SAF Production Surges in US Despite Uncertainty

May 23, 2025

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by Fayaz Hussain (SAF Investor) When the US President Donald Trump took office earlier this year, many in the renewables space (including SAF) held their breath. His early announcements about pausing the funding announced through the Inflation Reduction Act – especially the 45Z credits which US-based SAF producers were banking on – hinted at fears of plant shutdowns and cancellation of capacity increases.

Yet remarkably, latest data released by the US Energy Information Administration (EIA) this week (Week of 12, 2025) showed a doubling of domestic SAF production capacity since the end of 2024 with capacity additions during the first quarter of 2025.

Major projects have come online as scheduled, including Phillips 66’s 10,000 barrels per day (bpd) facility in California, Diamond Green Diesel’s 15,000 bpd operation in Texas and New Rise Renewables’ 3,000 bpd plant in Nevada.

Another 2,000 bpd of SAF production is scheduled to come online in the second half of 2025 at Kapolei in Hawaii. The project, run by Par Pacific, will increase the total production to nearly 30,000 bpd of SAF by the end of this year.

This development tells two things about SAF in the US. First, the momentum behind SAF production appears to have hit a critical point where market dynamics are driving growth despite ambiguity surrounding the federal incentives. Major producers like Phillips 66 and Diamond Green Diesel seem determined to produce SAF in the US, prioritising a long-term foothold in the market despite short-term uncertainties.

Second, it seems that contrary to early fears, state-level programmes and existing federal frameworks beyond the frozen 45Z credits have provided sufficient financial incentive to keep projects moving forward.

Project developers are also adapting, looking for other ways to ensure their operations remain profitable. These include efficiency improvements, feedstock optimisation and negotiating premium pricing from airlines eager to secure limited SAF supplies to meet their sustainability commitments.

Although this capacity expansion is a welcome sign and will play an immense role in decarbonising aviation, the question remains whether this represents a temporary surge of projects already in motion before the regulatory uncertainty, or whether the industry has truly found sustainable economics independent of the suspended 45Z credits.

The true test of the industry’s commitment will come in the next investment cycle. Will companies continue to invest billions in setting up new facilities without clarity on federal incentives or will this surge represent a high-water mark before a period of stagnation? READ MORE

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Is SAF taking flight? An overview of the UK's SAF mandate and the next steps needed to decarbonise the aviation sector (Slaughter and May)

Excerpt from Slaughter and May: Sustainable aviation fuel (‘SAF’) has emerged as the cornerstone of aviation sector decarbonisation strategies, offering the only scalable pathway to net zero for long-haul flight. With the UK’s SAF Mandate now in force - prescribing blending obligations from 2025 onwards - this article analyses the Mandate’s primary features, its interactions with other decarbonisation measures, and its relationship to emerging revenue support mechanisms. Our team examines the strategic role of SAF in the energy transition, assesses the challenges of scaling and enhancing investment in advanced fuels, and compares international regulatory divergences between the UK’s measures and SAF policies announced by other governments around the world. Through this, we situate the UK’s SAF Mandate not as an isolated intervention, but as a critical component of global energy transition and investment policies

Introduction: SAFs’ Strategic Role

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Current SAF Production and Estimated Future Demand

Since the inaugural SAF-powered flight in 2008, and first use of SAF on a commercial aircraft in 2011, SAF demand has experienced consistent growth, with approximately 500,000 flights having operated on fuel mixtures containing SAF to date. Although SAF currently accounts for less than 1% of total aviation fuel consumption, usage doubled in 2023 to over 600 million litres. Industry projections now foresee a sustained acceleration in SAF production, with output in 2025 anticipated to surpass 2.7 billion litres - more than double the actual 2024 figure of 1.3 billion litres - and underscoring the sector’s rapid maturation.

Longer term, the International Air Transport Association (‘IATA’) estimates that SAF usage could account for approximately 65% of the aviation industry’s net zero targets by 2050. The UK government estimates that domestic production of up to 5Mt of SAF annually may be required to achieve the UK’s 2050 net zero target (representing 40% of pre-pandemic aviation fuel consumption of 12.4Mt during 2019). In addition, major airlines, aircraft manufacturers, and corporates are increasingly committing to ambitious SAF targets.

Barriers to Entry

Despite these demand signals, the high capital costs that SAF production projects necessitate currently constrain SAF production, and infrastructure remains limited. Furthermore, production costs remain high. Jet A-1 - the internationally accepted standard for aviation turbine fuel - is currently priced at approximately US$0.05 to US$0.06 per kWh. By contrast, average aviation biofuel prices are currently between US$0.18 and US$0.21 per kWh.

In order to increase SAF production levels, attain economies of scale and reduce prices, substantial further capital investment is required in production capacity and infrastructure for current aviation biofuels. The long-term evolution of synthetic fuels also depends on investors committing the necessary capital for research into technological innovation and extensive production infrastructure.

