The perennially besieged airline industry responded by cancelling thousands of flights, cutting in-flight passenger services and threatening to impose fuel surcharges on tickets. The European Union also announced it would seek to “optimize” jet fuel distribution among member states and look for alternative supply.

You’d think this geopolitical convulsion might mark the long-promised inflection point for sustainable aviation fuel (SAF), a class of biodiesel additives seen by some as a way of weaning air travel from its reliance on fossil fuels. “Iran really is a ‘sharpen the markets’ case for domestic-waste-based SAF,” says Chris Cooper, CEO of XCF Global, a Reno, Nevada–based producer. The war, he adds, “[exposes] the fragility of the fossil crude inputs and supply. We’re fighting with other countries just to produce a product that brings more conflict to the global economy.”

Yet the reality is that SAF – despite years of research and development and policy stimulus on both sides of the Atlantic – has failed to establish itself as a bona fide low-carbon additive to one of the highest-emitting fossil fuels. There has been a conspicuous silence on the part of aviation players that, not so long ago, enthusiastically promoted SAF as a pathway to reduce the sector’s carbon consumption and meet its climate goals. Neither Air Canada nor the Greater Toronto Airports Authority responded to requests for comment on their own adoption timelines. Nova Sustainable Fuels, the company behind a planned multibillion-dollar SAF plant in Nova Scotia, won’t talk. And Delta yanked references to SAF from its sustainability reports a month into the war, Bloomberg reported.

All this circumspection is telling. If SAF can really decarbonize the aviation industry, why are the proponents staying quiet in the midst of the worst fossil fuel crisis since the 1970s?

Mixed signals

Among all transportation modes, aviation has been the most resistant to the adoption of alternative fuels, despite years of efforts to develop jet fuel substitutes. About 5% of fuel for road transport comes from low-carbon sources, such as biofuels, according to the International Energy Agency. Aviation has seen the highest growth in fuel demand; however, SAF still accounts for only 0.7% of all jet fuel production, with European carriers among the main users.

Not so long ago, the prospect of fostering an SAF market and supply chain generated all kinds of official and policy enthusiasm, such as the “SAF Grand Challenge Roadmap” concocted in 2022 by the U.S. departments of Energy, Transportation and Agriculture, as well as the Environmental Protection Agency. The European Union last year even mandated that all jet fuel supplied at European airports contain 2% SAF, with that benchmark rising to 70% by 2050.

The Trump administration has gutted climate policy, yet the waning of enthusiasm for SAF predates his election. In 2024, the International Air Transport Association bemoaned the “disappointingly slow growth” in SAF production, despite all the mid-pandemic progressive hype. “Governments are sending mixed signals to oil companies, which continue to receive subsidies for their exploration and production of fossil oil and gas,” the association’s director general, Willie Walsh, said at the time. “Investors in new-generation fuel producers seem to be waiting for guarantees of easy money before going full throttle.”

The regulatory nudges didn’t seem to be working. “Several countries have put policies and regulations in place to increase SAF use, such as SAF mandates in the European Union and the United Kingdom,” the International Energy Agency noted in a 2025 report. “In the accelerated case, the global SAF share climbs to 15% by 2035.” However, the operative term here is “accelerated,” which makes it more of a fond wish than a takeoff trajectory.

In the United States, some of the SAF-related tax credit from the Biden-era Inflation Reduction Act survived Trump’s backsliding. But the new credit tends to favour biodiesel, says Andy Navarrete, a researcher for the International Council on Clean Transportation, so SAF production remains limited.

Technical holdups

The delays in SAF adoption are also a direct result of the difficulty in ensuring that the chemistry behind these formulations is both reliable and resilient. “We identified very early on that aviation was going to be a particularly difficult sector to decarbonize,” says renewable-energy expert Warren Mabee, a Canada Research Chair at Queen’s University. Jet fuel, he says, has to remain stable under extreme temperatures and pressure changes to ensure that planes don’t suddenly experience a loss of power in mid-air.

Emerging SAF technologies that rely on cellulosic materials, like corn husks and other types of agricultural residues, or certain forms of municipal solid waste, promise lower carbon emissions but have not yet reached full commercial viability, Navarrete says. “There is a good amount of that material that’s available, but it’s not easy to convert into a liquid fuel.”

