Sustainable Decarbonization of Aviation in Latin America

Summary: The goal of this report is to contribute to the existing literature by providing a regional assessment of aviation decarbonization options in selected countries in Latin America. In particular, we focus on the following six countries: Brazil, Chile, Colombia, Ecuador, Mexico, and Peru. For these countries, we provide an assessment of sustainable aviation fuel (SAF) feedstock availability, the costs of the corresponding SAF pathways, and the likely implications of SAF deployment on fuel use, prices, emissions, and aviation demand in these countries. We also explore efficiency improvements and the role for market-based mechanisms in reaching decarbonization targets.

Key Takeaways

In the scenario of current policy approaches and emission trajectories, aviation demand in Latin America is expected to more than triple between 2019 to 2050, and the corresponding aviation emissions are projected to double. 

The aviation sector is aiming at reaching a net zero target by 2050. Decarbonizing aviation is a needed but challenging task. 

Sustainable aviation fuels (SAF) offer a significant decarbonization pathway in Latin America.

In the most ambitious economy-wide emission mitigation scenario considered (1.5°C stabilization pathway with 65% SAF use in Latin America by 2050), we project aviation emissions to be reduced by about 60% in 2050 compared to the scenario of current trends considering impacts from SAF use and economy-wide policy (e.g., more efficient aircraft, demand response). To reach net-zero goals, other measures will be required, such as improvements in operational and air traffic efficiencies, airplane fleet renewal, alternative forms of propulsion, carbon offsets and removals.

In Latin America, currently (2024) jet fuel prices are around $0.70/liter. It is projected that in the emission mitigation scenario, carbon prices by mid-century might be around $200-250/tCO₂. This level of carbon pricing might result in almost doubling jet fuel prices by 2050. We project the corresponding reduction in aviation emissions by 22% (without targeted SAF policies). 

Based on the current availability of feedstocks, we project SAF costs to range from $1.11–1.77/liter in Brazil, to $1.68–2.53/liter in Chile, $1.51–2.54/liter in Colombia, $1.32–2.15/liter in Ecuador, $1.41–2.40/liter in Mexico, and $1.38–2.86/liter in Peru.

Increased fuel prices could affect operating costs of the aviation sector and could affect overall aviation demand in the absence of strategies to manage price increases.

Sugarcane-based ETJ, palm oil-based HEFA, and soybean-based HEFA offer the most promising near-term opportunities for SAF production in Latin America.

Second-generation biofuels (i.e., based on non-food feedstocks) and e-fuels (i.e., power-to-liquids) are more expensive, and expected to require more R&D to become economically viable.

In the most ambitious SAF scenario considered, the total cumulative capital investments required to build new SAF producing plants between 2025 and 2050 are estimated at US$204 billion for the six countries studied (US$84 billion in Brazil, US$27 billion in Chile, US$23 billion in Colombia, US$5 billion in Ecuador, $US49 billion in Mexico, US$16 billion in Peru).

Government policy and regulatory mechanisms will be required to create the enabling conditions to attract SAF investments in the region and make SAF commercially viable, while balancing the impact of decarbonization measures on passenger demand and connectivity.

For fuel producers, stable policies and regulations with a long-term vision can create robust supply chains, to build a consolidated demand for establishing economies-of-scale, and to develop innovative SAF production pathways. 

Unification of decarbonization approaches between countries will ensure competitiveness, economy-of-scale, and avoidance of leakage of carbon emissions. Consideration of international approaches, such as CORSIA sustainability criteria, will help maintain a level playing field for aviation in the entire region.

There is a potential benefit of international SAF trading. If the ambitious SAF scenario (65% SAF use by 2050) is applied to the six countries studied (in the global emission mitigation scenario), and they relied solely on domestic SAF production to fulfill this target, aviation demand growth measured in RPK (revenue per passenger kilometer) would be reduced by 5% in 2050. However, if SAF trading was introduced, enabling each country to access the most competitive fuel, it would nearly halve the negative impact on demand growth.

Because of different potentials for the amounts and costs of SAF production, we project that in the case of regional SAF trading Brazil, Colombia, Ecuador, and Peru become SAF exporters, while Chile and Mexico find it economically attractive to import SAF.

There is a need for country-specific studies (on feedstock availability, trading approaches, impacts of policies and regulations) that involve international and local experts.