Sustainable Aviation Fuel (Revenue Support Mechanism)
Bill
“A Bill will be introduced to support sustainable aviation
fuel production.”
- This Bill will support sustainable aviation fuel (SAF)
production in the UK by providing revenue certainty to encourage
investment in the construction of SAF plants across the UK.
Sustainable aviation fuel is one of the key ways to decarbonise
air travel. This will help drive our missions to kickstart
economic growth and make Britain a clean energy superpower,
delivering the Government's manifesto commitment to secure the UK
aviation industry's long-term future, including through promoting
sustainable aviation fuels.
- Sustainable aviation fuel production is estimated to add over
£1.8 billion to the economy will support over 10,000 jobs across
the country while supporting decarbonisation.
What does the Bill do?
- The Government is committed to decarbonising the aviation
sector and reducing greenhouse gas emissions. Increasing the use
of SAF, which significantly reduces emissions of greenhouse
gases, is a key means by which to support this goal. It is a key
measure to decarbonise the aviation sector and reduce greenhouse
gas emissions.
- The Bill introduces a revenue certainty mechanism for SAF
producers who are looking to invest in new plants in the UK. This
builds on the SAF mandate, which will create demand for SAF by
setting targets on fuel suppliers to use a proportion
of SAF.
- This new sector will create jobs and growth opportunities in
the UK, help secure a supply of SAF for UK airlines, and enhance
energy security.
Territorial extent and application
- The Bill will extend and apply UK-wide.
Key facts
- Without action, the aviation industry's contribution to
greenhouse gas emissions is projected to continue to grow in the
coming decades. As a drop-in fuel, which can be used in existing
aircraft, sustainable aviation fuel (SAF) is one of the most
effective ways to start to decarbonise flights. The associated
greenhouse gas emissions from using SAF are 70 per cent less than
fossil jet fuel on a life cycle basis, and planes can already use
up to 50 per cent SAF under current rules.
- The Government will mandate the supply of SAF in the UK by
obliging suppliers to have at least 10 per cent SAF in their fuel
mix supplied to airlines. Whilst the mandate can be met with
imported SAF, with many other countries also looking to mandate,
or incentivise SAF in other ways, demand is likely to be high and
it would be prudent for there to be a supply of UK-produced
SAF.
- A range of production pathways for SAF are under development
globally, with only a small number in commercial deployment at
the moment. Making the leap from the lab to commercial scale has
proven difficult, as small demonstration facilities are
capital-intensive and often unprofitable at the scale involved.
Commercial plants can then typically cost £600 million to £1
billion or more to reach economical scales of production and it
takes years for revenues to off-set the initial investment. Where
plants are first-of-a-kind, the capital requirements are often
seen as too large for venture capital or too risky for most
private equity and fund investors.
- There are several reasons why revenue certainty remains a key
barrier to projects reaching Financial Investment Decision for
some forms of SAF. Firstly, there is no clear UK or global market
price for advanced SAF, as it is not yet being produced in large
scale anywhere. A nascent and variable price means predicting the
price that SAF will trade at in the UK over the short and medium
to long term (the next 10 to 20 years) is uncertain.
- There are a number of SAF projects being developed across the
UK. Bringing in a revenue certainty mechanism will help to reduce
risk, giving investors the confidence they need to invest in UK
SAF plants. It will increase the likelihood SAF plants will be
built in the UK, thereby securing a supply of SAF for the UK
aviation sector.