So for now, the adoption continues to be dogged by the same sorts of hard questions that orbit around other types of biofuels – namely, the source and quality of the feedstock. The EU discourages the use of waste cooking oils because of limited supply, even though such feedstocks, on average, promise an 80% reduction of greenhouse gas emissions compared to conventional jet fuel and are considered to be the least expensive feedstock. “SAFs that use crops as feedstock may not reduce life-cycle [greenhouse gas] emissions at all,” Navarrete adds. “When land is cleared and repurposed for agriculture, carbon stored in the soil and vegetation can be released.”

The EU, in turn, has pushed producers to disclose the full life cycle of their production methods.

Sustainable aviation fuel made from virgin oilseeds like canola, Mabee points out, also tends to be insufficiently dense in terms of chemical makeup, rendering it less suitable for power-hungry jet engines. “This is one of the things about these fuels, they’re not chemically identical to what goes into today’s jet fuels,” he says. “But it has to be similar enough that the engines respond the same way, because there’s really no room for error in these fuels.”

Alternatives to the alternative

Some investors are looking at new alternatives to the old alternatives, such as waste biomass from forestry or municipal solid waste. Nova Sustainable Fuels, based in Halifax, late last year won conditional approval for a large-scale SAF and renewable methanol processing plant powered by wind and solar energy. The facility is to be located in Goldboro, N.S., and will run on a diet of sawmill waste and underbrush from forest management operations, with the resulting SAF exported overseas.

While the company hasn’t formally released the size of the investment, recent media reports estimate that it will cost $4 to $6 billion, with the bulk of the financing coming from Octopus Energy, a leading British renewable-energy supplier with operations around the world. Despite the size of the project (situated on 313 hectares of private and public land) and its positioning as a future mainspring of Nova Scotia’s green energy sector, Octopus didn’t respond to requests for comment, while Nova declined to schedule an interview.

XCF, the Reno firm, has an annual production capacity of 38 million gallons of SAF on a 10-acre site and is expanding its Nevada plant as well as building two others in Australia, thanks in part to new incentives adopted by that country’s national government. Cooper, an oil industry veteran, says XCF uses waste oils created by the ethanol industry, as well as by soybean processing. “We produced the product through our refinery, and then we sold all of the production back to [the oil refiner] Phillips 66,” he says. XCF’s current off-take agreement is with BGN, an energy trader based in Houston.

The most established player in this space is the Finnish energy giant Neste, which generated €19 billion in revenues last year and earned profits of nearly €1.5 billion. The company has plants in Finland, the Netherlands, California and Singapore and is the world’s largest producer of biodiesel. SAF, which is just one of Neste’s products, is processed using waste materials such as residual biomass and cooking oil.

According to its 2025 annual report, Neste’s global SAF production capability is 1.5 million tons per annum, which will grow to 2.2 million tons per year by 2027 after the expansion of its Rotterdam facility. (The company, which is partially owned by the Finnish government, makes most of the world’s SAF.) “We have seen very positive developments recently within the U.S. and in Europe regarding renewable fuel policies,” a Neste spokesperson said in a statement to Corporate Knights. “They provide a solid outlook for years ahead. Renewables provide an alternative for fossil markets that are heavily Middle East–dependent, therefore governments should see renewables as a means to increase energy supply security.”

Perhaps the most promising policy can be found in the United Kingdom, Navarrete says. There, regulators have mandated a minimum ratio of SAF for all jets. But over time, a progressively smaller proportion of the SAF can come from spent cooking oils. As well, the government has fixed a price floor for producers, an approach they also used to drive wind power investment. A combination of a mandate and a price guarantee provides demand-side and supply-side incentives for SAF refiners looking to invest in newer technologies that offer scalable production – without gobbling up valuable agricultural land. “We don’t have anything similar to that in the US,” he says.

Asking the right question

For the foreseeable future, there’s no technology competition for SAF, notwithstanding a very limited number of experiments with battery-powered small planes, such as Harbour Air’s “e-plane,” a refurbished six-seat de Havilland Beaver, which flies around B.C.’s lower mainland. If a large aviation manufacturer like Airbus or Boeing decided to develop a battery-powered passenger jet, it would likely take well over two decades to design, engineer, test and certify such a vehicle, Mabee says. “The commercial biofuels are the only real option on the table.”

