SAF Global bio aviation fuel analysis

一、 Introduction

With the increasing global attention to climate change and the growing demand for sustainable development in the economy and society, the international community's call for carbon reduction in the aviation industry is growing. Institutions such as the International Civil Aviation Organization (ICAO) and the International Air Transport Association (IATA) have put forward goals and implementation paths for carbon reduction in the aviation industry, which is facing increasingly severe carbon reduction pressure. Under the "dual carbon" goal, the Civil Aviation Administration of China has explicitly stated in the "14th Five Year Plan for Green Development of Civil Aviation" to develop sustainable aviation fuels. On April 6, 2023, witnessed by the heads of state of China and France, China Aviation Fuel and Airbus signed a cooperation agreement on sustainable aviation fuel supply, accelerating the pace of carbon reduction in the aviation industry. The key to carbon reduction in the aviation industry lies in the greening of aviation fuel. Bio aviation fuel, with its relatively mature technology, abundant raw materials, good adaptability to existing aviation engines, and the ability to achieve zero carbon emissions throughout its entire lifecycle, has become the largest commercial and promising green aviation fuel variety. In recent years, its industry has achieved rapid development under the promotion of low-carbon development concepts. The development of bio aviation oil has a history of more than 10 years, and its commercial applications are becoming increasingly widespread. There is still little research on it from an industrial perspective in China. This article conducts research on the bio aviation oil industry, analyzes its industrial structure and influencing factors, and proposes suggestions for the development of China's bio aviation oil industry.

二、Bio aviation oil and its industrial development history
In 2019, greenhouse gas emissions from the aviation industry accounted for 1.8% of global emissions (approximately 1.06 billion tons of carbon dioxide) and 2.5% to 3% of total emissions. According to the International Air Transport Association, without carbon reduction measures, greenhouse gas emissions from the aviation industry will account for 22% of global emissions by the middle of this century. The combustion of aviation fuel accounts for about 79% of the total emissions, and the replacement of traditional fossil fuels with Sustainable Aviation Fuel (SAF) is the key to reducing carbon emissions. Electric, hydrogen powered aircraft, and aircraft fueled by bio based aviation fuel can all significantly reduce carbon emissions. However, from the current level of technology, the large-scale commercial application of electric and hydrogen powered aircraft is not yet mature. Bio based aviation fuel, with its wide sources, basic characteristics similar to fossil aviation fuel, and no need to modify engines, has the most commercial prospects at present. The term SAF currently refers to bio based aviation fuel. Bio aviation fuel is an aviation fuel produced from various animal and plant oils or other biomass materials using hydrogenation and deoxygenation technologies. From the perspective of raw material production, aviation fuel refining, and the entire life cycle of use, it can reduce greenhouse gas emissions by more than 80% compared to fossil aviation fuel, and does not require changes to aircraft and airport infrastructure. The International Civil Aviation Organization, International Air Transport Association and other organizations have regarded the large-scale use of bio aviation fuel as a powerful measure for reducing carbon emissions in the aviation industry. Biological aviation oil has gone through a long stage of experimentation and development from laboratory to commercial. On October 7, 2011, Thompson Airlines successfully launched the first "gutter oil flight" originating from a UK airport, which can be regarded as the first commercial application of bio aviation oil. The development of the bio aviation fuel industry can be divided into two periods: before and after global attention to carbon reduction in the aviation industry.
In the first period (2011-2016), the driving force of bio aviation fuel was in Europe, mainly through experimental commercial flights. Starting from January 1, 2012, the European Union included the civil aviation sector in its carbon emissions trading system through the imposition of an aviation carbon tax. Although this approach has been strongly opposed by the international community, violating the Framework Convention on Climate Change and the Kyoto Protocol that regulate climate change, as well as the Chicago Convention that regulates civil aviation, it still serves as a warning that the world is gradually realizing the inevitable trend of decarbonization in the aviation industry and has turned its attention to the experimental application of bio aviation fuel. The United States, the Netherlands, China, and other countries have successively carried out experimental production and flight of bio aviation fuel. However, during this period, the bio aviation fuel market has not yet been established, and various manufacturers are still conducting experimental research and production. Airlines are also conducting experimental flights, and the bio aviation fuel industry is still in its infancy. In the second period (2016 present), the development of bio aviation oil was still driven by Europe, but the initiative of commercial application in various countries around the world has generally increased. In 2016, the International Civil Aviation Organization proposed the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). This is the first global industry market emission reduction mechanism, and it is explicitly stated that this mechanism will be mandatory from 2027 onwards. On the demand and usage side, airlines are implementing policies such as carbon emissions tightening, subsidy incentives, and their own efforts in environmental, social, and corporate governance Governance， Under the requirements of ESG, accelerate the use of bio aviation fuel to reduce carbon emissions. Companies such as Continental Airlines, Lufthansa, KLM Royal Dutch Airlines, and All Nippon Airways have increased their procurement and use of bio based aviation fuel; Some airports have proposed the concepts of "low-carbon airports" and "near zero carbon airports" in order to reduce carbon emissions.

