According to China Energy News, compared with traditional petroleum aviation coal, the carbon dioxide emissions over the entire life cycle of SAF can be reduced by more than 50%, with the highest reduction reaching 85%.
According to the Wise Finance APP, Debon Securities released a research report stating that the demand for biomass fuel (SAF) needs to rely on industrial policy drive. By 2025, overseas will usher in a milestone turning point in SAF demand, and fuel injection of SAF is a key means for the aviation industry to achieve environmental protection and emission reduction goals. In recent years, the country has attached importance to the development of biomass fuels, introduced a number of SAF-related policies, which is expected to accelerate the actual application and promote the release of SAF demand.
Event: On October 30th, the National Development and Reform Commission and five other departments issued the 'Guiding Opinions on Vigorously Implementing the Action of Renewable Energy Substitution,' mentioning: 1) comprehensively improve the supply capacity of renewable energy, develop green fuels such as biogas, biodiesel, and bio aviation coal according to local conditions, actively and orderly develop renewable energy hydrogen production; 2) accelerate the integration and interaction of transportation and renewable energy, support the pilot operation of biological diesel, bio aviation coal, biogas, green hydrogen methanol, and other green fuels in the maritime and aviation fields in conditional areas. It provides important guidance for the development of the biomass fuel industry on both the supply and demand sides such as biodiesel, bio aviation coal (SAF).
Debon Securities' main points are as follows:
The aviation industry faces significant challenges in environmental protection and emission reduction, and fuel injection of SAF is a key means to achieve compliance.
As early as 2021, more than 140 countries worldwide have announced or are considering achieving net zero emissions by 2050 or 2060. However, due to the need for high energy density fuels, the aviation industry may find it challenging to meet emission reduction targets before breakthroughs in revolutionary technologies such as electric aircraft or hydrogen-powered aircraft are realized. According to China Energy News, SAF can reduce carbon dioxide emissions over the entire life cycle by more than 50%, with the highest reduction reaching 85%. Therefore, over the next 30 years, SAF is expected to be an important low-carbon alternative to existing fossil fuels. According to IATA projections, 65% of net zero emissions contribution by 2050 will come from SAF.
By 2025, overseas will witness a milestone turning point in SAF demand.
The bank believes that the release of the global demand for SAF needs to rely on the driving force of industrial policies. The EU ReFuelEUAviation proposal has stipulated that the mandatory blending ratio of SAF in aviation fuel will be 2% in 2025, gradually increasing to 6% by 2030, with a long-term goal of reaching 70% by 2050. In other countries, the UK, South Korea, India, and other countries have also clearly defined the mandatory blending ratio of SAF, which is expected to be gradually implemented in the future. According to the International Energy Agency, the global SAF consumption reached 0.5299 million tons in 2023, and is expected to grow rapidly by 142.6% annually from 2024 to 2028. By 2028, global SAF consumption is projected to reach 13.1171 million tons. According to the International Air Transport Association, SAF production worldwide from 2019 to 2024 will increase from 0 to 1.5 million tons, accounting for 0.53% of aviation fuel demand in 2024.
According to China Chemical Industry News Weekly, by 2027, the planned construction of SAF production capacity will still only be able to provide 1-2% of jet fuel demand. Based on the huge demand base for aviation fuel, and with next year being the first year of implementation of the EU's mandatory blending ratio, the rigidity of demand brought about by policy implementation is expected to give SAF demand a relatively certain growth.
Domestic policies are catalyzing the accelerated release of SAF demand.
In recent years, the country has attached importance to the development of biomass fuels, issuing multiple SAF-related policies. In 2022, the Civil Aviation Administration of China mentioned in the "14th Five-Year Plan for Civil Aviation Green Development" that it aims to promote breakthroughs in the commercial application of sustainable aviation fuels, striving to reach a SAF consumption of over 0.02 million tons in the same year 2025, with a cumulative consumption target of 0.05 million tons during the '14th Five-Year Plan' period, setting quantitative SAF consumption goals. Subsequent top-level plans such as the '14th Five-Year Plan for Renewable Energy Development', 'Green Aviation Manufacturing Industry Development Outline (2023-2035)', and 'Guidance Catalog for Industrial Structure Adjustment (in 2024)' all mention encouraging the development of SAF, gradually solidifying the policy foundation.
Considering the EU's temporary anti-dumping measures disclosed in July 2024, which only imposed temporary anti-dumping duties on biodiesel, SAF remains unaffected. This may indirectly provide an opportunity for the accelerated development of the domestic SAF industry. In September 2024, the Civil Aviation Administration of China launched a pilot project for the application of SAF on 12 flights, which is expected to accelerate the practical application and release of SAF demand.
Recommended targets: Beijing Haixin Energy Technology (300072.SZ), Zhejiang Jiaao Enprotech Stock (603822.SH), Longyan Zhuoyue New Energy (688196.SH), Penyao Environmental Protection (300664.SZ), Shandong High Speed Renewable Energy (000803.SZ).
Risk warnings: Insufficient promotion efforts for SAF-related policies, trade friction risks, lower-than-expected demand for civil aviation-related fuels.