Besides the lingering technical difficulties associated with blending biodiesel into jet fuel, the SAF industry’s main problem is that the price differential is too great; the financial incentives, too thin. Mabee learned this implacable fact while working with farmers on the potential for biodiesel. “Farmers will tend to deviate towards the market that’s going to give them a lot of value,” he says. “I can tell you that with biofuels, the value-add is not necessarily there. They can generally make more money selling their product for food than they can for fuel.” Which is just as well, given how ethanol distorted U.S. corn farming.

Indeed, when the International Council on Clean Transportation a month prior to the Iran war tallied up the cost of SAF compared to conventional jet fuel, the price differential was bracing. A litre of SAF cost about eight times more than a litre of jet fuel, and a range of EU-adopted regulatory subsidies reduced the gap by less than a half.

XCF’s Chris Cooper says that state and federal tax and carbon offset credits, both to biofuel refiners as well as to suppliers of the feedstock, have been instrumental in making a business case for its product. (In Canada, Mark Carney’s Liberal government last year launched a consultation about amending federal clean-fuel regulations so they stay abreast of what’s on offer for biofuel producers in the United States.) But, Cooper adds, the most salient selling point is that SAF offers essentially a hedge against the price volatility caused, in part, by geopolitical conflict. “What we’re actually providing the airlines is a bit of stability when these prices are moving.”

Should climate-forward governments be stoking a fuel that’s stuck in neutral? To answer that question, it’s worth noting the largesse that fossil fuels enjoy. As the International Energy Agency has noted, the world spent $600 billion on fossil fuel subsidies in 2023. The calculus around SAF, in other words, might finally change if the price of jet fuel wasn’t being kept artificially low.

“The danger is that the environmental element gets lost in the shuffle,” Navarrete warns. “If [policymakers] start to see SAF as a good on its own, without thinking about the sustainability implications, then we might be shooting ourselves in the foot.” 

John Lorinc is a journalist and author specializing in urban issues, business and culture.

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In 2021, the International Air Transport Association (IATA) set a target for the aviation industry to achieve net-zero emissions by 2050. With the sector contributing 2.8% of the world’s total carbon dioxide emissions from fossil fuel combustion, many airlines are considering carbon-capture-and-storage technologies and electric-powered planes. But these innovations may be years away from becoming scalable solutions. Sustainable aviation fuels (or SAFs), however, are an immediate tool that could help airlines kick-start their green transition.

“The use of SAF is expected to contribute around 65% of the reduction in emissions needed by aviation to reach net-zero in 2050,” says Albert Tjoeng, head of corporate communications for the IATA, which defines an SAF as a non-fossil fuel that has the potential to generate lower carbon emissions than conventional kerosene in its life cycle.

In April, Air Canada committed to investing $50 million in SAFs and other carbon-reducing technologies. And according to IATA, more than 50 airlines around the world have used sustainable fuels.

“Airlines bought every drop of SAF available in 2021,” Tjoeng says. “So airlines want to use SAF. The issue is the supply.”

At the moment, industry standards state that . Scientific trials to prove that aircraft can safely run on a solution that’s 100% sustainable are in the works.

There are a number of sustainable alternatives, some commercially available, some in development. Here’s what could be an eco-friendly power source on your next flight:

Cooking oils

Oils and fats are currently the most accessible option, according to Bradley Saville, a professor at the University of Toronto in the school’s Department of Chemical Engineering and Applied Chemistry.

“There’s a lot of growth where you’re seeing refineries being reconfigured because it’s low-cost and the infrastructure required for production is perfectly aligned with existing oil refinery technology,” he says. “The compatibility makes it a very attractive initial pathway.”

In the Netherlands, for example, Neste, an oil refining company, has a partnership with McDonald’s. Since 2020, Neste has picked up used cooking oil from 252 of the fast-food restaurants and refines it into fuel.

Dutch airline KLM has been viewed as a trailblazer for its use of cooking oil as fuel on a commercial flight in 2010. One year later, it scheduled more than 200 trial flights between Paris and Amsterdam using biofuel made from used cooking oil. Lufthansa and Continental Airlines followed suit shortly after.

