The market for sustainable aviation fuel (SAF) in the UK is about to change dramatically. Earlier this year, the UK Department of Transport (DOT) published the Pathway to Net Zero Aviation: Developing the UK Sustainable Aviation Fuel Mandate, which is the second consultation for the UK SAF mandate. This SAF mandate, which may take effect as soon as January 1, 2025, would require 10% of all jet fuel supply to be produced from sustainable sources by 2030. The SAF mandate serves as an operational guide to actualize the aviation sector's emissions reduction targets established in the UK’s 2022 Jet Zero Strategy. 

How the mandate reshapes the UK SAF market

The proposed SAF mandate would apply to all suppliers of aviation turbine fuel in the UK aviation market. In addition to the 10% benchmark, the mandate sets parameters on what qualifies as sustainable aviation fuel: The overall carbon intensity of SAF must be 40% lower than fossil fuel-derived kerosene, based on the UK’s Renewable Transportation Fuel Obligation (RTFO), with parameters that favor feedstocks with low-emission production processes. The mandate makes no distinction between SAF produced domestically or imported.

As written, the mandate does not permit fuels that are derived from crop-based feedstocks, which compete with food production. Instead, the mandate requires SAF to be derived from wastes or residues (such as biomass, plastic waste, or waste industrial gases) or from carbon dioxide and hydrogen (power-to-liquid), as long as the production process uses low-carbon electricity sources. Hydrogen feedstocks must have a low carbon intensity, defined as nuclear and electrolytic hydrogen, biohydrogen derived from wastes or residues, and RCF hydrogen. In order to diversify the SAF supply, particularly with the intention of increasing the supply of SAF with high GHG emissions savings potential and low land use change risk, the DOT has proposed a power-to-liquid mandate. The results of the second consultation of this SAF mandate will determine the supply targets enforced by the power-to-liquid mandate.

Notably, the mandate discourages hydrogenated esters and fatty acids (HEFA) fuels, a source that is relatively inexpensive to produce and is the predominant SAF on the market today. The DOT has proposed caps on HEFA to encourage investment in other SAF types and diversify feedstock sources, which in turn will reduce potential dependence on any one fuel source moving forward. HEFA is commonly derived from used cooking oil, waste animal fats/tallow, or vegetable oils (rapeseed, soy, palm etc.). The waste-derived feedstocks for SAF also compete with renewable diesel and biodiesel used for low-emissions ground transportation. The cap could help ensure continued feedstock supply for existing ground transport needs.

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Meeting SAF market challenges

The UK government has sent a signal to investors that the government believes in the role of SAF in decarbonizing the aviation sector, but according to the UK DOT, only 26 million liters of SAF (approximately 6.86 million gallons) were supplied in the UK in 2022. Compared to 14 billion liters of jet fuel consumed in the UK, SAF makes up around 0.19% of the total annual aviation fuel consumed on average. The proposed SAF mandate takes into account that the current supply is not on track to meet the nation's ambitious climate goals by adding mechanisms to incentivize SAF growth to meet demand while limiting cost exposure for fuel suppliers and consumers at the early stages of the supply transition. 

Bridging cost gaps with tradable certificates

With extremely limited production capacity, the permitted SAF sources are significantly more expensive than traditional jet fuels. To make up for this gap, the SAF mandate utilizes a number of policy levers to increase domestic production and guarantee long-term demand. To address higher production costs, the mandate incentivizes producers in the form of tradable certificates (exchangeable for cash) coupled with an obligation for aviation fuel suppliers to purchase mandated amounts, growing year-on-year. 

It’s also important to note that the technology to produce fuels from biomass or municipal waste is already commercially viable, but power-to-liquid fuels—produced using carbon dioxide and hydrogen, via electrolysis—are still in development, making it the most expensive SAF option. To grow demand and help reduce costs, the mandate proposes extra incentives, including a separate target and higher buy-out prices for power-to-liquid fuels.

Buy-out concessions for short-term roadblocks

The SAF mandate also accounts for short-term roadblocks such as unusual cost spikes or supply chain limitations that may hinder access to SAF. As a failsafe, the mandate would offer a buy-out option, which sets a maximum price for mandate certificates for jet fuel suppliers to purchase as an alternative to producing eligible fuels or purchasing certificates at a higher cost. Since the buy-out would not lead to greenhouse gas emissions savings and would lead to an increase in costs for consumers, it is not intended to be used as a long-term form of compliance.

Other SAF incentives 

In addition to the SAF mandate, the UK DOT has proposed a number of objectives to increase the current supply of SAF. Among them, the DOT has set a target to begin the construction of five commercial-scale, UK-based SAF plants by 2025. This is supported by the preemptively launched Advanced Fuels Fund which provides up to £165 million ($205.5 million) for new SAF production projects. Half of this was awarded in December 2022 and an additional £3.7 million has been provided to date in 2023 to support airports to modernize their airspace.

SAF Mandate compared to other policies

US SAF Policies

The UK SAF mandate combines features of well-known national and regional climate policies for the transportation sector. The UK SAF mandate has specific quantity requirements like the US Renewable Fuel Standard (RFS) program—a national policy that requires a certain volume of renewable fuel to be blended with petroleum-based transportation fuel, heating oil, or jet fuel. Like the US RFS, the UK SAF mandate requires a certain percentage of SAF (by energy content) to be blended with conventional petroleum fuel or suppliers can opt to pay the buy-out price. 

While the UK SAF mandate is, in part, a quantity mandate, it also incentivizes lower carbon fuels with performance-based characteristics like those found in California’s Low Carbon Fuel Standard (LCFS) which awards tradable certificates equivalent to the GHG reduction offered by renewable fuels, with lower-emission fuels generating more certificates. Similarly, the UK SAF mandate awards more certificates (functionally decreasing the quantity of fuel required) for lower GHG SAF.

An alternative approach to incentivizing SAF production through policy can be found in the 2022 Inflation Reduction Act. Included in this massive legislation is a two-phased SAF incentive, the Sustainable Aviation Fuel (40B) Tax Credit and Clean Fuel Production Credit (45Z), which provide incremental support for SAF production over five years. Both the Inflation Reduction Act and the SAF Mandate address the sustainability concerns of HEFA feedstocks in different ways: US tax credit disqualifies HEFA derived from palm, while the UK SAF mandate aims to cap the quantity of HEFA in the SAF supply and disallows crop-based feedstocks entirely. 

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EU SAF Policy

In September 2023, the EU Commission adopted the ReFuelEU Aviation proposal, which was part of the “Fit for 55” policy package of the European Green Deal. This policy will require “aviation fuel suppliers to supply a minimum share of SAF at EU airports, starting at 2% of overall fuel supplied by 2025 and reaching 70% by 2050.” This policy takes a more gradual approach to SAF uptake obligations compared to the UK SAF mandate. While the ReFuelEU Aviation proposal overlaps with the UK SAF mandate in coverage of a wide range of SAF technologies, there are slight differences in regard to the allowance of HEFA fuels. The EU allows for HEFA from used cooking oil and tallow, but not HEFA from foodcrop oils. The UK has the same allowances, but it places a cap on HEFA from waste oil and tallow to incentivize more long-term, sustainable SAF. 

These policies stand to dramatically increase the supply of SAF across the globe through a range of incentives for SAF production. Not only that, these policies send a signal to investors that SAF is a promising technology with an anticipated demand increase in the years to come. Fulfillment of both private and public sector climate commitments will be essential for reducing negative climate impact and bringing us closer to a better future for our global climate.

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