Freight forwarder Flexport picked up a surprising endorsement from the White House during this month’s Asia-Pacific Economic Cooperation (APEC) forum for its new initiative to help customers reduce their supply chain emissions for airfreight shipments.
The Biden administration highlighted efforts to decarbonize aviation at the meeting in San Francisco, where world leaders pledged continued cooperation on addressing climate change, in the process giving visibility to a company headquartered in the same city for a program similar to ones previously undertaken by a number of airlines and cargo partners.
A fact sheet outlined more than $50 billion of U.S. private-sector investments into APEC economies related to trade, sustainability and other goals, including an announcement by Boeing that it will work with the nations and U.S. government to advance development of sustainable aviation fuel (SAF) and promote its use by the region’s airlines. And it said Flexport is partnering with Norway-based Choose to offer air cargo customers a way to purchase SAF certificates that can be applied against freight movements with any vendor.
The APEC communique also mentioned Flexport’s September announcement of an omnichannel capability for small and midsize enterprises that allows them one-click ability to create a single pool of inventory and import, warehouse, sort and deliver goods directly to stores or consumers for orders placed on more than 20 e-commerce marketplaces.
President Joe Biden also acknowledged Flexport in remarks during a speech to CEOs at the summit.
“American businesses — significantly represented here in this auditorium — are the largest source of foreign direct investment into APEC economies. In fact, if we take just the U.S. companies represented here at this summit and look at their new investments [into] APEC economies in the calendar year, it totaled more than $50 billion so far. … Investments announced today from companies like Boeing, Apple, Flexport, and the Pepsi company — to make our economies greener and more sustainable,” he said
A Flexport spokesperson said the company shared the announcements with White House staff organizing the APEC event as an example of how its service gives small businesses the technology and capital to grow sustainably.
The Flexport listings didn’t come with price tags because they are only loosely affiliated with APEC’s $50 billion investment theme. Neither program is specifically focused on the Asia-Pacific region, although in reality the self-service global trade solution could apply because that is where e-commerce retail goods are mostly produced and where Flexport has some logistics infrastructure. And the SAF program applies to freight movement anywhere in the world, not just on the trans-Pacific corridor.
Green credits
Flexport controls the use of three Boeing 747-400 freighter aircraft and arranges shipments with other cargo and passenger airlines, but its SAF program functions independently from the physical flow of goods in its system while allowing customers to purchase the environmental benefits through a practice called book-and-claim.
The book-and-claim model for air cargo is not unique to Flexport. European logistics powers Kuehne+Nagel, DB Schenker and DSV, among others, offer virtual SAF purchases through their reservation channels.
Distributing SAF to a specific airport or flight is difficult because of limited fuel availability and infrastructure. Under aviation’s book-and-claim model, SAF isn’t dropped into the flight of the company covering the fuel premium. Instead, the volume of SAF that is produced and pumped into planes is tracked and verified, after which related carbon emissions are calculated and allotted to the business that “booked” the purchase of SAF. The customer paying the premium receives a SAF certificate to lay “claim” to the environmental benefits, which it can apply to reduce its indirect carbon footprint.
Using this method means SAF can be sourced for flights with airlines or out of airports that do not have SAF supply available. It’s a similar approach to buying renewable energy credits because consumers can’t physically control where their electricity comes from.
Flexport’s program is enabled by Choose, a software-as-a-service platform that helps businesses integrate climate programs directly into their online sales offerings, and is available through a digital connection with the Flexport trade portal.
“This means democratized access to SAF through the book and claim chain-of-custody model, which allows Flexport customers to reduce their emissions for any air freight shipment on any trade lane with any carrier,” Flexport said in a statement. “When clients purchase a SAF certificate, book and claim ensures that a proportional volume of fuel is used somewhere within the aviation sector resulting in a net-reduction. For our clients, this flexibility ensures that consignees of any size can contribute to emissions reduction without having to arrange for large fuel offtake agreements directly with air carriers or fuel suppliers.”
Kuehne+Nagel two years ago became the first air logistics provider to offer customers the option to purchase SAF for each shipment regardless of airlines used, origin or destination. Pricing is tied to the actual weight of a shipment. After booking confirmation, the equivalent volume of SAF is credited from 3.4 million gallons of SAF available to Kuehne+Nagel while the customer receives an authorized certificate confirming the emissions saving for environmental reporting.