Saville, who has also been assessing sustainable-fuel life-cycle emissions for the United Nations’ International Civil Aviation Organization, says that oils can reduce greenhouse gas emissions by 80 to 90% compared to fossil fuels.

But to be truly sustainable, Saville adds that the best way to produce this fuel is to use excess or unwanted oil and fat that doesn’t pass food-grade standards instead of growing crops specifically for fuel.

His models also show used oil and fat being the cheapest to produce, at US$1,200 to $1,300 per ton.

Biomass and municipal waste

Saville says that biomass, made from algae, crop residues, animal waste, forestry residue and municipal waste, could also have big potential as an aviation fuel.

“If you look to crop and forest residue and leave just the right amount behind to promote good soil quality, you could replace a fairly high percentage of jet fuel,” he says. “Then with municipal solid waste, you’re solving a waste problem and turning it into energy.”

Biomass has the same 80 to 90% reduction as used oils but come at a slightly higher production cost, at US$1,800 to $1,900 per ton. This is one barrier to implementation, Saville explains, and one reason why these fuels are in short supply. Unlike with waste oils, the infrastructure transition isn’t as seamless and supply chains aren’t set up to source and deliver on this in a big way, he adds.

In 2021, United Airlines used jet fuel made from agricultural waste such as corncobs and corn stalks in a normal passenger flight. And in 2016, the airline and Los Angeles International Airport made a pledge to purchase up to 15 million gallons of sustainable aviation fuel using agricultural waste and non-edible natural oils over a three-year period. Saville considers the airline a leader in this sense, noting it has been the only airline that has consistently made other offtake agreements with fuel producers.

In 2017, British Airlines partnered with U.S.-based Solena Fuels to make and use jet fuel from municipal solid waste. It was the first project in the world to attempt to convert municipal waste into a fuel for airplanes.

Synthetic kerosene

Synthetic kerosene, also known as e-kerosene or power-to-liquid, might show the most promise in terms of its ability to reduce the airline industry’s carbon footprint. It is made by combining hydrogen and carbon dioxide. If the hydrogen is generated using renewable electricity (known as green hydrogen) and the carbon dioxide is captured from the atmosphere, models have shown it to have zero, or very close to zero, carbon emissions.

This is a sustainable fuel that is in the earliest stages of development and implementation.

British energy giant Shell is working on establishing synthetic kerosene operations in Germany and the Netherlands. It produced 500 litres of e-kerosene over three months for a KLM flight in February 2021, from Amsterdam to Madrid, that blended the e-kerosene with conventional fuel.

In October 2021, German non-profit atmosfair opened the first production plant, aiming to produce a carbon-neutral product. Lufthansa announced at the time that it had agreed to buy 25,000 litres of the fuel each year for five years. The fuel will be mixed with conventional kerosene.

Then in June, Airbus, Uniper, Siemens Energy and Sasol also announced that they were partnering to open an e-kerosene production facility in Hamburg that would be operational in 2026.

Saville says he can’t provide cost estimates at this time, but numbers provided by the Dutch Ministry for Infrastructure and Water Management in 2021 calculated a production price tag ranging from €1,500 to €6,800 per tonne, which translates to US$1,800 to $8,200.

What Saville does project, however, is that these options will be mainstream in the next seven or eight years.

“We’ll just be scratching the surface, but we’ll be on a clearer path,” he says. “It will be important for broader policy support and cooperation to take place amongst a bunch of different stakeholders and federal government. This will ensure we can increase production and build the infrastructure.”

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Canada’s manufacturers generate more than 10% of total GDP, export more than $354 billion in goods each year and employ 1.7 million Canadians. Along with all the many benefits, manufacturing also has a sizable footprint. When it comes to greenhouse gas (GHG) emissions, there are two distinct groups: general manufacturing and what we call heavy industry. The heavy industries are the energy-intensive, primary processors, sometimes called the “smokestack industries” – steel, metal smelting, pulp and paper, lime and cement, and industrial chemicals. They consume 80% of the sector’s energy and emit more than 85% of total manufacturing GHG emissions. Their energy and emissions intensities are tied to the production technologies and processes used to make useful materials from raw inputs like trees, ores and aggregates, often in high-temperature furnaces and kilns. They are economic and employment mainstays of the communities and regions where they are located, but most of them operate in global business environments and markets where innovation is driving rapid change. For them, the low-carbon path is a game changer.