On the production and supply side, in order to meet the growing demand for bio aviation oil and seize the market, traditional oil producers and emerging enterprises are accelerating their investment and layout in the bio aviation oil industry, continuously increasing the production of bio aviation oil to meet market demand. BP, Royal Dutch Shell, Total, NESTE, SKYNRG, PetroChina, Sinopec, and Sany Environmental Protection have all increased their research and development, investment, and production of bio aviation oil to seize this promising green energy market. During this period, the technological route of bio aviation fuel continued to innovate, the range of raw materials continued to expand, and the production and consumption levels continued to rise. The bio aviation fuel industry entered a rapid development stage.

三、Analysis of the Supply and Demand Pattern of Bio aviation Fuel 

After more than 10 years of development, the global bio aviation oil has gradually formed a unique supply and demand pattern different from traditional fossil aviation oil. In terms of total volume, the consumption and production of bio aviation fuel worldwide have been increasing year by year. The consumption was approximately 25 million liters in 2019, 63 million liters in 2020, 100 million liters in 2021, and 300 million liters in 2022; The production volume was approximately 50 million liters in 2019, 125 million liters in 2020, 150 million liters in 2021, and over 300 million liters in 2022. From the data of total supply and demand, firstly, the production and consumption of bio aviation oil have grown rapidly, and secondly, with the continuous tightening of carbon reduction policies in the aviation industry, the pattern of supply and demand has shifted from loose to tight. The International Air Transport Association stated that in 2022, "airlines have exhausted every drop of SAF produced. However, it is worth noting that due to the sharing of raw materials and process facilities between bio aviation oil and second-generation biodiesel, the production capacity of Hydrogenated Vegetable Oil (HVO) can be considered to some extent as the upper limit of SAF production and supply. Therefore, if HVO production capacity is added, the current broad SAF production and supply capacity still greatly exceeds demand. As biofuel manufacturers continue to invest in the construction, expansion, and renovation of bio aviation oil factories, the production and supply capacity of SAF will far exceed demand in the short term. But if the European Union, the International Civil Aviation Organization, the International Air Transport Association, and governments of various countries increase the mandatory use ratio and requirements for bio based aviation fuel, according to the calculation data of the International Air Transport Association, the current broad SAF production capacity will be far from meeting the demand. From a regional perspective, the current use of bio based aviation fuel is initiated and driven by European airlines, with the vast majority of bio based aviation fuel usage mainly concentrated in Europe, with a small amount used in the United States. Other regions use it on an experimental basis, such as China where it is limited to trial flights by Air China, China Eastern Airlines, and blended refueling delivered by Airbus aircraft. However, the production and use areas of bio aviation oil do not overlap. Currently, several major production regions have been formed, mainly in Europe, North and South America, Southeast Asia, and China, and a pattern has been formed where products produced in Southeast Asia, China, Brazil, and Argentina are exported to Europe for use.

Structurally speaking, the current commercial production of bio aviation oil mainly adopts the technology route of hydroprocessed esters and fatty acids (HEFA), which is a hydroprocessed lipid and fatty acid fuel. Other technology routes are still being explored due to reasons such as raw materials, yield, and economy. A significant difference between bio aviation oil and traditional fossil aviation oil is that bio aviation oil is divided into different varieties based on the different raw materials, such as SAF produced from rapeseed oil, soybean oil, palm oil, used cooking oil (UCO), etc., and the prices of different SAF are also different. At present, Southeast Asia mainly uses palm oil as raw material, the United States mainly uses soybeans and corn as raw materials, Europe mainly uses rapeseed oil and UCO as raw materials, and China uses UCO as raw material. With global attention to food security, the production of food crops is increasingly constrained, such as palm oil SAF which has been restricted in Europe, and the market for SAF produced by UCO is growing.

