After years as nuclear powerhouse, France makes play in offshore wind

This image, from Sept. 2022, shows French President Emmanuel Macron speaking with workers on board a boat during a visit to the Saint-Nazaire Offshore Wind Farm.

Stephane Mahe | AFP | Getty Images

A facility described as “France’s first commercial-scale offshore wind project” is fully operational, multinational utility EDF said this week.

The news represents a significant step forward for the country’s offshore wind sector, with more projects set to come online in the years ahead.

In a statement Wednesday, EDF said the 480-megawatt Saint-Nazaire Offshore Wind Farm would help to “support the French State’s energy transition goals, which include targets to generate 32% of its energy from renewable sources by 2030.” EDF’s majority shareholder is the French state.

Located in waters off the south west coast of France, the Saint-Nazaire project consists of 80 turbines. Its first electricity was generated in June 2022.

Looking ahead, EDF said the wind farm would “supply the equivalent of the consumption of 700,000 people with electricity every year.”

Read more about energy from CNBC Pro

While the Saint-Nazaire project represents a significant shot in the arm for France’s nascent offshore wind sector, the country has for decades been something of a powerhouse when it comes to nuclear.

According to the World Nuclear Association, France is home to 56 operable reactors. “France derives about 70% of its electricity from nuclear energy,” it adds.

In wind power, the country has an established onshore sector. Its offshore industry is by contrast miniscule, with a cumulative capacity of just 2 MW in 2021, according to figures from industry body WindEurope.

This is set to change in the coming years. “Offshore installations are finally set to take off as of 2022, and we expect 3.3 GW of offshore wind installations from now until 2026,” WindEurope’s Wind Energy in Europe report, which was published in Feb. 2022, said.

In a statement, EDF Renewables’ CEO Bruno Bensasson expressed pride in commissioning what he called “France’s first industrial offshore wind farm.”

“Over the past 10 years, this project has contributed to the construction of the offshore wind power industry in France and has mobilized a significant number of jobs during construction and now in the operating phase,” he later added.

Renault plans to harness geothermal energy and help heat plant

A Renault logo photographed in Bavaria, Germany. The French automotive giant says it’s targeting carbon neutrality in Europe by 2040 and globally by 2050.

Igor Golovniov/Sopa Images | Lightrocket | Getty Images

The Renault Group is working with French utility Engie on the development of a geothermal energy project at the automaker’s Douai facility, with the collaboration set to last 15 years.

In a statement, Renault said Thursday a subsidiary of Engie would start drilling work at Douai — which was established in 1970 and focuses on bodywork assembly — in late 2023.

The plan centers around taking hot water from a depth of 4,000 meters, or more than 13,100 feet.

According to Renault, this water will be used to help meet the Douai site’s “industrial and heating process needs from 2025.” The temperature of the water will be between 130 and 140 degrees Celsius.

“Once implemented, this geothermal technology would provide a power of nearly 40 MW continuously,” the company said.

“In summer, when the need for heat is lower, geothermal energy could be used to produce carbon-free electricity,” it added.

Read more about energy from CNBC Pro

The Renault Group’s CEO, Luca de Meo, described the program planned for Douai as “one of the most ambitious decarbonisation projects on a European industrial site.”

According to the International Energy Agency, geothermal energy refers to “energy available as heat contained in or discharged from the earth’s crust” which can be utilized to produce electricity and provide direct heat.

Elsewhere, the U.S. Department of Energy says geothermal energy “supplies renewable power around the clock and emits little or no greenhouse gases.”

News about Renault’s geothermal project with Engie was accompanied by details of other projects centered around decarbonizing operations at a number of the automotive giant’s industrial facilities.

Looking at the bigger picture, Renault says it’s targeting carbon neutrality in Europe by the year 2040 and globally by 2050.

Despite these aims, a top executive at the firm recently told CNBC that the firm saw the internal combustion engine as continuing to play a crucial role in its business over the coming years.

Earlier this month, it was announced the Renault Group and Chinese firm Geely had signed a non-binding framework agreement to establish a company focused on the development, production and supply of “hybrid powertrains and highly efficient ICE [internal combustion engine] powertrains.”