The transition to a sustainable production system is proceeding on many fronts, led by a reframing that shifts the focus from commodities to services, and includes dematerialization and lightweighting, reuse and recycling, the substitution of renewable energy for fossil fuels and information for energy, the elimination of toxic by-products and pollutants, and a redoubling of efficiency everywhere. Human production systems may never equal the elegance, efficiency and circularity of the natural systems in which they are embedded, but that is the aspirational goal and that is the direction in which they were evolving when the pandemic put the world on pause.

We have become accustomed to thinking of the primary processors as being necessarily energy- and carbon-intensive, but nowhere is the drive toward cleaner production more intense than in the heavy industry group. Most of the technologies we need to dramatically reduce emissions already exist: in patents, in some engineer’s lab or already in commercial use.

For the rest of the manufacturers, from food and beverage to the auto and industrial machinery industries, energy is no less critical an input, but it is a smaller contributor to the cost of production. Particularly for light manufacturing like consumer goods manufacturing and food processing, decarbonization is possible by electrifying the energy and transportation used, which, although it requires upfront investment, is increasingly popular because of the favourable economic paybacks. This means that there are ready-made solutions available today to significantly reduce emissions, including switching from natural gas to electric heat pumps, improving process efficiency, electrifying fleets and using alternative fuels like sustainable biofuels or hydrogen where available.

A critical component of the transition to net zero will be creating a circular economy, one that designs products for durability, uses fewer raw materials and returns as much used material back into the production chain as possible. A circular economy reduces emissions and waste sent to landfill as well as pressure on natural resources. It also creates jobs and new economic activity: the International Labour Organization projects that worldwide employment would grow 0.1% by 2030 under a circular economy compared to business-as-usual, with a net creation of 18 million green jobs.

Setting Canada’s manufacturing industry on a pathway to decarbonizing as part of building back better can help meet Canada’s goal to be net zero by 2050, as well as support good jobs by enabling the manufacturing sector to weather the economic downturn while retooling for the future and, at the same time, make Canadian companies leaders in exportable low-carbon technology.

 Some key steps for getting there include:

• creating jobs in the transition to a zero-waste economy by setting policy direction that sends a clear signal to business;
• accelerating the uptake of technology to switch from natural gas to electricity where it already exists and is affordable;
• using the power of government procurement to support the use of zero- and low-carbon materials and the adoption of deep decarbonization technologies for cement and steel, and reward producers for the amount of carbon reduced; and
• attracting businesses that build low-carbon equipment and technology in Canada with research and development and business supports.

Building Back Better Manufacturing:

The proposal

1. Drive investment and innovation toward a circular, zero waste economy: Shifting our manufacturing and retailers to support the transition to a circular, zero-waste economy can reduce the need for raw materials, support local economic development and domestic manufacturing (including “upcycling” of materials), and reduce vulnerability to global market disruptions. It can also reduce waste that goes to landfill, reduce GHG emissions and support new jobs in the technologies to reduce, reuse and recycle products in the waste management sector, which has grown three times faster than the rest of the economy over the past two decades.

The recycling industry is currently in crisis. For the industry to work, companies need to earn a return on their investments. There is a clear role for the federal government here to help create markets for recycled material, for example by establishing mandatory recycled content in products and packaging that contain plastics. The federal government could also provide carrots in the form of financial support for new investment in circular economy initiatives in provinces that agree to better harmonize their extended producer responsibility (EPR) standards (under which producers of packaging and paper are responsible for 100% of costs) as well as Nova Scotia–style landfill bans – both of which create reliable supply for recycling firms).

