British energy giant BP has struck a 10-year deal with Australian agribusiness firm Nufarm to buy supplies of a sustainable biofuel ingredient that could help clean up the carbon-intensive aviation sector and fight climate change.

Nuseed, a subsidiary of ASX-listed Nufarm, announced on Tuesday it would provide Carinata oil to BP to process or sell into the growing markets for sustainable biofuels in Europe and North America.

While the aviation industry is a major contributor to climate change due to the greenhouse gas emissions released by burning oil-based jet fuel, planes are unable to readily switch to greener technology such as electric batteries. Airlines including Qantas, Lufthansa, Cathay Pacific and United have made long-term purchasing commitments to encourage biofuel production, while Norway has mandated that its airlines must use 30 per cent sustainable aviation fuel by 2030.

Qantas in 2019 committed to spending $50 million over the next 10 years to kick-start a local biofuel industry.

“Sustainable biofuels have a vital role to play in decarbonising transport,” said Carol Howe, BP’s executive vice-president of trading and shipping.

By working with Nuseed, we can use their sustainable feedstock to help decarbonise challenging transportation sectors such as aviation.”

BP has set a goal of more than doubling its bioenergy portfolio by 2025, and quadruple it by 2030 from 2019 levels.

Carinata, which has been certified by the International Civil Aviation Organisation, is a non-food crop that can be used to produce low-carbon biofuel feedstock and reduce emissions by replacing fossil fuels. It also removes atmospheric carbon, and restores soil carbon while it grows.

Using biofuel can achieve significant emissions cuts without significant changes to aircraft engines or airport infrastructure. However, airlines can use only a 50-50 mix of biofuels with conventional jet fuel because aviation authorities are not yet satisfied engines can run as reliably and safely with a higher blend. Aviation companies including Airbus, the world’s biggest plane-maker, are also exploring other decarbonisation options for air travel including the use of zero-emissions hydrogen.

Following news of the agreement with BP, shares in Nufarm gained nearly 3 per cent to end the trading day at $4.58.

While the short-term expansion of Nuseed’s Carinata is unlikely to have a significant impact to Nufarm’s underlying earnings, Nufarm chief executive Greg Hunt said it had the potential to drive meaningful earnings growth “as production ramps up in later years”.

Under the deal announced, Nuseed will expand its existing network of crop-growers and supply chain partners to deliver Carinata to BP and its affiliates. BP will make payments to Nuseed, subject to meeting agreed-upon milestones, that will help underwrite the cost of expanding and developing Carinata.

Extracted in full from: BP strikes crop deal with Nufarm as airlines look to biofuels (