Speaking to CNBC’s Charlotte Reed, Renault Chief Financial Officer Thierry Pieton sought to explain some of the reasoning behind the planned partnership with Geely.

“In our view, and according to all the studies that we’ve got, there is no scenario where ICE and hybrid engines represent less than 40% of the market with a horizon of 2040,” he said. “So it’s actually … a market that’s going to continue to grow.”

Read more about electric vehicles from CNBC Pro

Renault’s continued focus on the internal combustion engine comes at a time when some big economies are looking to move away from vehicles that use fossil fuels.

The U.K., for example, wants to stop the sale of new diesel and gasoline cars and vans by 2030. It will require, from 2035, all new cars and vans to have zero tailpipe emissions.

The European Union, which the U.K. left on Jan. 31, 2020, is pursuing similar targets. Over in the United States, California is banning the sale of new gasoline-powered vehicles starting in 2035.

Offshore floating desalination plant aims to produce drinking water from the ocean

Ocean Oasis’ Gaia system has been designed to use wave power to desalinate water.

Ocean Oasis

Plans to use marine energy to desalinate water received a further boost this week, after a Norwegian firm presented a system that will be put through its paces in waters off Gran Canaria.

In a statement Monday, Oslo-headquartered Ocean Oasis said its wave-powered prototype device, which it described as being an “offshore floating desalination plant,” was called Gaia.

The plant — which has a height of 10 meters, a diameter of 7 meters and weighs roughly 100 tons — was put together in Las Palmas and will undergo testing at the Oceanic Platform of the Canary Islands.

Ocean Oasis said its technology would enable “the production of fresh water from ocean waters by harnessing the energy of the waves to carry out a desalination process and pump potable water to coastal users.”

Read more about energy from CNBC Pro

The company said the development of its prototype had received financial backing from a range of organizations including Innovation Norway and the Gran Canaria Economic Promotion Society.

The main investor in Ocean Oasis is Grieg Maritime Group, which is headquartered in Bergen, Norway.

Desalination

Stock picks and investing trends from CNBC Pro:

With the above in mind, projects looking to desalinate water in a more sustainable way will become increasingly important in the years ahead.

The idea of using waves to power desalination is not unique to the project being undertaken in the Canaries. In April, for example, the U.S. Department of Energy revealed the winners of the last stage of a competition focused on wave-powered desalination.

Back on the Canary Islands, Ocean Oasis said it would be looking to construct a second installation after testing at the PLOCAN facility had taken place. “In this phase, the prototype will be scaled with the capacity to produce water for consumption,” the company said.

While there is excitement about the potential of marine energy, the footprint of wave and tidal stream projects remains very small compared to other renewables.

In data released in March 2022, Ocean Energy Europe said 2.2 megawatts of tidal stream capacity was installed in Europe last year, compared to just 260 kilowatts in 2020.

For wave energy, 681 kW was installed, which OEE said was a threefold increase. Globally, 1.38 MW of wave energy came online in 2021, while 3.12 MW of tidal stream capacity was installed.

By way of comparison, Europe installed 17.4 gigawatts of wind power capacity in 2021, according to figures from industry body WindEurope.

China played a great game on lithium and we’ve been slow to react: CEO

This image, from March 2021, shows a worker with car batteries at a facility in China.

STR | AFP | Getty Images

China is leading the way when it comes to lithium — and the rest of the world has not been quick enough to respond to its dominance, according to the CEO of American Lithium.

Speaking to CNBC’s “Squawk Box Europe” Monday, Simon Clarke discussed how China had secured its position of strength within the industry.

“I just think the Chinese have — I mean you have to take your hat off, they’ve played a great game,” he said.

“For decades, they’ve been locking up some of the best assets across the world and quietly going about their business and developing knowledge on building lithium-ion technology, soup to nuts,” he added. “And we’ve been very slow to react to that.”

He added that the U.S.’ Inflation Reduction Act, and a number of other measures, meant people were “starting to wake up to it.”

Alongside its use in cell phones, computers, tablets and a host of other gadgets synonymous with modern life, lithium — which some have dubbed “white gold” — is crucial to the batteries that power electric vehicles.

Read more about China from CNBC Pro

China is certainly a dominant force within the sector.

