S.Korea to launch sustainable biojet fuel initiative

South Korea will require airlines to replace a portion of jet fuels with environmentally-friendly ones such as used cooking oil, palm oil and biodiesel from as early as 2025 in line with global policy efforts toward shift to sustainable aviation fuels (SAFs), according to oil refinery and aviation industry sources.

The government is expected to announce the initiative on August 30, following in the foosteps of the European Union that in 2023 passed a law stipulating 2% of jet fuels must be sustainable as of 2025 and 70% by 2050.

SAFs emit about 80% less carbon than conventional jet fuels, but cost about two to five times that of fossile fuels such as kerosene. So the shift toward SAFs would lead to an increase in airline ticket prices, with fuels accounting for about 30% of the cost of one flight.

The eco-friendly initiative for the aviation industry is also expected to threaten South Korea's No. 1 position in the aviation fuel export market. Domestic oil refineries process crude oil imported from the Middle East into jet fuels at competitive prices. But they have no SAF production facilities yet.

Korean Air Lines Co., South Korea’s full-service air carrier, has begun to use a mix of SAFs and fossil fuels for the Incheon-Paris route from 2022.

Starting on August 30, the flag carrier will fleet its aircraft with the blended fuel for the Incheon-Tokyo route and expand it into other routes in phases. Incheon International Airport is South Korea's main air gateway.

To promote the SAF adoption, the government plans to provide subsidies to oil refineries that install SAF refueling facilities at domestic airports and relax the relevant regulations, as the US, Japan, Germany and the Netherlands do.

Also, South Korea may consider cutting taxes on SAF-related facilities. Constructing an SAF facility that has a capacity of processing 500,000 tons of fuels costs about 1 trillion won ($752 million).

In 2022, South Korea exported 14.8 trillion won worth of jet fuels, outstripping the 10.3 trillion won from its mobile phone shipments the same year.

But the country is far behind other countries such as the US and China in the SAF segment. In the world, there are 323 SAF production facilities, but nothing of them belongs to South Korea. 

According to the International Air Transport Association, global SAF demand is forecast to surpass 400 billion tons in 2050, matching the current jet fuel demand of 350 billion-400 billion tons. That means all airplanes will fly with SAFs by then.

The US, the world’s largest aviation fuel importer, plans to replace 100% of jet fuels with SAFs by 2050.

In tandem with such a trend, SK Energy Co. will modify its crude oil processing facility for commercial production of SAFs. Other domestic oil refiners such as S-Oil Corp., HD Hyundai Oilbank and GS Caltex Corp. are considering building SAF-dedicated facilities.

They are asking the government to provide subsidies and tax credits for the construction of SAF plants that would cost billions of dollars.

Write to Sang Hoon Sung and Woo-Sub Kim at uphoon@hankyung.com
Yeonhee Kim edited this article