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Air Canada explores possible use of lower-carbon plane fuel

(Reuters) - Canada's largest airline has inked a deal seeking to bring in more lower-carbon aviation fuel from green hydrogen and carbon dioxide by 2025, Air Canada and its partner company told Reuters on Thursday as efforts to reduce airplane emissions accelerate.

Air Canada will work with New York-based Air Company, which produces the fuel, to explore potential options for production of so-called "power-to-liquid" sustainable aviation fuel in Canadian regions, including Quebec, to expand development of the fuel in North America.

Air Company has already partnered with JetBlue, Virgin Atlantic and Boom Supersonic, which have collectively agreed to purchase more than one billion gallons of the fuel. Air Canada and Air Company did not outline if there were financial terms to their agreement.

Air Company, founded in 2019, makes sustainable aviation fuel, or SAF, by taking power from renewable electricity to produce green hydrogen, which then combines with captured carbon dioxide.

Investments to produce SAF, more typically made from biomass such as used cooking oil and animal fat, have grown in recent years as governments bolster efforts to fight climate change.

The aviation industry, which represents some 2% to 3% of total emissions, is known as one of the hardest to decarbonize. With new engine technology not expected before the next decade, the near-term focus is on developing more environmentally friendly fuels.

The United States produces around 24.7 billion gallons of petroleum-based jet fuel annually. By comparison, President Joe Biden's administration has targeted 3 billion gallons of SAF production per year in the United States by 2030.

In May, renewable fuel producer HIF Global said it was conducting preliminary engineering for its first U.S.-based facility to produce a sustainable airline fuel made from recycled carbon dioxide and hydrogen produced using renewable electricity.

Analysts say financial incentives are needed to spur production, however. Power-to-liquids SAF is even more expensive than biomass-based SAF, which already can be two to four times costlier than petroleum-based jet fuel.

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