In its World Energy Outlook 2022 report, the International Energy Agency said the country accounted for roughly 60% of the world’s lithium chemical supply. China also produces three-quarters of all lithium-ion batteries, according to the IEA.

With demand for lithium rising, major economies are attempting to shore up their own supplies and reduce dependency on other parts of the world, including China.  

The stakes are high. In a translation of her State of the Union speech, delivered in September, European Commission President Ursula von der Leyen said “lithium and rare earths will soon be more important than oil and gas.”

As well as addressing security of supply, von der Leyen also stressed the importance of processing.

“Today, China controls the global processing industry,” she said. “Almost 90% … of rare earth[s] and 60% of lithium are processed in China.”

Read more about electric vehicles from CNBC Pro

With the above in mind, a number of companies in Europe are looking to develop projects centered around securing supply.

Paris-headquartered minerals giant Imerys, for example, plans to develop a lithium extraction project in the center of France, while a facility described as the U.K.’s first large-scale lithium refinery is set to be located in the north of England.

Looking ahead, American Lithium’s Clarke forecast continued geopolitical competition within the sector.

“There’s a real initiative to wrest back some of the supply chain from … China,” he said.

“I think China is in such a dominant position, it’s going to be very hard to do that. But … I think you’re starting to see that approach happening.”

‘Indiscriminate use of hydrogen’ could slow energy transition: Report

Hydrogen has a diverse range of applications and can be deployed in a wide range of industries.

Aranga87 | Istock | Getty Images

Hydrogen use by the G-7 could jump by four to seven times by the middle of this century compared to 2020 in order to “satisfy the needs of a net-zero emissions system,” according to a new report from the International Renewable Energy Agency.

In a foreword to the report, IRENA Director-General Francesco La Camera said it had “become clear that hydrogen must play a key role in the energy transition if the world is to meet the 1.5 °C target of the Paris Agreement.”

Despite this assertion, IRENA’s analysis — which was published on Wednesday, during the COP27 climate change summit in Egypt — paints a complex overall picture that will require a delicate balancing act going forward.

Among other things, it noted that “despite hydrogen’s great potential, it must be kept in mind that its production, transport and conversion require energy, as well as significant investment.”

“Indiscriminate use of hydrogen could therefore slow down the energy transition,” it added. “This calls for priority setting in policy making.”

Read more about electric vehicles from CNBC Pro

The first of these priorities, IRENA said, related to the decarbonization of “existing hydrogen applications.” The second centered around using hydrogen in “hard-to-abate applications” like aviation, steel, shipping and chemicals.

The energy transition can broadly be seen as a shift away from fossil fuels to a system dominated by renewables. Given that it depends on a multitude of factors – from technology and finance to international cooperation – how the transition pans out remains to be seen.

A spokesperson for Hydrogen Europe, an industry association, told CNBC that IRENA was “correct that the deployment of large-scale infrastructure and energy production require large-scale investments, and it is true that it requires energy to produce, store and transport hydrogen.”

The spokesperson said Hydrogen Europe agreed “that any development of hydrogen-related projects should be done responsibly and that certain use applications should be prioritised over others.”

“On how to prioritise, we believe this should be done as much as possible through market instruments that properly value the CO2 emission savings and other aspects (like security of supply), so that consumers can make informed choices,” they added.

A “top-down dogmatic restriction of certain sectors,” such as hydrogen for heating, should be avoided, they said.

Hopes for hydrogen

Described by the International Energy Agency as a “versatile energy carrier,” hydrogen has a diverse range of applications and can be deployed in a wide range of industries.

It can be produced in a number of ways. One method includes electrolysis, with an electric current splitting water into oxygen and hydrogen.

If the electricity used in this process comes from a renewable source such as wind or solar then some call it “green” or “renewable” hydrogen. Today, the vast majority of hydrogen generation is based on fossil fuels.

In a statement published alongside its report, IRENA said the G-7’s goal of net-zero emissions by the middle of this century would “require a significant deployment of green hydrogen.”

Read more about energy from CNBC Pro

Over the past few years, major economies and businesses have looked to tap into the emerging green hydrogen sector in a bid to decarbonize the way sectors integral to modern life operate.

During a roundtable discussion at COP27 last week, German Chancellor Olaf Scholz described green hydrogen as “one of the most important technologies for a climate-neutral world.”