Aviation accounts for an estimated 2%-3% of global carbon emissions but is one of the most difficult sectors to decarbonize because of technological hurdles and the heavy investment required. SAF, which proponents say reduces earth-warming emissions by 70% and costs three to four times as much as conventional jet fuel, is considered a bridge to a hydrogen or electric future. It amounts to just 0.2% of total global jet fuel consumption. The International Air Transport Association says demand signals from airlines should spur governments and energy producers to heavily invest in production and distribution infrastructure. Much more SAF needs to be produced to meet current demand and the airline industry’s commitment to net-zero carbon emissions by 2050.
SAF can be produced from a number of sources, including waste fats, oils and greases, municipal solid waste, agricultural and forestry residues, and nonfood crops. They can also be produced synthetically via a process that captures carbon directly from the air. About 10 facilities currently produce SAF, but more than 150 projects in 35 countries are being explored for SAF production by 2029. Some analysis shows that up to 25 million tons of SAF could be produced by the next decade, according to the cross-sector Air Transport Action Group.
It should be noted that SAF still produces some carbon emissions in flight but generally releases less carbon dioxide during the production and refining phase than fossil fuels.
Airlines have entered into forward purchase agreements for SAF worth about $45 billion, well in excess of today’s SAF availability, IATA says. Fifty airlines representing over 40% of global air traffic have committed to more than 5% of their own fuel use being SAF in 2030, with many setting higher goals.
And logistics companies are increasingly partnering with airlines to directly subsidize the cost of SAF purchases.
As part of a multipronged decarbonization effort, Air France-KLM Group three years ago launched a SAF program that now includes more than 50 companies. Chicago-based AIT Worldwide Logistics recently joined the program and agreed to purchase 460 metric tons of SAF from Air France-KLM-Martinair Cargo for 2023, with even higher volumes committed for 2024. In October, the group’s cargo division introduced goSAF, which allows customers to reduce their carbon emissions per booked shipment by making a direct investment in SAF. In the first week after the feature was introduced, a SAF contribution was added to more than 1,000 bookings.
Lufthansa Cargo has also been out front reducing carbon pollution and promoting the use of SAF. The airline and Kuehne+Nagel jointly committed to support the world’s first production site for synthetic crude oil in Germany and are already buying small quantities from a nonprofit called Atmosfair. The partnership built on K+N’s existing agreement to help subsidize purchases of SAF fuel made from biowaste.
Synthetic kerosene, also known as power-to-liquid fuel, is produced from regeneratively generated electricity, water and CO2. Power-based fuels are still in the development stage but are considered a long-term alternative to conventional jet fuel or bio-generated SAF because they can theoretically be produced without availability limits.
In February, Lufthansa Cargo parent company Deutsche Lufthansa signed a memorandum of understanding with European energy company Varo to supply SAF. Varo plans to produce 86 million gallons per year from 2026 with a long-term target of 165 million gallons annually. The company in September announced plans to build a major SAF manufacturing facility in Rotterdam, Netherlands.
German logistics giant DB Schenker and Lufthansa Cargo in 2021 started regular full charter flights between Frankfurt and Shanghai that are 100% covered by sustainable aviation fuel made from renewable waste and residue raw materials such as used cooking oils. That means Lufthansa blends in the same amount of SAF on flights throughout its network to equalize the amount of fuel used on the charter flight. Computer hardware maker Lenovo has regularly booked space on the flights.
Last November, DB Schenker began giving customers the option of choosing SAF for their air transport to any location in the world — independent of the type of aircraft or airline used. Shippers pay a premium for virtual allocation of SAF for an air cargo shipment and receive certification for the amount of greenhouse gases avoided. The actual physical insertion of SAF might occur on flights different from the one carrying the freight. DB Schenker has also purchased SAF credits from Singapore Airlines.
Denmark-based logistics power DSV last year similarly struck an agreement with Etihad Cargo, the cargo division of Etihad Airways in Abu Dhabi, to purchase SAF to offset the carbon emissions of its shipments utilizing a book-and-claim system.