四、Analysis of the Structure of the Bio aviation Oil Industry
From the perspective of the bio aviation oil industry chain, the entire industry includes upstream raw material links, midstream production and refining links, and downstream supply and consumption links.
（一） Upstream raw material process
The upstream raw material process of bio aviation oil includes the collection, production, processing, and sales of raw materials. The raw materials of bio aviation oil have the characteristics of non-standard, dispersed, difficult to obtain, and difficult to sustain stable supply. In terms of technical recognition of SAF, the American Society for Testing Materials (ASTM) has developed an industry technical standard numbered ASTMD7566. As of the end of 2022, there are a total of eight mainstream technological routes, with raw material structures covering non edible animal and vegetable oils, animal fats, etc., and gradually transitioning and upgrading towards waste oil and microbial oil with technological iteration. HEFA is currently the mainstream technology route for commercial applications, with raw materials including animal and vegetable oils and kitchen waste oil. 

Under the current technology route dominated by HEFA, the scattered upstream structure gives the raw material market a distinct feature of "tailored to local conditions and decentralized layout". From the perspective of the global raw material market, it is divided into regional markets in Europe, America, Southeast Asia, and China. Each market is mainly related to the stable policy orientation of raw materials and biofuel raw materials in the region. The main raw materials in Europe are rapeseed oil, soybeans in North and South America, and palm oil in Southeast Asia. In China, starting from the policy of "not competing with others for food", the main raw materials are kitchen waste oil. Corresponding to the raw material market with obvious regional characteristics, the entities participating in the upstream market have diverse characteristics. In order to find a consumer market for surplus agricultural products and increase bargaining power, agricultural product companies were the first to participate in the upstream market. For example, in the United States, soybean was used as ethanol gasoline, and in Indonesia and Malaysia, palm oil was used as biodiesel raw material, gradually expanding to provide raw materials for bio aviation fuel.

In order to ensure a stable supply of raw materials, traditional petrochemical companies and biofuel production enterprises have also entered the upstream market. For example, BP, the UK's largest hydrogenated vegetable oil supplier, acquired a 30% stake in GBF in 2022 and signed a 10-year strategic purchase and market development agreement with agricultural and seed company Nufarm to obtain raw material supply for the production of sustainable biofuels. Due to the segmentation of raw materials and production areas, and in order to hedge or profit from fluctuations in crude oil, refined oil, and agricultural product prices, major traders have also joined the upstream raw material market, and futures market entities have indirectly entered this market. In addition, some entities that were not originally involved in this market have also entered this field, such as China's listed company Shangao Huaneng, which has obvious advantages in the domestic kitchen waste oil collection field. By the end of 2022, it had reached a daily collection and processing capacity of about 5000 tons, and Peak Group has also expanded its layout in the kitchen waste oil collection field.
The dispersed characteristics and diverse market participants of the upstream market make its competitive landscape relatively fierce, without forming a monopoly or oligopoly pattern, which is conducive to the bargaining power of the midstream production process over the upstream, but not conducive to the unified and orderly development of the upstream market.

（二） Midstream production refining process 

The production and refining of bio aviation oil is the most critical link in the entire industry chain, determining the technological level and efficiency of the entire industry, and also having decisive significance for the development of upstream raw material markets. It has important constraints on downstream supply and consumption markets in terms of production capacity. 

On the technical route, unlike the mature and stable production technology route already possessed by traditional fossil aviation oil, the production and refining of bio aviation oil presents the characteristics of "multiple technical routes coexisting and HEFA dominating". As mentioned earlier, there are currently 8 mainstream technological routes, which are mainly affected by factors such as stable raw material acquisition, process complexity, output rate, and production line investment, resulting in slow technological development. Currently, the most mature and mainstream commercial application is the HEFA technology route, which is widely used in most of the bio aviation oil factories that have been put into operation or are under construction. The Fischer Tropsch synthesis and alcohol spray synthesis technology routes are also partially applied. The production of bio aviation oil is closely related to biodiesel, and the raw materials used for both are the same. The second-generation biodiesel plant can directly produce bio aviation oil through process extension and parameter adjustment. Therefore, except for some plants dedicated to producing bio aviation oil, many factories can switch between bio diesel and bio aviation oil according to market demand. 