“Green hydrogen is the key to decarbonizing our economies, especially for hard-to-electrify sectors such as steel production, the chemical industry, heavy shipping and aviation,” Scholz added, before acknowledging that a significant amount of work was needed for the sector to mature.

“Of course, green hydrogen is still an infant industry, its production is currently too cost-intensive compared to fossil fuels,” he said.

“There’s also a ‘chicken and egg’ dilemma of supply and demand where market actors block each other, waiting for the other to move.”

Also appearing on the panel was Christian Bruch, CEO of Siemens Energy. “Hydrogen will be indispensable for the decarbonization of … industry,” he said.

“The question is, for us now, how do we get there in a world which is still driven, in terms of business, by hydrocarbons,” he added. “So it requires an extra effort to make green hydrogen projects … work.”

Green hydrogen could help us cut our carbon footprint, if it overcomes some big hurdles

Energy transition will fail unless wind power fixes problems: CEO

Wind turbine blades photographed at a Siemens Gamesa facility in Hull, England, in January 2022.

Paul Ellis | AFP | Getty Images

The CEO of Siemens Energy on Wednesday argued that the energy transition would fail unless his industry addressed a number of issues currently facing the wind power sector.

In an interview with CNBC’s “Squawk Box Europe,” Christian Bruch said his firm was “in the heart of the energy transition” but noted that there were “challenges in wind” especially when it came to supply chains.

“Never forget, renewables like wind roughly, roughly, need 10 times the material [compared to] … what conventional technologies need,” he said.

“So if you have problems on the supply chain, it hits … wind extremely hard, and this is what we see.”

“And this, unfortunately, obviously, leads to the situation [where] … it impacts the overall group results substantially.”

Read more about energy from CNBC Pro

On Wednesday, Siemens Energy said its “overall performance” had been “held back by the negative development at Siemens Gamesa Renewable Energy,” a wind turbine manufacturer in which it has a majority stake.

In a statement, Siemens Energy said its adjusted earnings before interest, taxes, and amortization — and special items — had fallen to 379 million euros (around $393.8 million) compared to 661 million euros for the 2021 fiscal year.

“While Gas and Power benefited from its turnaround plan and saw adjusted EBITA rise sharply, the increase was more than offset by a wider loss at SGRE,” it added. This was “due to difficulties in the ramp-up of the 5.X onshore platform as well as supply chain delays.”

Siemens Energy posted a net loss of 647 million euros against a 560 million euro loss in the previous year but also reported a record order backlog of 97.4 billion euros.

“Due to the widening loss, and the challenges facing the company now and in the coming year, the executive board of Siemens Energy will suggest to the Supervisory Board not to propose a dividend for 2022 at its annual shareholder meeting in February 2023,” it added.

New management has been installed at SGRE — which has faced a period of turbulence — and Siemens Energy on Wednesday also referenced its announcement in May of a “voluntary cash tender offer to acquire all outstanding shares in SGRE.”

Overall, Bruch appeared optimistic about Siemens Gamesa’s prospects. “I think we have seen now that we have initiated all the relevant measures, and with Jochen Eickholt [SGRE’s new CEO], have a person on board who is step after step, tackling the different elements going forward.”

“And I’m confident that we can tap into this mid-term and long-term fantastic potential of wind, which is there,” he said. “And to be crystal clear, [the] energy transition without wind energy does not work.”

‘No option but to fix it’

Despite this positive outlook, Bruch noted that several issues facing the sector would need to be ironed out. There was, he argued, “still a way to go” when it came to the wind industry maturing.

“How do you manage that business, how do you manage long-term risk,” he said.

“And also — between our customers, the operators and ourselves — how do you distribute risk along the supply chain in a world which is much more volatile, much more difficult, much more multilateral than before.”

There were, he explained, certain areas that the industry needed to fix itself, including sourcing and supply chains.

“And there are certain elements where the market needs to fix certain things,” he added.

This included shortening approval times for projects and distributing risk between operators, who were making “good profits”, and equipment suppliers.  

These were the “discussions which we will need to have over the course of the next 12 months to drive this business forward.”

“But there’s no question — if we don’t resolve it as an industry, we are missing a substantial part of the energy transition, and we’ll fail with the energy transition. So there’s no option but to fix it.”