Japanese freight forwarder Kintetsu World Express in 2022 committed to use SAF on Lufthansa Cargo flights for one year, reducing by 5% its total CO2 footprint for shipments transported by the airline.
Korean Air last week announced logistics company LX Pantos as the inaugural partner for its new SAF program for cargo customers. LX Pantos will purchase SAF for Korean Air’s cargo operations and the airline will share the amount of carbon emissions reduced accordingly. Last year, the airline signed an agreement with Shell to purchase SAF at major airports in Asia and the Middle East from 2026 to 2031.
A number of airlines have even committed equity and risk capital into SAF projects. United Airlines, for example, this year started a $200 million fund to help support startups developing sustainable aviation fuel. Air Canada, JetBlue and Hawaiian Airlines are also contributing.
London Heathrow Airport will offer $89 million of incentives to airlines in 2024 in an effort to boost SAF to 2.5% of total fuel usage. The scheme, now in its second year, cuts the price gap between kerosene and its greener alternative by about half. The airport aims for 11% SAF usage by 2030, scaling up the incentive each year.
Meanwhile, Virgin Atlantic has received approval from the U.K. Civil Aviation Authority to use 100% sustainable aviation fuel for the first-ever long-haul test flight across the Atlantic Ocean, from London to New York, on Tuesday.
Renewed commitments at UN meeting
Governments have recognized the importance of SAF in making aviation more environmentally sustainable. The European Parliament has mandated the incremental use of SAF from 2025 onward, while the U.S. government has created incentive programs to help scale up SAF production over the next decade. Critics say more governmental support is needed to lower costs, increase production and de-risk private investment in alternative fuels.
A UN gathering of more than 100 countries in Dubai on Friday agreed to an interim goal of 5% carbon reduction in aviation by 2030 through a transition to SAF by using less carbon intensive aviation fuels. The aviation sector’s long-term goal is for net-zero carbon emissions by 2050.
Lower carbon aviation fuels are fossil fuels that are produced with improved production techniques to reduce their life cycle CO2 emissions compared to traditionally produced fossil fuels. They can be around 10% less carbon intensive and could provide a good interim measure until SAF can be scaled up.
A large majority of the International Civil Aviation Organization’s (ICAO) members also agreed on a global framework for cleaner fuels, which includes capacity building for less developed nations and giving airlines benefits against decarbonization obligations based on uniform SAF accounting principles.
Stakeholders agreed to work together to increase global production of SAF and other cleaner fuels, as well as improve standards, regulatory frameworks, infrastructure and engine technology to support the shift to alternative fuels. They said the interim goal would help bring in investors.
“A shift towards a replacement of fossil fuels by SAF will require significant investment. The agreement today helps to provide another layer of certainty to unlock the trillions in capital needed,” said Haldane Dodd, executive director of the Air Transport Action Group, in a statement. “Aviation has provided a near-term objective and the global framework. Now it is up to the finance community and energy sector to support the necessary infrastructure and start delivering SAF in ever increasing quantities.
“A global average goal allows some parts of the world to move fast and develop their existing base of SAF deployment whilst leaving room for other states to build up the capabilities needed for SAF production and use,” said Dodd.
During the event, ICAO and Airbus signed a declaration of intent to explore the feasibility of SAF development and deployment in South America, initially focusing on three countries.
Dubai-based Emirates on Wednesday became the first airline to operate an A380 flight using 100% SAF in one of its four engines, demonstrating its potential as a drop-in replacement for jet fuel on commercial flights. Earlier this year, Emirates successfully completed the first 100% SAF-powered demonstration flight in the region on a GE90-powered Boeing 777-300 Extended Range. The airline recently expanded its partnership with Neste for the supply of over 3 million gallons of blended SAF in 2024 and 2025 for flights departing from Amsterdam Schiphol and Singapore Changi airports. It currently uplifts SAF in Norway and France.
Environmentalists said the Dubai agreement lacks any enforcement mechanism and doesn’t specify what fuels airlines would use to reach the 5% global target, Reuters reported.
Click here for more FreightWaves/American Shipper articles by Eric Kulisch.
Contact Reporter: ekulisch@freightwaves.com
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