Aviation accounts for 10-13% of transportation [2]. (global data looks similar, although I don't have a link at hand)
So while 2.5% is not nothing, it is only a small fraction of energy consumption and could remain Kerosene based in the medium term.
Also, a lot of flights could theoretically be shifted to high speed rail.
[1] https://en.wikipedia.org/wiki/World_energy_consumption#By_se...
[2] (2016) https://www.eea.europa.eu/data-and-maps/indicators/transport...
One could already see maybe small scale operations capturing niches - maybe if a corporation that operates a private jet wants to further a reduction in their carbon footprint.
Instead, I'm for transferring funding decisions under the program to a much more open set of actors to originate investment loans (much like mortgage brokers). The investment performances are evaluated on their successes/feasibility, the loans purchased from their originators with high feasibility (i.e. we're scaling known limits), as well as opening up higher origination limits (if they prove out better carbon negative/netural tech). It's more of a financial tooling solution than a tech centered solution. This increases the possibility of failures, but provides a regulated scale out needed with a optimization criteria to keep scaling along successful lines with more organizations rewarded who make successful carbon investments. Experts like ARPA-E could definitely be involved in assessment, but the scale would be completely different then what has gone on before.
If we can't make enough ethanol for all air travel, I'm still optimistic. It's likely that battery densities will become good enough for us to have electrically powered regional jets within the next decade. Then only long flights would need liquid fuels. As a last option, we could also switch to high-speed trains for continental travel.
Most commercial aircraft use jet engines. Other biofuels that are chemically closer to kerosene can be used in most existing jet engines in blends; use of 100% biofuels for hasn't been extensively tested-- but it has been tested![0] This is also the highest-hanging fruit and I wouldn't worry about it in 2019.
There's not a lot of work to do, just the details of making a mil-spec standard and then doing the testing in each engine type. In other words, everyday blocking and tackling not scientific breakthroughs.
https://techcrunch.com/2018/07/08/the-electric-aircraft-is-t...
Considering jets already do 9,500 mile flights a 500 mile range seems viable. But, if you start talking significant amounts of electric aircraft, very short landings for battery swapping are also possible. That's not going to get you to Hawaii, but it's still faster than taking a high speed train.
PS: You can also push these numbers as electricity is much cheaper than jet fuel. Electric engines also weigh less than batters which allows for a higher mass fraction for fuel. Shorter flights also have lower penalties for going slower. So, an optimized electric aircraft could probably make 800 miles with similar costs to current jets without any major breakthroughs.
However, the turbines require more infrastructure around the turbine. Put another way, simply comparing fuel vs batteries ignores the weight of fuel tanks, fuel pumps, etc. We care about the system not just individual components. That said, the fact that burned fuel reduces aircraft weight is a huge advantage over batteries.
The most likely carbon neutral solutions for aviation fuel are either algae produced bio fuels, or synthetic hydrocarbons manufactured using renewable energy.
At the moment, biofuels are renewable but high-carbon and nuclear is low-carbon but not (considered) renewable.
Don't forget jets. Jets are mega-emitters and have very few electrification options because lithium-ion has about a 50th the energy per mass as jet fuel.
For heating, cheap, fracked natural gas is dominating in the US, with a battle cry of "better than coal"! Unfortunately it's still extremely high carbon. They do amazing PR though.
China is building a few supercheap swimming pool TRIGA nuclear reactors specifically for district heating in northern regions for winter, where coal is the only alternative. This is wild, but makes sense. They aren't usually used commercially because the temperatures are too low for conversion to electricity. But for straight heat it makes plenty of sense.
Also heat pumps can help but won't get you there alone.