From the perspective of regional layout, in order to balance the convenience of raw material acquisition and product trade and sales, bio aviation oil refineries are mainly distributed in regions such as the Netherlands, Spain, Indiana and Oregon in the United States, Pio í and S ã o Paulo in Brazil, Indonesia, Malaysia, Singapore, China, Japan, and South Korea.

From the perspective of market participants, the refining enterprises of bio aviation oil mainly include emerging biofuel production companies, traditional aviation oil supply companies, and traditional refining companies. After more than a decade of development, a development pattern of "several leading enterprises+a series of local medium-sized enterprises" has been formed globally. Emerging biofuel production companies started early, mostly transitioning from technological research and development breakthroughs to new technologies and processes for production and refining. 

Neste, a Dutch company that originally produced lubricants and chemicals, developed the earliest commercially viable HEFA technology and became a leading company in the industry in just a few years. It also invested in Singapore's largest bio aviation oil refinery with an annual output of 1 million tons. China's Haixin Energy Technology Company (formerly known as Sany Environmental Protection), Jia'ao Environmental Protection, and Zhuoyue New Energy have announced their entry into the field of bio aviation oil, rapidly increasing China's SAF production capacity. 

Traditional aviation fuel companies such as EXOLUM (formerly Spanish Fuel Logistics CLH Company) and WORLD ENERGY (World Fuel Company) in the United States have also extended their layout of bio aviation fuel refining upstream. More and more traditional refining companies are entering the field of bio aviation oil production. TotalEnergies started producing SAF at several refineries located in France in 2021 and 2022. Shell is transforming its refineries to produce SAF and investing globally in bio aviation oil production plants, such as building one of the largest biofuel facilities in Europe to produce SAF at the Shell Energy and Chemical Park in Rotterdam. Sinopec Zhenhai Refining and Chemical, as the first enterprise in China to obtain RSB certification, has completed the construction of a production line with an annual output of 100000 tons of SAF.

（三） Downstream supply and consumption links
The downstream supply and consumption are the main links driving the development of the bio aviation oil industry, including the procurement, transportation, storage, sales, and refueling of bio aviation oil. Like any market-oriented industry, the development of the bio aviation oil industry ultimately relies on consumption.
Aviation oil traders, aviation oil supply companies, airlines, airports, and carbon trading institutions constitute the downstream market entities of bio aviation oil. The broad downstream supply and consumption entities also include individuals who travel by plane. Aviation oil traders and aviation oil supply companies provide bio aviation oil products and fuel supply services to end consumers through oil procurement, trade, and transportation; Airlines are the ultimate consumers, and purchasing fuel products and refueling services from aviation fuel companies is a key entity in downstream processes; The airport company does not directly participate in aviation fuel trading, but will require the proportion of bio aviation fuel added to the airport; Due to the characteristic of Certified Emission Reduction (CER) in the carbon trading framework, the use of bio aviation oil is closely related to carbon trading. Airlines can use the carbon credits generated from the use of bio aviation oil to trade in the carbon market.
Downstream, airlines have absolute say. Currently, due to high costs (the price of bio aviation fuel is generally 2-4 times that of traditional aviation fuel) and limited supply, airlines in various countries have different attitudes towards bio aviation fuel. Among them, European and American airlines are more willing to use bio aviation oil due to carbon reduction requirements and corporate ESG considerations, and it accounts for the vast majority of practical applications. However, emerging markets and other regional airlines have only conducted a small number of test flights and have limited practical applications. For example, China completed its first aviation biofuel verification flight in 2011, but has not used biofuel on a large scale for more than 10 years.
Due to varying levels of practical use of bio based aviation fuel among airlines in different countries, the involvement of downstream aviation fuel companies in providing aviation fuel products and services also differs. The global aviation fuel supply market has always been a pattern of "several multinational supply giants+local supply companies". Generally speaking, due to the semi monopolistic nature of the aviation fuel industry, national oil companies or national aviation fuel companies in each country are responsible for their own domestic aviation fuel supply. However, Shell Aviation, BP Aviation, Total, World Fuel Company, and others rely on their global resources and market advantages to carry out aviation fuel supply around the world. The supply of bio aviation fuel has to some extent disrupted this pattern. Due to the fact that currently only airlines in developed economies such as Europe and America use bio based aviation fuel, which is supplied by European and American aviation fuel companies such as Shell Aviation and BP Aviation, aviation fuel companies in general countries rarely supply it. 

