The term “sustainable aviation fuel” (SAF) is a vague, umbrella term used indiscriminately to describe a range of fuels with widely different environmental credentials, depending on the feedstocks they’re made from and the energy sources powering their production. This lack of clarity misrepresents these fuels’ environmental impact and can mislead consumers and investors. Therefore, this report refers instead to “alternative aviation fuels” as the catch-all term to describe non-fossil jet fuels.
SUMMARY
- The UK government’s Sustainable Aviation Fuel (SAF) Mandate entered into force in 2025, requiring alternative fuels to account for two per cent of total UK jet fuel demand and specifying a sub-target for power-to-liquid (PtL) fuels.
- The government has introduced its SAF Bill, currently under Parliamentary discussions, which includes a Revenue Certainty Mechanism.
- The government has delivered several funds to support the alternative aviation fuel sector, but the industry and its investors still require further financial certainty. The Revenue Certainty Mechanism is expected to address this, but is still under development by the Department for Transport.
The UK aerospace industry is the second largest in the world1 and the Labour government views the sector as a vital part of the UK’s economy. However, with international and domestic aviation accounting for around eight per cent of the UK’s greenhouse gas (GHG) emissions2 and growing, there is an urgent need to implement policies that will ensure the sector aligns with climate targets.
The Jet Zero Strategy, launched in 2022, outlined the previous Conservative government’s strategic vision and plan for reaching net-zero aviation by 2050. A Jet Zero Council — formed of senior industry representatives and policy makers — was established, to provide strategic oversight of the government’s plans as key stakeholders in the sector’s transition, which has since been superseded by a Jet Zero Taskforce launched in November 20243. Four sub-groups are being formed within the Taskforce to provide expert input on key enablers for alternative aviation fuel (i.e. “sustainable aviation fuel” (SAF)), unlocking barriers for zero-carbon hydrogen aircraft, the role of GHG removals and implementing contrail avoidance.
Alternative aviation fuel has been noted as “one of the key levers available to government and industry to accelerate the transition to net-zero aviation”4, and it was estimated that the UK’s alternative aviation fuel industry could be worth £16.7 billion per year in exports by 2050, supporting approximately 130,000 highly paid jobs5.
Aviation is currently the UK’s sixth most polluting industry, but the government’s own climate experts — the Climate Change Committee — estimate that by 2038 it could be the highest emitting sector. While some progress has been made on growing the uptake of alternative fuels to address emissions from aviation, actions elsewhere from this government risk undermining these lifecycle emission savings. Since coming into power, this Labour government has shown renewed support for several airport expansions, including the highly contested6 third runway at London Heathrow7, the fourth busiest airport in the world8. Contrary to claims that SAF use would offset the emissions from an increased number of flights, the expansions of Heathrow, Luton and Gatwick airports alone would wipe out the benefits of efforts to decarbonise our power system (under Labour’s Clean Power Plan) within five years of expanded operation.
SAF mandate
The UK SAF mandate was signed into law in November 2024, and entered in force as of 1 January 2025, requiring jet fuel suppliers to blend alternative aviation fuel into conventional aviation fuel at increasing concentrations, much like the European Union’s ReFuelEU SAF mandate. These blend quantities increase from two per cent SAF as a percentage of total jet fuel demand yearly from 2025, to ten per cent by 2030 and 22 per cent by 2040. The UK government also launched a “SAF Clearing House” to provide technical support and funding towards the development, testing and qualification of alternative fuels9. Currently, the SAF Clearing House is instrumental in supporting mandate compliance through the Renewable Transport Fuel Obligation (RTFO) Operating System certificates.
In December 2025, the Department for Transport opened a call for evidence “SAF Mandate: crop‑derived sustainable aviation fuel”, looking at whether fuels from energy crops, cover crops, and food/feed crops should ever be allowed under the UK SAF Mandate. The Call will run until 16 March 2026. Currently, crop‑based fuels are excluded; only wastes, residues, recycled carbon and PtL are eligible under the mandate10. This call for evidence is likely a response to airlines and the fuel industry pressuring for cheaper crop feedstocks to be included in the SAF mandate to ensure compliance, particularly following the US/UK trade deal in 2025, which opens the UK market to US bioethanol.
