Can SAF Make Progress in Mandates without Incentives?

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November 07, 2025

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(ResourceWise) As the aviation sector races toward its 2050 net-zero target, Sustainable Aviation Fuel (SAF) has emerged as its most immediate and scalable decarbonization tool. Across Europe, North America, and Asia, governments are introducing SAF blending mandates that require airlines to use a set percentage of SAF in their fuel mix.

But as the International Air Transport Association (IATA) recently cautioned, mandates without meaningful incentives risk doing more harm than good.

Incentives refer to financial or policy mechanisms that help close the cost gap between SAF and conventional jet fuel. Because SAF is still more expensive to produce, governments often use incentives such as tax credits, production subsidies, grants, carbon pricing mechanisms, or preferential loan programs to encourage investment and scale.

These measures de-risk early projects, attract private capital, and signal long-term policy support. They give producers the confidence to expand capacity. Without them, SAF supply remains limited, prices stay high, and blending mandates become far harder to achieve.

For airlines already operating under tight margins, compulsory blending at current SAF prices could strain finances, stall progress, and slow the broader clean-fuel transition. The question isn’t whether mandates are necessary. Instead, it’s whether they can succeed alone.

The Current SAF Landscape

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The EU’s ReFuelEU Aviation initiative will require airlines to use 2% SAF by 2025, rising to 70% by 2050. The US Inflation Reduction Act provides tax credits for SAF producers under the 40B and forthcoming 45Z schemes, though rollout remains uneven.

Across Asia, several governments are pursuing domestic mandates as they aim to secure energy resilience and local feedstock markets.

But while mandates can create demand, they can’t guarantee supply (or affordability).

Mandates Without Incentives: The Structural Problem

On paper, blending mandates sound simple: require airlines to buy SAF, and producers will have a guaranteed market. In practice, the economics are far more complex.

1. The Supply-Side Squeeze

SAF production capacity is still measured in millions, not billions, of liters. Feedstocks such as used cooking oil (UCO) and animal fats are finite and already in demand from the renewable diesel sector.

Building new refineries takes years and substantial capital investment. Without incentives to de-risk early projects, developers hesitate to expand.

2. The Cost Gap

SAF currently costs two to five times more than conventional jet fuel. Airlines forced to meet blending requirements must absorb these costs, often without being able to pass them on to consumers in price-sensitive markets.

This undermines competitiveness and could disincentivize participation in voluntary decarbonization programs.

3. Policy Fragmentation

Inconsistent policy frameworks across regions add further uncertainty. While the EU leans on mandates, the US favors incentive mechanisms. Meanwhile, emerging markets are experimenting with both.

For airlines operating globally, this patchwork approach makes compliance more complex and less predictable.

In short: mandates create demand, but incentives enable supply. Without a dual-track approach, the system tilts toward cost inflation rather than innovation.

Why Incentives Matter

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Where strong incentive frameworks exist, SAF projects are scaling faster. In the United States, the SAF Grand Challenge aims for three billion gallons of annual production by 2030 supported by targeted credits and research funding.

In contrast, in regions relying solely on mandates, producers often struggle to finance projects due to uncertain return on investment.

Beyond economics, incentives also encourage feedstock diversification.

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Case Study: Europe’s Balancing Act

Europe offers a glimpse of what happens when mandates outpace incentives. Under ReFuelEU Aviation, airlines must blend rising shares of SAF regardless of cost or availability.

The result means pressure on limited European feedstock pools and higher fuel prices for carriers. Many of such carriers have voiced concerns that the policy could disadvantage regional operators versus long-haul competitors.

Meanwhile, countries such as the Netherlands and Finland are working to balance the equation by supporting domestic SAF producers with grant funding, carbon accounting frameworks, and early purchase agreements. These measures aim to prevent mandates from turning into unfunded obligations.

The Role of Carbon Intensity in Value Creation

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Toward a Smarter Policy Mix

The path forward isn’t mandates or incentives… it’s both.

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Policy Alone Won’t Fly

SAF remains aviation’s most promising tool for near-term decarbonization. But mandates without incentives risk turbulence ahead.

Without targeted financial and structural support, the market could see supply shortfalls, inflated prices, and stalled investment.

Progress depends on alignment: mandates that create the pull, incentives that create the push. Only when both work together can the SAF market reach cruising altitude and deliver meaningful carbon reductions without grounding economic growth. READ MORE

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Excerpt from International Air Transport Association (IATA): We estimate that Sustainable Aviation Fuel (SAF) could contribute around 65% of the reduction in emissions needed by aviation to reach net zero CO2 emissions by 2050. This will require a massive increase in production in order to meet demand. The largest acceleration is expected in the 2030s as policy support becomes global, SAF becomes competitive with fossil kerosene, and credible offsets become scarcer.

Government policy has an instrumental role to play in the deployment of SAF. IATA encourages policies which are harmonized across countries and industries, while being technology and feedstock agnostic. Incentives should be used to accelerate SAF deployment. As SAF is in the early stages of market development, mandates should only be used if they are part of a broader strategy to increase the production of SAF and complemented with incentive programs that facilitate innovation, scale-up and unit cost reduction.