First Solar selects Alabama for new factory as IRA prompots boom

A worker builds frames for solar panels at First Solar in Perrysburg, Ohio July 8, 2022.

Megan Jelinger | Reuters

First Solar said Wednesday that it has selected Alabama as the site for its fourth U.S. solar panel manufacturing facility, after the Inflation Reduction Act and its incentives for domestic manufacturing encouraged companies to onshore production.

First Solar will spend around $1.1 billion on the facility in North Alabama’s Lawrence County. The company announced plans for a new facility in August, but hadn’t yet disclosed the location. First Solar CEO Mark Widmar previously told CNBC that the Inflation Reduction Act was the key catalyst that led First Solar to choose the U.S. for its latest factory.

related investing news

Enphase could continue rallying as optimism around the solar energy sector grows, Deutsche Bank says

CNBC Pro
Enphase could continue rallying as optimism around the solar energy sector grows, Deutsche Bank says

The new facility will produce 3.5 gigawatts of solar modules annually by 2025. The company said the site will create more than 700 new jobs. 

All told, First Solar plans to manufacture more than 10 gigawatts of solar modules by 2025. The company’s other three facilities – one of which is slated to come online during the first half of 2023 – are in Ohio. With the latest Alabama factory announcement, First Solar said it’s invested more than $4 billion in U.S. manufacturing.

“The passage of the Inflation Reduction Act of 2022 has firmly placed America on the path to a sustainable energy future,” First Solar’s Widmar said in a statement Wednesday. 

“This facility, along with its sister factories in Ohio, will form part of the industrial foundation that helps ensure this transition is powered by American innovation and ingenuity,” he added.

The U.S. solar industry now stands at around 126.1 GW, which is enough to power 22 million homes, according to the Solar Energy Industries Association. During the first quarter of this year the country added 3.9 GW of solar capacity, according to SEIA.

First Solar is the largest U.S.-based panel manufacturer, and focuses on utility-scale panels. Shares of First Solar hit their highest level since April 2011 on Wednesday after the IRA reignited interest in renewable energy companies. Still, the company has faced some recent headwinds as rising rates prompt investors to rotate out of growth-oriented areas of the market.

But First Solar has held its gains, outperforming other solar stocks and the market broadly. Shares of the Arizona-based company have advanced more than 80% this year. By comparison, the S&P 500 is down 17% this year while the Invesco Solar Fund has added 6%.

Other solar companies, including SolarEdge and Enphase Energy, have said they are exploring manufacturing in the U.S. following the climate bill. Elsewhere in clean energy, battery maker Freyr and lithium miner Piedmont Lithium are among the companies that have announced new facilities.

The ‘world’s largest floating wind farm’ produces its first power

Offices of Equinor photographed in Feb. 2019. Equinor is one of several companies looking at developing floating wind farms.

Odin Jaeger | Bloomberg | Getty Images

A facility described as the world’s largest floating wind farm produced its first power over the weekend, with more turbines set to come online before the year is out.

In a statement Monday, Norwegian energy firm Equinor — better known for its work in the oil and gas industry — said power production from Hywind Tampen’s first wind turbine took place on Sunday afternoon.

While wind is a renewable energy source, Hywind Tampen will be used to help power operations at oil and gas fields in the North Sea. Equinor said Hywind Tampen’s first power was sent to the Gullfaks oil and gas field.

“I am proud that we have now started production at Hywind Tampen, Norway’s first and the world’s largest floating wind farm,” Geir Tungesvik, Equinor’s executive vice president for projects, drilling and procurement, said.

“This is a unique project, the first wind farm in the world powering producing oil and gas installations.”

Read more about energy from CNBC Pro

Hywind Tampen is located around 140 kilometers (86.9 miles) off the coast of Norway, in depths ranging from 260 to 300 meters.

Seven of the wind farm’s turbines are slated to come on stream in 2022, with installation of the remaining four taking place in 2023. When complete, Equinor says it will have a system capacity of 88 megawatts.

Alongside Equinor, the other companies involved in the project are Vår Energi, INPEX Idemitsu, Petoro, Wintershall Dea and OMV.

