SUSTAINABLE AVIATION FUEL REGULATION AND INCENTIVES – UK

1. Introduction

Sustainable Aviation Fuel (SAF) is a central regulatory instrument for reducing greenhouse-gas emissions from aviation, particularly because long-haul aviation remains difficult to electrify. UK SAF regulation combines mandatory fuel-supply obligations, tradable certificates, sustainability criteria, buy-out payments and investment-support mechanisms. The principal framework is the Sustainable Aviation Fuel (SAF) Mandate, introduced under powers in the Energy Act 2004 and effective from 1 January 2025.

2. SAF Mandate and Legal Obligations

The SAF Mandate places a legal obligation on aviation-fuel suppliers to supply an increasing proportion of SAF. The obligation is 2% of total UK jet-fuel demand in 2025, rising linearly to 10% in 2030 and 22% in 2040. The 22% level is maintained after 2040 until greater certainty exists regarding SAF supply.

The scheme operates through certificates. Suppliers receive certificates according to the greenhouse-gas savings achieved by eligible SAF. Certificates may be used for compliance or traded, thereby creating an economic value for emissions performance. Suppliers unable to obtain sufficient certificates may satisfy the obligation through a buy-out mechanism.

The regulatory structure therefore combines command-and-control regulation with market incentives.

3. Power-to-Liquid and Feedstock Regulation

The Mandate contains a separate Power-to-Liquid (PtL) obligation. It begins in 2028 at 0.2% of total jet-fuel demand and rises to 3.5% by 2040. The objective is to stimulate advanced synthetic fuels that are less dependent upon scarce biological feedstocks.

The framework also regulates reliance on HEFA fuels. HEFA can initially contribute substantially to the obligation, but its permitted contribution decreases over time, reaching 71% in 2030 and 35% in 2040. This is designed to encourage technological diversification and avoid excessive dependence upon limited waste-oil feedstocks.

4. Sustainability and Verification

SAF eligibility is conditional upon compliance with sustainability and greenhouse-gas requirements. Suppliers must provide evidence demonstrating eligibility and sustainability, while recognised verification processes support regulatory enforcement. The certificate system consequently functions not merely as an economic incentive but also as a measurement and accountability mechanism.

5. Revenue-Certainty Incentives

The Sustainable Aviation Fuel Act 2026 establishes a new revenue-certainty framework. It permits the Secretary of State to direct a designated government-owned counterparty to enter into private-law contracts with eligible UK SAF producers. These contracts can guarantee a specified strike price for eligible SAF for a defined period.

The mechanism resembles the revenue-support logic of Contracts for Difference. If the market reference price falls below the strike price, the counterparty can make a compensating payment; where the reference price exceeds the strike price, the producer pays the difference back. This reduces uncertainty surrounding long-term SAF revenues and can assist projects in reaching final investment decisions.

The Act also permits a levy on aviation-fuel suppliers to finance the revenue-certainty mechanism. In 2026 the Government consulted on the detailed levy design, including contributions, reserves and treatment of surplus funds.

6. Case Law

Case Name/Citation: R (Friends of the Earth Ltd and Others) v Heathrow Airport Ltd [2020] UKSC 52.

Facts: The case concerned the legality of the Airports National Policy Statement supporting Heathrow's third runway and the Government's treatment of climate-change commitments.

Legal Issue: Whether the Government unlawfully failed to take relevant climate-change commitments into account when designating the aviation policy framework.

Judgment: The Supreme Court considered the statutory framework governing the ANPS and the relevance of the Paris Agreement. The decision illustrates the importance of legally relevant climate considerations in aviation policy-making.

Legal Principle/Ratio: Where legislation requires environmental and climate considerations to be taken into account, governmental aviation policy must comply with those statutory decision-making requirements.

Significance: Although the case did not directly concern SAF, its reasoning is important when SAF mandates, airport policy, infrastructure decisions and aviation decarbonisation measures are challenged through judicial review.

Case Name/Citation: R (Heathrow Hub Ltd and Another) v Secretary of State for Transport [2020] EWCA Civ 213.

Facts: The challenge concerned the Government's selection and designation of the Heathrow aviation policy framework.

Legal Issue: Whether the decision-making process involved legal errors concerning competition law, legitimate expectation and relevant considerations.

Judgment: The Court of Appeal examined the statutory and administrative-law framework surrounding aviation infrastructure policy.

Legal Principle/Ratio: Major aviation-policy decisions remain subject to statutory limits, procedural fairness and judicial review.

Significance: The principle is relevant to SAF regulation because mandate design, infrastructure support and revenue mechanisms involve substantial governmental discretion.

7. Regulatory Significance

UK SAF law therefore operates through a multi-layered regulatory model: mandatory demand creation through the SAF Mandate; certificate trading; sustainability verification; buy-out obligations; technology-specific PtL incentives; feedstock controls; and long-term revenue support through the 2026 Act. The overall framework attempts to address both sides of the SAF market—creating demand while reducing investment and revenue risk for producers.