Callum McPherson, Head of Commodities at Investec, dives into the intricate world of sustainable aviation and marine fuels. He highlights why electrification is challenging due to energy density limits for long-haul flights and shipping. The conversation explores the potential of Sustainable Aviation Fuel (SAF) and Hydroprocessed Esters and Fatty Acids (HEFA) as viable alternatives. McPherson also discusses EU policies promoting these green fuels and gives insights on investment strategies in the evolving landscape of decarbonization.
30:23
forum Ask episode
web_stories AI Snips
view_agenda Chapters
auto_awesome Transcript
info_circle Episode notes
insights INSIGHT
Mass And Energy Density Limit Electrification
Aircraft and ships face large physical limits that make battery electrification far harder than for cars.
Fuel mass is a much larger fraction of aircraft and ship total mass, so batteries become impractical for long ranges.
question_answer ANECDOTE
Existing Electric Drivetrains On Big Ships
Gerard points out many large ships already use electric drivetrains, and aircraft increasingly adopt electric components.
The challenge is producing the electricity cheaply and cleanly for long-distance operations.
insights INSIGHT
HEFA Is Drop-In But Supply-Limited
HEFA (waste oils/fats) can be processed into drop-in jet-like fuels but supply is tiny versus global demand.
Cost is much higher than fossil jet: roughly $2,000/tonne today versus ~$650/tonne for jet fuel.
Get the Snipd Podcast app to discover more snips from this episode
Aviation and marine transport together account for approximately 15% of global oil consumption—a substantial share driven by sectors that are among the hardest to decarbonize. Unlike road transport or power generation, these industries face unique constraints: the high energy density required, long operating ranges, and the limitations of onboard storage mean that electrification or hydrogen solutions remain technologically and economically unfeasible in the near to medium term.
In response, policymakers and industry leaders are increasingly focusing on low-carbon liquid fuels as transitional solutions. Chief among these are Sustainable Aviation Fuel (SAF) and Hydroprocessed Esters and Fatty Acids (HEFA), both of which can be used in existing infrastructure and engines with minimal modification. These fuels can be of biological origin—typically derived from waste oils, agricultural residues, or purpose-grown feedstocks—or synthetic origin, such as Power-to-Liquid (PtL) fuels produced via electrolysis and CO₂ capture.
Globally, significant efforts are underway to scale up these alternatives. The European Union, for instance, has introduced blending mandates through the ReFuelEU Aviation and FuelEU Maritime regulations, requiring a gradual increase in the share of SAF or other renewable fuels used in transport. These policies are supported by a range of subsidies, research programs, and emissions trading mechanisms (e.g., EU ETS inclusion for aviation and shipping), all designed to stimulate supply and demand for cleaner fuels.
To help unpack the complex interplay of technical, economic, and regulatory challenges, we invited Callum McPherson, Chair of its Sustainable Business Forum and Head of Commodities at Investec, a London-based investment bank. With a mandate to structure and trade a wide array of fuels, Callum provides real-world insight into how these markets are evolving—and the limitations that remain.
Some of the key topics Laurent and Gerard explored with Callum included: Which green fuels have realistic pathways to scale, and which are unlikely to work due to poor energy return on investment, unsustainable feedstocks, or prohibitively high costs? How will regional mandates, particularly those in the EU, impact global markets—and will they be enforceable in practice? What role will synthetic fuels play, given their dependence on clean electricity, high capital costs, and still-immature supply chains?
What emerges is a highly nuanced picture. Despite the political momentum and technological progress, the fundamental economics remain challenging. Current estimates suggest that the cost of abating one tonne of CO₂ in these sectors can easily exceed €1,000 requiring considerable public support, whether stick or carrot.
High costs and regulatory uncertainties are probably some of the reasons why Shell has decided not to complete the construction of a SAF refinery in Rotterdam.
Laurent and Gerard conclude that while green fuels are a necessary part of the decarbonization toolkit, they are far from a silver bullet. The financial and ecological trade-offs are significant, and at current cost trajectories, these fuels will make only a marginal dent in overall emissions curves—at least in the near term.
Finally, an excellent book on the general topic of biofuels by Michael Grunwald: "We Are Eating the Earth: The Race to Fix Our Food System and Save Our Climate."
“The views and opinions expressed by Callum Macpherson are his own and are provided for information purposes only and should not be construed as investment advice, recommendation, or an offer to buy or sell any financial products or commodities.No representation or warranty, express or implied, is made as to the accuracy, completeness, or reliability of the information discussed. Listeners should not place reliance on any of the information share, and we accept no responsibility or liability for any loss arising directly or indirectly from the use of or reliance on such information.Commodities and other investments carry risks, and past performance is not a reliable indicator of future results. Before making any investment or financial decision, you should seek independent advice from a qualified professional, taking into account your own objectives and circumstances.”