Equinor said Hywind Tampen was expected to meet around 35% of the Gullfaks and Snorre fields’ electricity demand. “This will cut CO2 emissions from the fields by about 200,000 tonnes per year,” the company added.

The use of a floating wind farm to help power the production of fossil fuels is likely to spark some controversy, however.

Fossil fuels’ effect on the environment is considerable and the United Nations says that, since the 19th century, “human activities have been the main driver of climate change, primarily due to burning fossil fuels like coal, oil and gas.”

Speaking at the COP27 climate change summit in Sharm el-Sheikh, Egypt, last week, the U.N. Secretary General issued a stark warning to attendees.

“We are in the fight of our lives, and we are losing,” Antonio Guterres said. “Greenhouse gas emissions keep growing, global temperatures keep rising, and our planet is fast approaching tipping points that will make climate chaos irreversible.”

An emerging industry

Equinor said the turbines at Hywind Tampen were installed on a floating concrete structure, with a joint mooring system. One advantage of floating turbines is that they can be installed in deeper waters than fixed-bottom ones.

Back in 2017, Equinor started operations at Hywind Scotland, a five-turbine, 30 MW facility it calls the world’s first floating wind farm.

Since then, a number of major companies have made moves in the sector.

In Aug. 2021, RWE Renewables and Kansai Electric Power signed an agreement to assess the feasibility of a “large-scale floating offshore wind project” in waters off Japan’s coast.

In Sept. of that year, Norwegian company Statkraft announced a long-term purchasing agreement relating to a 50 MW floating wind farm — which it has also dubbed the “world’s largest” — off the coast of Aberdeen, Scotland.

And a few months later, in Dec. 2021, plans for three major offshore wind developments in Australia — two of which are looking to incorporate floating wind tech — were announced.

Earlier this year, meanwhile, the White House said it was targeting 15 gigawatts of floating offshore wind capacity by the year 2035.

“The Biden-Harris Administration is launching coordinated actions to develop new floating offshore wind platforms, an emerging clean energy technology that will help the United States lead on offshore wind,” a statement, which was also published by U.S. Department of the Interior, said at the time.

As well as the 15 GW ambition, a “Floating Offshore Wind Shot” aims to reduce the costs of floating technologies by over 70% by the year 2035.

“Bringing floating offshore wind technology to scale will unlock new opportunities for offshore wind power off the coasts of California and Oregon, in the Gulf of Maine, and beyond,” the statement added.

How wind power is leading America's energy transition

‘We are not acting swiftly enough’: Ex-Obama advisor on COP27

We are not acting swiftly enough on climate change, former Obama advisor says

The COP27 climate conference represents an opportunity to move forward, but a significant ramping up of efforts will be required in the years ahead, according to a former special assistant to President Barack Obama.

Speaking at CNBC’s Sustainable Future Forum last week, Alice Hill was asked if she was optimistic or very concerned about the pace of change.  

“Very concerned — we are not acting swiftly enough, and the impacts and the danger [are] … overtaking our efforts,” Hill, who is now a senior energy fellow at the Council on Foreign Relations, told CNBC’s Steve Sedgwick.

COP27, which is being held in Sharm el-Sheikh, Egypt, is taking place at a time of significant global volatility. War, economic challenges and the Covid-19 pandemic are all casting long shadows over its proceedings.

During her interview with CNBC, it was put to Hill that climate change often slipped down the pecking order compared to other global challenges and events.

It was a viewpoint she seemed to align with. “Climate change has suffered from the problem that I learned in the White House,” she said.

“When I worked in the White House, [it] quickly became apparent that the urgent would overtake the important,” she added. “Of course, climate change is now urgent.”

Read more about energy from CNBC Pro

Despite this urgency, she noted that the war in Ukraine, tensions between the U.S. and China and other geopolitical strains were tending to “overshadow the need to work on and continue to drive progress towards addressing climate change.”

This had, she argued, “really been the state of play since scientists first raised these alarms decades ago.”

There is a significant amount riding on the negotiations taking place in Egypt.

On Monday, the United Nations secretary general issued a stark warning, telling attendees at COP27 that the world was losing its fight against climate change. “We are in the fight of our lives, and we are losing,” Antonio Guterres said.