In China, for more than 10 years, China Aviation Fuel Group Co., Ltd. has provided bio aviation fuel supply to several major domestic airlines for trial flights, Tianjin Airbus aircraft delivery, Colorful Guizhou Airlines, etc., but has not yet provided large-scale commercial aviation fuel supply. With the increasing attention paid by various sectors in China to the use of bio aviation fuel, the improvement of bio aviation fuel use will drive the development of related industries.

五、 Analysis of the impact of policies on the bio aviation oil industry
The bio aviation oil industry is significantly influenced by policy drivers. In the early stages of development, compared with the traditional fossil aviation oil industry, although bio aviation oil has the advantages of green environmental protection and sustainable development, its economic viability is far inferior to fossil aviation oil, and it is difficult to rely solely on market cultivation. Therefore, policies are the key driving force for the development of the bio aviation oil industry.
International organizations, the European Union, and relevant countries in the aviation industry have all introduced relevant regulations and incentive policies.
One is that international organizations in the aviation industry have increasingly strict requirements for carbon reduction in the aviation industry. The International Civil Aviation Organization (ICAO) adopted the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) in 2016, and the 41st ICAO Assembly in 2022 adopted the decision to achieve zero carbon targets for the aviation industry by 2050, further clarifying the mandatory requirement for airlines to reduce carbon emissions from 2027 onwards. The International Air Transport Association (IATA) had already adopted emission reduction targets at its annual meeting in Kuala Lumpur in 2008, which aimed to achieve zero growth in carbon emissions starting from 2020; The 77th International Air Transport Association Annual Meeting in October 2021 approved the resolution for the global air transport industry to achieve net zero carbon emissions by 2050. The European Aviation Safety Agency, American Airlines Association A4A, World Air Transport Action Group ATAG, and others have all proposed a net zero target and path for the aviation industry. The mandatory constraints of international organizations have led to a consensus in the global aviation industry on the necessity of carbon reduction. Carbon reduction is no longer an optimization option, but a necessity for development, and more airlines and energy companies are turning to the development of bio aviation oil.
Secondly, the EU was the first to include the aviation industry in the carbon reduction industry. The Second Amendment to the EU Emissions Trading System Directive (2008/101/EC) is the first system specifically regulating aviation carbon emissions, incorporating the aviation industry into the carbon emissions trading mechanism. The amendment requires that from January 1, 2012, regardless of whether the aircraft taking off and landing from EU member states belong to EU countries, the carbon dioxide emitted during the entire flight will be forcibly included in the carbon emission trading system. The total carbon emissions from aviation are subject to quota restrictions, and aircraft exceeding the quota must purchase the excess carbon emissions from the carbon emission trading market. This regulation has alerted the aviation industry to carbon reduction and stimulated the development of bio aviation fuel.
Thirdly, with the increasing global attention to climate change, more and more countries have introduced carbon emission constraint policies for the aviation industry, with the most important aspect being the mandatory use of green aviation fuels. In 2021, the United States returned to the Paris Agreement and proposed to reduce aviation carbon emissions by 20% by 2030. The EU proposed the "Fit for 55" regulation and policy package in July 2021, which aims to reduce the EU's net greenhouse gas emissions by 55% by 2030, gradually eliminate free carbon emission quotas for aviation, and align with the CORSIA program for carbon offsetting and reduction in the international aviation industry. It also proposes that by 2025, the proportion of aircraft bio aviation fuel refueled at EU airports should be 2%, and by 2050, it should be increased to 63%.

At the same time, the EU has re regulated the progressiveness of raw materials for sustainable aviation fuels, such as palm oil. On February 4, 2022, 35 European countries and 146 industry stakeholders signed the Toulouse Declaration in Toulouse, France, outlining specific policies to help the European aviation industry achieve net zero carbon dioxide emissions by 2050. Japan, India, South Korea, Singapore and other countries have set specific targets and pathways for reducing carbon emissions in the aviation industry within the framework of their own zero carbon goals. On the one hand, these policies have boosted the confidence of the main players in the bio aviation fuel market, and on the other hand, they have put forward specific carbon reduction targets for the aviation industry, effectively promoting the development of the bio aviation fuel industry. 