Facilitating such investment demands a stable, predictable policy framework and clearly articulated long-term targets and demand drivers. In contrast, perceived policy risks could deter sustainable, long-term investment. The coming into force of the UK’s SAF Mandate at the beginning of this year is the result of a multi-year effort by successive governments to provide this predictable policy framework and to increase demand drivers.

Development of the UK Landscape on SAF

Aviation in the UK Emissions Trading Scheme

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Carbon Offsetting and Reduction Scheme for International Aviation

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UK Jet Zero Strategy

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UK Renewable Transport Fuel Obligation

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UK SAF Mandate: Obligations and Mechanisms

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Main Obligation

The main obligation imposes escalating SAF supply obligations on fuel from 2025 to 2040. For 2025, fuel suppliers must ensure that SAF comprises 2% of the total aviation turbine fuel they supply in that year. Each supplier’s obligation is calculated in terms of total energy content — rather than fuel mass or volume — thereby accounting for differences in energy density. This annual target increases to 10% by 2030, 15% in 2035, and 22% in 2040 (refer to Figure 1 for each annual obligation from 2025 to 2040). In the Department of Transport’s (‘DfT’s’) estimation, these targets balance the need for long-term investment certainty in the UK’s SAF demand with the flexibility required to accommodate ongoing technological and commercial developments, whilst upholding ambitious environmental standards.

HEFA Cap

HEFA represents the key commercial-scale SAF production pathway currently available. Although HEFA qualifies as an eligible SAF under the main obligation, the government will cap the volume of HEFA eligible for incentives under the SAF Mandate. Initially, the HEFA cap begins at 100% for 2025 and 2026, then decreases to 92.31% in 2027, declining incrementally each year until the cap reaches 42.16% in 2040. This measure intends not only to encourage investment in a more diverse portfolio of advanced SAF technologies, but also mitigate the premature diversion of HEFA from its vital role in the road transport sector. Importantly, the cap restricts only the volume eligible for support under the SAF Mandate, not the total production of HEFA in the UK, acknowledging that the finite nature of its feedstocks faces global competition from other transport sectors.

Power-to-Liquid Obligation

Complementing the main obligation, the SAF Mandate introduces a dedicated requirement to supply PtL fuels, defined as low-carbon aviation turbine fuel synthesised from renewable (excluding biomass) or nuclear power. From 2028, the SAF Mandate will impose a PtL obligation of 0.2% of the total quantity of aviation turbine fuel that each supplier delivers in a given calendar year, escalating to 0.6% in 2030, and reaching 4.5% by 2040. It requires PtL suppliers to demonstrate that the renewable electricity consumed in the fuel’s production represents genuinely new or surplus generation, rather than diverting existing low-carbon supply from the grid. Suppliers must also demonstrate that their electricity qualifies as ‘additional eligible energy’, proving that it would not have been generated, or would otherwise been curtailed or wasted, without consumption by the PtL production site.

Sustainability criteria

To qualify for eligibility under the SAF Mandate, fuels must satisfy specified sustainability benchmarks, principally achieving a minimum greenhouse gas emissions reduction of at least 40% when compared to a fossil-based aviation turbine fuel baseline of 89gCO2e/MJ. This calculation employs a lifecycle methodology, consistent with the established approach under the RTFO (refer to Figure 2 for further detail). In setting these thresholds, the government sought to strike an appropriate balance between driving immediate substantive emissions reductions and enabling the inclusion of emerging fuel pathways, which may currently exhibit higher emissions, but hold substantial future decarbonisation potential. To maintain momentum towards deeper decarbonisation, the government anticipates progressively raising this GHG reduction threshold. While precise timings and increments for these increases remain under consideration, the government has stated it is committed to an evidence-based, phased approach that responds dynamically to market developments and technological advancements.

Furthermore, the SAF Mandate excludes SAF derived from food and feed crops, reflecting broader concerns over food security, land use pressures, and environmental sustainability. This exclusion aligns with the government’s objective to prioritise waste-based and advanced feedstocks, thereby fostering more resilient and socially responsible supply chains. Eligible SAF must conform to international technical standards — including, but not limited to, ASTM D7566 — which governs fuel composition, performance, and safety of synthetic fuels. Certified SAF may be blended with conventional, fossil-based Jet A-1 aviation turbine fuel in proportions of up to 50%, in accordance with ASTM D1655 specifications for aviation turbine fuel.

