UK legislation to further support the development of domestic sustainable aviation fuel production has been presented in Parliament. The Sustainable Aviation Fuel Bill introduces legislative measures to implement a revenue certainty mechanism (RCM) that guarantees SAF producers a price for the sale of eligible SAF over a period. The Bill will enable a government designated and owned counterparty to enter into private law contracts with SAF producers and also make regulations imposing a levy on suppliers of aviation fuel in the UK to cover the costs of issuing payments under contracts and administering the scheme. Although fuel suppliers already have obligations to supply a growing percentage of SAF under a mandate that started in January, the RCM is aimed at reducing key risks to investors and support successful final investment decisions (FIDs) for UK first-of-a-kind, commercial-scale plants. The government has also announced extra funding of £400,000 ($530,000) to support the testing and qualification of green aviation fuels.
“The new legislation will help industry meet its requirements under the SAF Mandate, which specifies that at least 10% of all jet fuel used in flights taking off from the UK from 2030, rising to 22% by 2040,” said the UK’s Department for Transport (DfT).
“The new financial mechanism is another display that the UK is rock solid in its commitment to building a prosperous hub for homegrown sustainable fuel production. Furthermore, this vital update provides SAF producers and the industry at large the confidence and stability to plough investment into clean energy.”
The government says there are currently three main barriers to projects reaching FID in the UK: there is no clear UK or global market price for advanced non-HEFA SAF; policy and regulatory uncertainty; and projects are competing for finance with other emerging low carbon technologies and in other countries.
It is therefore proceeding with a RCM using a guaranteed strike price (GSP) that works in a similar way to an existing Contracts for Difference scheme in place for low carbon electricity generation. The first tranche of contracts under the RCM are expected to be allocated to UK projects producing SAF using non-hydroprocessed esters and fatty acids (HEFA) technologies and feedstocks.
Under the ‘polluter pays’ principle, the scheme will be funded by a variable levy on industry rather than the general taxpayer, with some costs inevitably being passed on to airline passengers – the DfT estimates a cost of around £1.50 ($2) per passenger.
“By placing a levy on aviation fuel suppliers, it may allow costs to be widely spread across the supply chain,” it adds in a response to a public consultation it carried out. “Suppliers have the potential to benefit from the additional SAF available and lower prices that the RCM could provide and is also less administratively burdensome than other options.”
The SAF Mandate obligation is expected to fall on around 20 aviation fuel suppliers, who will also be required to pay the levy, with individual contributions determined by market share. The definition of an aviation fuel supplier is one that owns 15.9 terajoules or more of aviation turbine fuel at the assessment point for use in the UK during a UK SAF Mandate obligation period, which the government says it will continuously monitor and keep under review. Financial penalties will be imposed on suppliers that do not comply with the levy.
The RCM is intended to be a time-limited measure to support the establishment of first-of-a-kind plants, which have estimated capital costs of between £600 million ($800m) and £2 billion ($2.6bn) each to construct, and also lose money in the initial years. As these plants are built and proven at scale, the costs for future projects are expected to fall.
The government has rejected suggestions the scheme should be funded by existing and scheduled revenues from the UK Emissions Trading Scheme, Air Passenger Duty and/or SAF Mandate buy-out funds. “We generally do not hypothecate taxes to particular spending programmes as it can reduce flexibility in spending decisions and lead to a misallocation of resources with reduced value for money for taxpayers,” it explains.
It also believes that a Singapore-style levy on air passengers to be used by government to bulk purchase SAF would not work in the UK, partly because of the hypothecation principle but also centralising the procurement of SAF would present “significant challenges” in the UK, where the aviation landscape was different to that of Singapore’s, it argues.
“Procuring and supplying fuels is currently effectively performed by industry and the market, and there is substantial risk of government distorting the market by adopting this additional function,” it adds.
The SAF Bill had its first reading on May 14, with legislation expected to be in place by the end of 2026. In between, more details of the scheme will be determined. The DfT has also published a cost benefit analysis of the RCM.
“Collaboration with industry will be crucial in providing an effective revenue certainty mechanism as soon as possible,” says the government. “This is likely to include further engagement on the operational design of the funding mechanism option and key contract considerations.”
Responding to the introduction of the legislation, Tim Alderslade, Chief Executive of trade body Airlines UK, said: “This is a welcome announcement given the importance of the RCM to commercialising and scaling up SAF production in the UK, a technology key to decarbonising aviation by 2050. A UK SAF industry, kick-started by the RCM and SAF Mandate, can create tens of thousands of jobs across the country, whilst supporting our world-class aviation sector to deliver economic growth.
“We look forward to working with government on the scheme’s design and how contracts are allocated, so that we balance the need to deliver the SAF required to support mandate compliance, whilst keeping costs as low as possible through a competitive and transparent bidding process that places the consumer at its heart.”
Added Duncan McCourt, Chief Executive of cross-sector group Sustainable Aviation: “The challenge now is to scale the industry, ensuring we have enough SAF to meet the mandate whilst keeping costs low and creating jobs. This legislation will help to do that.”
Nuala Doyle, Policy Officer at the SASHA Coalition, an industry green alliance group focused on aviation and shipping, said: “We welcome the government’s decision to fund the RCM through a levy on fuel suppliers. This will make those responsible for emissions pay fairly for them, in line with the polluter pays principle, and incentivise the transition away from fossil fuels.
“That said, the RCM should focus on e-kerosene, since this is the alternative fuel with the fewest lifecycle emissions, but is today still the most expensive. This means introducing measures to channel a greater proportion of the funds to e-kerosene producers, commensurate with this truly green fuel’s sustainability credentials. Failing to do so will see these limited funds misused on non-solutions like biofuels that emit more greenhouse gases, endanger our nature and biodiversity, and are not economically sustainable in the long run.”
The government has also announced grant funding of £400,000 ($530,000) to help new fuel producers develop, test and qualify their fuels through the UK SAF Clearing House. Funding will be awarded on a first-come, first-served basis, with an application deadline of 1 September 2025.
This support for producers follows £63 million ($83m) of additional funding made available earlier this year through the Advanced Fuels Fund for the period up to the end of March 2026.
Photo: Alfanar has been awarded UK government funding to support the development of its Lighthouse Green Fuels advanced SAF facility based in NE England