While waste management is largely under provincial and municipal jurisdiction, the federal government has an important role to play in setting the policy and public procurement framework to help drive investment in the circular economy. This includes:

• setting rising standards and integrating requirements for the recycled content of plastic produced to drive demand for recycled plastic in Canada and send a clear signal to recycling firms that they will have a domestic market; this would reduce vulnerabilities to supply- and value-chain interruptions and boost domestic recycling capacity;
• delivering on the government’s commitment to ban harmful single-use plastic products while providing financial carrots for provinces to adopt a more harmonized approach to landfill bans, modelled on the approach taken in the EU; and
• making producers fully responsible for their products, including packaging, at end of life by working with provinces and territories to ensure that companies that manufacture plastic products or sell items with plastic packaging are responsible for the cost of collecting and recycling, through EPR programs, and to set increasingly aggressive targets for recycling.

2. Leverage public procurement: The steel and cement sectors produce critical materials needed to build our transit, buildings and infrastructure, and they employ tens of thousands of Canadians. As part of the pathway to net zero (which the Canadian Steel Producers Association has recently adopted as a formal goal), these sectors will need significant investments in new process technologies. But if Canadian steel and cement producers do not make these investments as soon as possible so they can begin gradually dialling down emissions, there is a risk that it will cost a lot more to move quickly later to comply with Canada’s net-zero targets.

All levels of government are significant purchasers of steel and cement for the construction of public works projects like hospitals, transit and bridges. To support the decarbonization of these sectors, Canada should follow the lead of California and Europe by adopting green public-procurement policies for construction materials. California’s “Buy Clean Act” will set standards for the maximum amount of GHGs produced by steel and other building materials used in public works projects. The European Green Deal is building on existing green public-procurement policies to drive toward the EU’s net-zero goal.

The federal government and some provinces have already taken steps to lay out guidelines for greener procurement.

The federal government can send a clear signal to the steel and cement sectors that there will be a strong market in Canada for low-carbon materials by:

• paying a premium for lower-carbon cement and steel in public projects ($100 per tonne of carbon avoided), based on an industry benchmark, that declines as the cost of adopting the technology decreases;
• adopting a policy to reward lower-carbon suppliers in its own public procurement that sets a maximum threshold for GHG intensity that declines over time; and
• requiring that comparable thresholds are phased in by provincial and municipal governments for projects that receive federal government funding.

It is estimated that a $350 million per year program in subsidies for avoided greenhouse gases could (if combined with $50 million per year for measurement and verification systems and $80 million per year in R&D support) help unlock the $3.7 billion of private capital investment per year that is required for deep decarbonization in these sectors, as well as open up potential opportunities for other low-carbon building materials. With these measures, energy economist Chris Bataille estimates that by 2030, the carbon intensity of steel and cement could be reduced by 30%, and the technology will have developed such that new facilities could be net-zero carbon by 2035.

3. Incentivize electrification of light manufacturing: Light manufacturing has been reducing its energy use over the last several years and increasing electrification. There is an opportunity to accelerate this process and reduce GHGs quickly by creating a financial incentive for facilities to convert from natural gas to electricity, making them more efficient and competitive and securing jobs. The federal government could help spur investment by the private sector in technologies like heat pumps with a time-limited investment tax credit of 50% for the purchase and installation of equipment that eliminates the use of natural gas. To attract the facilities that manufacture this equipment to Canada, such as heat pump manufacturers, the federal government could extend this investment tax incentive for new heat-pump manufacturing facilities located here.

4. Incentivize new circular, zero-waste facilities: In addition to setting the policy and procurement framework to help drive the transition to a circular, zero-waste economy, the federal government can help attract new businesses and technologies to Canada to take advantage of the market. To accelerate these new investments, the federal government could offer an investment tax incentive, similar to what was used to spur solar investment in the U.S., for businesses that want to set up in provinces that have established a policy framework that creates the right conditions for a circular economy (including the phase-in of harmonized EPR and bans along the lines of Nova Scotia, which has among the best diversion rates in the country).

Smart, dynamic policies can help us build back better by accelerating the circular economy, electrifying light industry and decarbonizing heavy industry – moves that will help us build a resilient foundation to strengthen Canada’s manufacturing sector for a thriving 21st-century low-carbon economy.

Ralph Torrie is senior associate with Sustainability Solutions Group and partner at Torrie Smith Associates.

Toby Heaps is the CEO and co-founder of Corporate Knights.

With files from Céline Bak.

Notice to reader: Please be aware some of the figures and other details in this white paper have been updated in the Final Report to reflect feedback.

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