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Buy-out mechanism

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Compliance and Operational Mechanisms

Point of Obligation

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SAF Certificate Types and Allocation

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Validation and Record-Keeping

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Discharging Obligations

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Penalties

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SAF Revenue Certainty Mechanism and Industry Levy

Scaling Challenges and Investment Imperatives

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Revenue certainty mechanism

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Guaranteed strike price

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Funding the revenue certainty mechanism

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International Comparison of SAF Policies

Governments worldwide are also actively establishing measures to accelerate SAF deployment. In the EU, the ReFuelEU Aviation Regulation mandates steadily increasing SAF blending requirements, starting at 2% in 2025 and rising to 70% by 2050. Unlike the UK’s approach, which permits suppliers to discharge shortfalls through a predefined buy-out payment, ReFuelEU imposes direct obligations on fuel suppliers — together with certain operational requirements on airports and airlines — and enforces compliance through monetary penalties.

While both regimes impose financial consequences for failures to meet blending targets, their legal character diverges. The UK’s buy-out mechanism operates as an ex ante compliance alternative, deliberately priced to incentivise physical SAF uptake, while providing a predictable ceiling on non-compliance costs. By contrast, ReFuelEU Aviation treats blending as a strict legal obligation: non-compliance triggers an ex post enforcement penalty, with no structured alternative to achieving the mandated volumes. This structural distinction reflects a broader difference in regulatory philosophy between the two regimes, balancing flexibility and deterrence in contrasting ways.

In addition, the EU and UK regimes’ SAF eligibility criteria diverge in several material respects. ReFuelEU Aviation imposes higher lifecycle emissions reductions of 65% for biofuels and 70% for PtLs, compared to the UK’s 40% minimum standard. Feedstock eligibility also differs: the EU restricts eligible feedstocks to a narrower range of inputs than the UK. Certification requirements further diverge, with the UK relying on domestic verifiers and the EU mandating recognition under approved voluntary schemes. The EU also enforces a 90% minimum uplift requirement to mitigate tankering risks, a measure absent from the UK’s framework.

Furthermore, ReFuelEU Aviation does not establish a certificate trading scheme. Compliance under ReFuelEU is demonstrated directly through verified records of physical SAF supply and sustainability certification, without the creation of tradable surplus credits. Finally, both the EU and UK regimes require certain synthetic SAF production facilities to comply with temporal correlation requirements. This means those facilities must match the facility’s renewable electricity consumption with renewable energy supplied exclusively to the specific facilities, although EU requirements remain less restrictive than those applicable in the UK. These differences have practical implications for cross-border SAF supply chains and project structuring.

In North America, the US Inflation Reduction Act has established significant incentives to catalyse SAF production. Until the end of 2024, a dedicated tax credit under section 40B offered a base rate of US$1.25 per gallon, increasing to a maximum of US$1.75 per gallon for SAF achieving lifecycle emissions reductions exceeding 50% relative to fossil-based aviation turbine fuel. From 1 January 2025, this regime transitioned to the Clean Fuel Production Credit under section 45Z, which offers a base credit value of US$0.35 per gallon of SAF produced. This amount escalates to a maximum of US$1.75 per gallon when prevailing apprenticeship and wage requirements are satisfied, and the fuel achieves the lowest carbon intensities. The credit value is further adjusted based on the fuel’s CO2 emissions factor and annual inflation rates. Separately, California’s Low Carbon Fuel Standard (‘LCFS’) and British Colombia’s LCFS incentivise SAF production by enabling the issuance and trading of compliance credits to achieve carbon intensity benchmarks.

At the global level, CORSIA remains in its voluntary phase until the end of 2026, and covers around 60% of total international aviation emissions. CORSIA’s sustainability criteria — as specified by ICAO — differ slightly, but materially, from those under ReFuelEU Aviation and the UK SAF Mandate. For instance, CORSIA accepts a wider range of eligible feedstocks, including certain crop-based materials. Its lifecycle emissions threshold is also less demanding, requiring a minimum 10% reduction relative to fossil-based aviation turbine fuel.

Yet, while international schemes diverge in their sustainability criteria and enforcement mechanisms, a common structural challenge persists: how to match regulatory ambition with SAF distribution and availability. With this, governments may need to consider the deployment of ‘book-and-claim’ mechanisms to complement physical SAF deliveries. By decoupling the environmental attributes of SAF from its physical movement, book-and-claim models could offer flexible, cost-effective pathways for operators to meet compliance obligations, even where direct SAF supply is unavailable. If properly calibrated, such mechanisms can preserve environmental integrity — ensuring rigorous verification of emissions reductions — while expanding access to SAF markets globally. Furthermore, aligning book-and-claim standards with international frameworks could enhance certificate fungibility across jurisdictions and mitigate the risk of regulatory arbitrage.

Conclusion and Implications

The UK SAF Mandate’s introduction signals a decisive step forward in the UK’s ambition to decarbonise aviation, offering clarity and predictability for stakeholders across the aviation turbine fuel supply chain. READ MORE

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