Sustainable aviation fuels in Europe: An agent-based simulation of market dynamics in a regulated competitive landscape

While many of the European Union’s (EU) economic sectors successfully reduced emissions before the COVID-19 pandemic, transport and aviation in particular showed the opposite trend. With the Fit for 55 package, the EU initiated a political push to drive the sustainable transition in aviation. Taking into account the policy drive of the Fit for 55 package, we investigate the political market intervention in intra-European aviation, considering the potential role of sustainable aviation fuels (SAFs). For this purpose, an agent-based simulation modeling approach coupled with a system dynamics environment was developed to analyze market developments through both economic and ecological lenses. Two key stakeholders, customers (both passengers and freight companies) and airlines, are considered to capture the impacts of their behaviors and decision-making preferences in the adoption of SAFs. Several scenarios, based on different policy interventions, were considered in the analysis in order to comprehensively explore the impacts of further political developments. The results indicate that policy intervention can lead to a transition driven by sustainable sector performance and demand effects in response to price changes. Furthermore, as intended by the regulations, the results suggest that achieving the sustainable transition requires a shared responsibility amongst customers, industry players, and policymakers. While the sector will reduce its relative and absolute emissions, achieving a 90% reduction compared to 1990 levels seems unlikely with current regulatory instruments.