Flight Path to the Future: The UK SAF Mandate

by Andrew Nealon, Afzaal Abidi, Joshua Hayes, and Alex Lee (Energy Intelligence) Despite many airlines having pledged to use 10% sustainable aviation fuel (SAF) to fuel their planes by 2030, its use has only grown from 0.04% of global aviation fuel in 2021 to 0.17% in 2023. In an effort to boost SAF adoption, the UK government is introducing an obligation on aviation fuel suppliers to blend increasing proportions of SAF into the UK aviation fuel mix (the UK SAF Mandate). This article outlines the legislative framework of the UK SAF Mandate and the challenges that need to be addressed for it to be a success.

One of the primary challenges in adopting SAF is its cost, as SAF is currently more expensive than fossil kerosene. In addition, production capacity is limited, with current production only sufficient to replace a small fraction of total jet fuel consumption.

Although still relatively few compared with other energy transition projects, there are announced UK SAF projects. LanzaJet, British Airways and Nova Pangaea Technologies are partnering to produce SAF and were awarded a grant of up to £9 million ($12 million) from the Department for Transport’s Advanced Fuels Fund (AFF) in 2023. Velocys and British Airways are also planning to develop Europe’s first commercial scale waste-to-jet-fuel facility in Lincolnshire, a project which was awarded a grant of up to £27 million from the AFF.

In the US, the Inflation Reduction Act 2022 introduced a clean fuels tax credit program under which SAF producers are eligible for a tax credit of $1.25 per gallon of qualifying SAF. Taking a different approach, the EU’s ReFuelEU Aviation Regulation — enacted in October 2023 — mandates fuel suppliers, when supplying to EU airports, to supply 2% SAF by 2025, 6% by 2030 and 70% by 2050.

Using a similar rubric to the ReFuelEU Aviation Regulation, the UK SAF Mandate will be enacted via the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024 (SAF Order 2024); a statutory instrument approved by parliament on Sep. 9, 2024, coming into force on Jan. 1, 2025.

Pursuant to Article 3 of the SAF Order 2024, two obligations are imposed on every supplier that supplies aviation turbine fuel at, or for delivery to, places in the UK in a calendar year with a total energy content of more than 15.9 terajoules. These obligations are placed on the suppliers at the point at which their fuel can only be supplied to UK aviation.

The SAF Order 2024 imposes two obligations: (i) the power-to-liquid (PTL) obligation, discharged through the supply of PTL SAF (made when carbon is made into fuel using a process powered by renewable or nuclear energy), and (ii) a main obligation, discharged through the supply of all other types of eligible SAF — with limits on the amount that can be supplied from hydro-processed esters and fatty acids feedstock. The main obligation starts in 2025 at 2% and increases annually to 10% in 2030 and 23% in 2040. The PTL obligation begins in 2028 at 0.2%, rising to 4% in 2040.

Suppliers will be able to meet their obligation by: (i) supplying SAF and earning certificates (excess certificates can be traded or saved to discharge up to 25% of the following year’s obligation), (ii) buying certificates from others who have supplied fuel or (iii) paying a buy-out price (£4.70 per liter). The SAF Order 2024 provides that a supplier is not eligible to apply for certificates where the SAF has benefited from a “support scheme” outside of the UK.

To qualify, the SAF will need to fulfil the "sustainability criteria" set out in Schedule 1 of the SAF Order 2024. Each feedstock has slightly different criteria but, broadly, the SAF will need to (i) make a minimum greenhouse gas saving relative to fossil jet fuel, (ii) meet technical specifications relevant to the specific feedstock and (iii) be derived from sustainable, non-recyclable residues, recycled carbon fuels or PTL fuels.

In July, the King’s Speech confirmed that there will be a Sustainable Aviation Fuel (Revenue Support Mechanism) Bill to introduce a revenue certainty mechanism for new SAF production plants in the UK.

Some potential SAF producers may wait for more certainty, particularly on how any costs will be “funded by industry.”

Pursuant to Schedule 1 of the SAF Order 2024, the specified minimum emissions savings that SAF has to make to qualify under the UK SAF Mandate will be in guidance published by the Secretary of State for Transport. The previous UK government signaled that the minimum threshold will be a 50% saving, but this should be confirmed soon, especially given that the first obligation applies from Jan. 1, 2025.

SAF is currently zero-rated under the UK Emissions Trading Scheme (UK ETS). The UK ETS Authority intends to align the UK ETS and the UK SAF Mandate as, for example, the sustainability criteria under each are different and the UK ETS does not allow airlines to claim for forms of SAF that are not biofuels. The UK ETS Authority has not said how or when this will be done. With one (the UK SAF Mandate) being an obligation on fuel suppliers and the other (the UK ETS) being an obligation on airlines, it is possible that any misalignment will cause disagreements when negotiating SAF contracts. READ MORE

Excerpt from Biofuels International: The UK House of Commons has given the green light to the draft Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024.

This was unopposed in the House with support gathered from both sides of the parliamentary divide.

The order was first put before the House earlier in July and it now needs to be approved by the House of Lords before becoming a law.

Mike Kane, the Parliamentary Under-Secretary of State for Transport, said: “SAF is one of the most effective ways of starting to decarbonise flights. The SAF mandate will support the decarbonisation of the aviation industry by creating demand for SAF in the UK.”

The UK, which confirmed the mandate in April 2024, said it reached on the target after extensive consultations with the industry. It said the ambitious mandate will see around 1.2 million tonnes of SAF supplied to the UK airline industry each year. READ MORE