marginal plays at best.”

Q would respond with the sort of trajectory of battery technology, right, and the fact that there is so much improvement Both on cost and on energy density that we are seeing in batteries today, driven in part by electric vehicles, but some of which could be applied here. Do you see a pathway where that changes as batteries get better, or is there something fundamental that's just tough to overcome?

A No, no, I mean, the, the, the ranges will increase, um, but there are a number of unique kind of requirements for aircraft, just in terms of, um, you know, in terms of cooling and packaging and, um, Certification allowances, because this is a very, very, uh, safe industry with almost zero tolerance for accidents. Um, so, I mean, you'll definitely see incremental improvements. The question is, um, whether those will be significant enough to break through any of these, these hard constraints. I will say that we, we haven't dug deep yet into things like distributed propulsion, um, Uh, which is a technology where instead of having a couple big, uh, you know, engines or, or props, then you have a number of small props, uh, throughout the wing, and those can give you additional efficiencies. So, um, I will never say never, but the flight physics are really punishing for electric aircraft.

AI assessment note: “I will never say never, but the flight physics are really punishing for electric aircraft.”

Q they, are they giving you more detail where that sustainable aviation fuel is gonna come from? I mean, to your point originally, like, the lowest hanging fruit cost perspective sustainable aviation fuel is pretty severely supply limited, so are they looking at this and seeing either More supply, or seeing the cost trajectory of e-fuels coming down fast, or like, what do they see that makes them think it's possible?

A Yeah, I mean, in terms of what's being disclosed publicly, generally you'll get, like, an overall volume target. Generally, you'll get, like, a, um, a range of years. Like, we're, we're, we've agreed over a ten-year period to, to purchase up to this many hundreds of millions of gallons of SAFs, and then they'll typically have, like, the name of the company involved, and if you're, if you know the space, you can, from there, kind of work out the feedstock, and then Ballpark the life cycle and missions from it. It's a little bit of an exercise, uh, in, in judgment, but, um, Yeah, it's, it's, it's, I would say, overall, the commitments that we're seeing, the volumes are definitely getting up, and the feedstocks are, by and large, pretty good. There are some questions about a few companies, and those, again, go back to this idea of using, uh, crops to generate, um, some sustainable aviation fuel.

AI assessment note: “if you know the space, you can, from there, kind of work out the feedstock”

Q All right, so, uh, to put you on the spot, if you're betting, let's just say, I don't know, 2030 and 20 40, Which, which of these pathways has sort of done the most to decarbonize aviation? What do you think wins? And I, I wonder whether the answer changes over those two timeframes.

A Uh, I, I think it would. Um, I, I should caveat this. Um, my background is actually in environmental engineering, and a lot of my research to date has been not about zero emission technologies, but about, uh, fuel efficiency and fuel efficiency improvements. And, uh, I, I often get critiqued as being like way too negative about SAFs. Uh, in part because there's just, there's been so much optimism about them, uh, over the past decade that has not come to fruition because of the, because of the economics and the supply constraints. Um, so, um, you know, in the course of the past 10 years, fuel efficiency has been the major driver. Like, that is what has been reducing emissions over time. We're going to pivot into the future where, um, SAFs become more important, especially after twenty-twenty-five. Hydrogen could become significant after twenty-thirty-five, and then we'll have electric aircraft kind of in, in a few regional niche markets, I mean, as soon as twenty-twenty-five. But, I mean, I would say, um, You know, 2030, SAFs, definitely. Uh, 2040, I would also say SAFs. 20 50, it may shift to hydrogen. We'll just have to see how the, the economics work out, and, um, you know, it's, we've got a number of new technologies that are competing here, right? We've got direct air capture, we've got carbon capture, um, we've got renewable energy, uh, and then overlaying this, there's th…

AI assessment note: “You know, 2030, SAFs, definitely. Uh, 2040, I would also say SAFs.”

Q have emerged as kind of the leading contenders. You alluded to all of them, but let's dig into each of them individually and talk about the kind of trade-offs. Um, so the first one is sustainable aviation fuels, and there's, there's multiple categories within that. So, uh, why don't you walk us through kind of what are sustainable aviation fuels and then what are the big buckets underneath that umbrella?

A So sustainable aviation fuel is sort of a catch-all phrase. Um, it's meant to describe drop-in alternatives to fossil jet fuel. You may hear me call it Jet A. That's kind of the baseline fuel for aviation. Um, and so these are being generated using a variety of feedstocks. Uh, current uptake is very, very small. It's, uh, it's less than .one percent of global jet fuel use. But sustainable aviation fuels have a lot of Merits in that they're, they're meant to be drop-in, so you can blend them into existing supply and continue to use the same planes and the same engines that are already in service. Um, they're energy dense, so as a sort of a liquid hydrocarbon, in essence, uh, they will allow planes to maintain their same range, so you'll be able to take a long-haul flight, for example, on a sustainable aviation fuel. Um, And we do believe that there'll be less polluting, uh, Not just on a CO₂ basis, but those other co-pollutants I mentioned, sort of NOx and contrails and whatnot. We think, um, sustainable aviation fuels can reduce those climate impacts as well. So that, that's the good news. Uh, the limitations are supply is very low. Uh, cost remains really high. So the figure you often hear quoted is three to four times the cost of conventional jet fuel or jet A today.

AI assessment note: “sustainable aviation fuel is sort of a catch-all phrase. Um, it's meant to describe”

Q in on sustainable aviation fuels. Airbus is not all in on hydrogen, but they've certainly been very public about their hydrogen ambitions. Do you think that's a function of their headquarters? Boeing is an American company. Airbus is a French company. Europe is ahead on, on climate policy in general, but on hydrogen in particular, um, or is it a shareholder thing? Is it just You're like, what's the difference?

A I think it's a little bit of everything. Certainly, like, concern about the climate change is higher in Europe baseline than it is here in the United States. I think that's one, one facet of this. Also, discussions about sort of the hydrogen economy and hydrogen infrastructure are definitely more accelerated in Europe than they are in the U.S., Generally, I think that's a good thing, but I will put maybe an asterisk around it. Um, there is concern in the environmental community that hydrogen is basically just a Trojan horse for natural gas. Uh, and that, uh, so I've sort of Actually, we haven't really talked about gray versus green versus blue hydrogen. That's like a whole conversation in and of itself.

AI assessment note: “I think it's a little bit of everything. Certainly, like, concern about the climate change”