For the sake of national energy security, China started developing bio aviation oil from Sinopec as early as 2006, and the following year, PetroChina also entered the field. But under the policy guidance of emphasizing "not competing with people for food, not competing with food for land", the main raw materials for the development of bio aviation oil in China are kitchen waste oil, gutter oil, etc. In 2020, China proposed the "dual carbon" target, and the "14th Five Year Plan for Green Development of Civil Aviation" proposed a cumulative consumption of 50000 tons of bio aviation fuel over five years, with 20000 tons to be used by 2025. In 2021, the national unified carbon market was established and the aviation industry was included in the carbon reduction industry, accelerating the pace of carbon reduction in China's aviation industry. At the 41st ICAO Conference in 2022, the Chinese government agreed to adopt the decision to achieve zero carbon goals in the aviation industry by 2050 and the CORSIA mechanism. In March 2023, the Civil Aviation Administration of China held the first Civil Aviation Green Exhibition in Weihai, Shandong, further highlighting the commitment and determination of China's aviation industry to green development. The development of the bio aviation oil industry in China has entered a fast lane.

Fourthly, an increasing number of countries are introducing incentive policies to support the development of the bio aviation oil industry. Both European and American countries have introduced policies to encourage the development of the bio aviation fuel industry. For example, since 2004, the United States has introduced a blending tax credit subsidy policy in its employment bill, which provides a $1 tax credit subsidy for every gallon of renewable fuel blended. The EU has proposed the "Multiplier" measure, which means that the "carbon reduction effectiveness" of low-carbon and sustainable fuels can be calculated multiple times to incentivize the use of sustainable fuels. Starting from early 2021, the UK has stipulated that both new and existing SAF projects can apply for a sustainable development fund share of £ 15 million. These incentive measures have further increased the enthusiasm of participants in the bio aviation oil industry. China has not yet introduced any special incentive policies in the field of bio aviation oil, except for the policy of first levying value-added tax on biodiesel and exempting consumption tax.
六、Other important factors affecting the development of the bio aviation oil industry
Due to the long industrial chain of bio aviation fuel, covering different fields such as agricultural products, urban waste, oil products, aviation industry, and environmental protection, its development is also influenced by many other factors.
Firstly, raw materials are a key factor restricting the development of the bio aviation oil industry. The problem of raw materials is mainly reflected in the limited total amount of available raw materials under the current technological path. At present, there are 8 technical routes for preparing bio aviation oil certified by the American Society for Testing and Materials (ASTM). Whether it is alcohol spray synthesis or HEFA, the required raw materials all have problems such as dispersion, small quantity, low calorific value, and difficulty in obtaining sustained stability. Taking the main raw material kitchen waste oil (UCO) used in the current mainstream commercial technology route HEFA as an example, the collection capacity and upper limit of available raw materials are the biggest issues.
Taking China as an example, the production of kitchen waste in 2021 was 121 million tons, with a potential oil content of 5%, corresponding to approximately 6 million tons of waste oil. According to survey data from the National Development and Reform Commission, the available scale of gutter oil has reached 400000 tons per year, and there are still various other forms of waste oil that have not been properly treated. Taking into account factors such as consumption patterns, resource concentration, and collection range, the actual available collection volume is about 8 million tons. However, due to the numerous sources of waste oil production, catering enterprises, hotels, slaughterhouses, unit canteens, and residential kitchens have a large quantity and wide distribution, making centralized collection difficult. Currently, the amount of waste oil collected and utilized in China's catering industry is about 3 million tons (with a utilization rate of less than 40%), and even if all of it is utilized, it is far from the amount of bio aviation fuel raw materials needed for long-term carbon reduction in the aviation industry. At the same time, kitchen waste oil (UCO) is also used in fields such as biodiesel and other products. At present, when the global consumption of bio aviation fuel is still low, the raw materials of bio aviation fuel refineries can still be supplied. Once the demand side increases, the raw materials under the existing technological route will be far from sufficient to meet the production needs.
Secondly, the price of bio aviation fuel has a significant impact on the development of the industry, and there are many factors that affect the price. Currently, the pricing of bio aviation fuel products is influenced both by fluctuations in raw material prices on the cost side and by fossil aviation fuel prices on the sales side, while oil prices affect both raw material and sales prices. When oil prices rise, it generally drives up the prices of palm oil and other oils, putting pressure on the cost of the bio aviation oil industry. At the same time, there may be a deviation between oil prices and fossil aviation oil prices, making it difficult to transfer the increased raw material costs and suppressing the production enthusiasm of bio aviation oil. The high price of fossil fuel will drive up the price of bio fuel, improve the profitability of bio fuel production and supply, and drive industrial development.

