In pursuit of aviation decarbonisation, both the European Union (EU) and the United Kingdom (UK) have adopted mandates on the use of so-called ‘sustainable aviation fuels’ (SAF): under ‘ReFuelEU Aviation’ and the ‘UK SAF Mandate’ respectively. These regulations set ambitious targets to be fulfilled by aviation fuel suppliers; but given the expected high cost of SAF and the immature state of the industry, it is far from certain that sufficient fuel production capacity will be developed in time to hit near-term targets. It is anyway likely that there will be political pressure to reduce long-term targets.
Complementary policies have been developed to provide financial support to SAF on a ‘per litre’ basis, with the aim of facilitating uptake and/or production. The EU’s reimbursement scheme mitigates the cost to airlines for each unit of alternative fuel they consume by reimbursing some fraction of the cost difference compared to fossil kerosene. The UK’s guaranteed strike price (GSP), on the other hand, offers a Government-backed mechanism to shield SAF producers from variability in market prices, thereby establishing certainty over revenues and de-risking investment.
This report “Staying Aloft Support Mechanisms for ‘Sustainable Aviation Fuels’ in the United Kingdom and European Union” by Cerulogy funded by the International Council of Clean Transportation examines the SAF policy frameworks in the two regions and reviews their strengths and weaknesses. The policy frameworks of the EU and UK are currently the strongest incentives for SAF consumption in the world, but both face challenges, and this report argues that the structure and targeting of the complementary support mechanisms in the EU and the UK will deliver diverging outcomes.
Access the report here