At the Sustainable Future Forum, Hill was asked about the best scenario she could realistically see coming out of COP27.

“That we have further progress on the methane pledge,” she said, in an apparent reference to the commitment on cutting methane emissions made at COP26 last year.

Her other hopes for COP27 included getting “serious commitments, or improvements in commitments” when it came to financing for the developing world; and better addressing the issue of loss and damage.  

Despite the above, Hill ended on a note of caution.

There were “a lot of opportunities for really significant steps forward,” she said, “but I’m afraid this COP won’t offer us that kind of transformational leap forward that this problem cries out for — and deserves — in order to keep the globe safe.”

Taxation is a blunt instrument, IATA chief Willie Walsh says

IATA: Environmental taxes are a 'blunt instrument' to provide a sustainable footprint in aviation

The aviation industry requires more carrot and less stick going forward to become more sustainable, according to the director general of the International Air Transport Association.

Speaking at CNBC’s Sustainable Future Forum on Friday, Willie Walsh was asked if subsidies and tax breaks to encourage investments into cleaner energy were more effective than firms or consumers being taxed for emitting higher levels of carbon.

“Quite honestly, all of the evidence that we have available shows that the carrot is far more effective than the stick,” Walsh replied.

Expanding on his point, Walsh went on to describe taxation as being “a very blunt instrument — in many cases, actually, it would make our industry less efficient.”

Read more about energy from CNBC Pro

“I don’t think it would stop the number of planes flying, it would definitely reduce the number of people flying on the planes,” he added. “And that would be a silly thing to do.”

“What we need to do is to ensure that our planes are more full rather than less full, and to provide incentives to produce sustainable aviation fuels which will make a genuine impact on the environmental footprint of aviation.”

The European Union is currently looking to revise its energy taxation directive. Among other things, this would see both maritime and aviation fuels taxed. 

Net-zero goals

In Oct. 2021, IATA member airlines passed a resolution “committing them to achieving net-zero carbon emissions from their operations by 2050.”

Given the fact it’s a crucial cog in the global economy, conversations about aviation and its effect on the environment will undoubtedly take place at the COP27 climate change conference being held in Sharm el-Sheikh, Egypt.

This is because despite its importance, aviation has been described by the World Wildlife Fund as “one of the fastest-growing sources of the greenhouse gas emissions driving global climate change.”

The WWF also says air travel is “currently the most carbon intensive activity an individual can make.”

During his appearance at the Sustainable Future Forum, IATA’s Walsh was asked how difficult it was for the airline industry to decarbonize compared to others.

Read more about electric vehicles from CNBC Pro

“It’s very difficult … we account for about 2.4% of manmade CO2 today,” he said.

“We recognise however, as other industries decarbonize — and for many of them there are relatively simple pathways to decarbonization — our contribution will increase, because we will continue to be dependent on kerosene to power our aircraft,” he added.

“Now, technology will provide some solutions but … we’re not prepared to depend on something being developed in the future, we recognize we have to do something now.”

“So for us, the key to our goal is the use of sustainable aviation fuels — the science there is proven.”

“What we’ve got to do is turn what is very low levels of production of sustainable fuels into widespread availability.”

This, Walsh argued, represented a real opportunity not only for the industry but “countries around the world to start producing a sustainable jet fuel.”

Such a move would “address the environmental issues but … also create jobs.”

Gatherings like COP27 'are hugely important,' aviation CEO says

The overarching idea behind sustainable aviation fuels is that they can be used to reduce an aircraft’s emissions.

In terms of content, aircraft maker Airbus has described SAF as being “made from renewable raw material.” It’s stated that the most common feedstocks “are crops based or used cooking oil and animal fat.”

There are major concerns in some quarters that an increased uptake of SAF could, among other things, result in significant deforestation and create a squeeze on crops crucial to the production of food, an issue Walsh touched upon earlier this year.

Back at the Sustainable Future Forum, Walsh struck an optimistic tone about his sector’s prospects going forward, whilst acknowledging that work lay ahead.

“I think the fact that we are committed to net zero by 2050 is important, but demonstrating that we have a credible pathway to … net zero is equally important,” he said.

“And people are beginning to recognize that through sustainable aviation fuels and other initiatives … we can achieve that clear goal.”