At present, in the stage of policy influence and industry expansion, the sensitivity of the bio aviation oil industry to prices is far from obvious. Even in the stage of high raw material prices and low fossil aviation oil prices, bio aviation oil enterprises will increase investment layout and production in order to occupy the market. In theory, there should be a positive correlation between carbon price and the consumption of bio aviation fuel. The higher the carbon price, the more bio aviation fuel should be used to reduce the cost of purchasing carbon sinks. However, companies will compare the carbon price with the additional cost of bio aviation fuel. In short, in the market environment, the development of the bio aviation oil industry will be jointly affected by fluctuations in raw materials, oil, substitutes, and carbon emissions prices.
七、 Policy recommendations for the development of China's bio aviation oil industry
China is a major aviation country, with the aviation industry ranking second in the world, only behind the United States. Against the backdrop of global carbon reduction and China's proposal of the "dual carbon" target, it is inevitable for the aviation industry to reduce carbon emissions. Bio aviation oil covers multiple fields such as agriculture, energy, civil aviation, and environmental protection. The development of its industry in China cannot be rushed or relaxed, and must adhere to the principle of stability and progress while maintaining stability.
Firstly, at the policy level, we must adhere to the principle of "putting ourselves first" based on domestic demand, while also taking into account the needs of the international situation. The carbon reduction in China's aviation industry is facing certain urgency and inevitability. Compared with Europe and America, the production and application of bio aviation oil in China are relatively low, and the development of the industry urgently needs attention from all sectors. The development of China's bio aviation oil industry should not only focus on international requirements, but also consider development safety and feasibility, especially after three years of huge losses in the aviation industry due to the epidemic. The development of the bio aviation oil industry must fully consider the economic viability of all relevant parties, taking into account safety, economy, and environmental protection requirements.
The second is to promote domestic enterprises to accelerate the formation of bio aviation oil production capacity that is consistent with planning requirements, avoiding both insufficient and excessive production capacity, and effectively ensuring the supply of bio aviation oil in China. At present, although the mandatory requirements for the use of bio aviation oil in China are not high, with 50000 tons used throughout the 14th Five Year Plan period, many enterprises have begun to increase investment and construction in the production of bio aviation oil. Promote enterprises to form production capacity and layout that is consistent with both short-term and long-term planning, focusing on both the present and the long term; To prevent both excessive capacity construction and the situation where the aviation industry accelerates carbon reduction and the production capacity of bio aviation fuel cannot be met; At the same time, it is suggested to introduce relevant support policies to encourage industrial development and avoid a rush under the policies.
The third is to guide the orderly development of enterprises in the bio aviation oil industry, promote the integration of industry resources, cultivate industry leading enterprises, and improve the development level of China's bio aviation oil industry. At present, the bio aviation oil industry is still an emerging industry in China, developing rapidly. However, there is a large gap between the upstream oil market and the downstream aviation market. The pattern of the industry's upstream, midstream, and downstream is still relatively scattered, and there is a certain degree of scattered development. It is urgent to standardize the development of the industry market from a strategic perspective under the guidance of policies, promote the integration of industry resources, improve industry concentration, cultivate industry leaders, and lead the healthy and orderly development of bio aviation oil in China.
Fourthly, we will persist in conducting independent research and development of bio aviation fuel technology, strengthen international cooperation, and enhance the global influence of China's bio aviation fuel industry. Overall, as an emerging industry, the technology of bio aviation oil is far from mature and stable. Technology is the key to this industry, and it is necessary to encourage relevant research institutes and enterprises to increase their scientific and technological research and development of bio aviation oil, improve the technical level of bio aviation oil development in China, and ensure that the core technologies of China's bio aviation oil industry chain and supply chain are always safe. By strengthening international cooperation in research and development, production, and supply, exchanging advanced international technologies, and further enhancing China's bio aviation oil technology strength and application capabilities, the bio aviation oil industry in China will have a considerable influence globally.