Similarly to ReFuelEU, the SAF Mandate has included a sub-mandate on “power-to-liquid” (PtL) fuels — referred to as synthetic aviation fuels in the EU mandate — due to their “high GHG emissions savings potential and low land use change risk”11. The government noted that this type of high-integrity alternative fuel would require more support to get to market and help in bringing costs down for their inputs such as green hydrogen and renewable energy; thus, it was expected that the sub-target would be ambitious. However, the PtL target fell short of expectations and is lower than the counterpart target within ReFuelEU, requiring only 0.5 per cent PtL by 2030 and reaching a significantly lower target of 3.5 per cent PtL by 2040 as compared to the EU’s ten per cent target for the same year.
The current mandate includes a cap to hydroprocessed esters and fatty acid (or “HEFA” fuels) which, though cheap and abundant, do not align with their commitment to only use waste residues for fuels whilst helping to create space in the market for newer SAF technologies to become competitive. The HEFA cap starts at two per cent in 2025 and rises to 7.8 per cent by 2040. In 2025, used cooking oil (UCO) was the feedstock for all SAF used, and over 70 per cent of it came from Asia.
The mandate also includes a buy-out price whereby jet fuel providers have a cost penalty should they not supply enough alternative fuel. The buy-out mechanism for the main SAF obligation is £4.70 per litre and the PtL obligation is £5.00 per litre. Figure 1 compares the mandate targets within the UK’s SAF mandate to those of ReFuelEU.
Revenue certainty mechanism
The UK government is in the design phase for a revenue certainty mechanism which will “provide an incentive for the production of SAF via price support”12. In January 2025, the government published its response to an initial consultation, stating that it recognised “the importance of providing certainty to industry and investors on the allocation process to allow investment decisions to be made,” and has committed to13:
- Upholding the HEFA cap, meaning these fuels will not be eligible for revenue support. The first tranche of contracts offered will be with UK SAF projects that produce using non-HEFA technology and feedstock.
- Pursuing a guaranteed strike price mechanism (GSP) which will require a private law contract to be concluded between the SAF producer and a counterparty.
- Developing “a robust and effective allocation process that can be delivered as soon as is practicable” with stakeholders. This will be important as it will demonstrate a signal for which types of SAFs the government supports. The ambition would be for the highest integrity e-fuels — produced with green hydrogen and additional renewable energy — to receive the most support. Utilising industry funding for the mechanism, with the current proposal being that fuel suppliers are levied based on their market share of aviation fuel supply14.
Under the RCM, producers agree a strike price per litre for eligible UK-produced SAF (initially non-HEFA tech/feedstocks). The counterparty tops up if market/reference prices fall below the strike; producers repay excess if prices exceed it. Contracts run 15 years from commissioning (with a longstop buffer). A consultation on the Indicative Heads of Terms and contract allocation for the RCM launched January 2026 and closes 3 April 2026. This builds on the previous industry funding consultation (closed 2025), which confirmed the variable levy on aviation fuel suppliers (≥15.9 TJ threshold, market share-based). Costs flow from aviation fuel suppliers via a variable levy, meaning no taxpayer exposure, and total liability is capped by contract volumes/strike prices.
Funding
The UK Government has allocated significant but currently insufficient funds to support the growth of the SAF market. These funding mechanisms target activities across the Technology Readiness Levels (TRLs), from the innovation stage through to demonstration. At the moment, the UK Government is focused on the RCM rollout to support alternative fuels. Table 1 provides a snapshot of funding available as of March 2026.
| Fund name | Organisation(s) | Description | Total fund |
| Currently closed | |||
| Hydrogen Innovation Initiative Demonstration | – Connected Places Catapult – Hydrogen Innovation Initiative (HII) | Connected Places Catapult, acting as a partner of the HII, is looking to procure results from near-term demonstrations. | A budget of up to £50,000 per project to contribute to the costs of the demonstration activities |
| Jet zero: aviation’s non-CO2 impacts on the climate | – Department for Business and Trade (DBT) – DfT – Natural Environment Research Council (NERC) | Collaborative research which focuses on the underpinning science of aviation’s non-carbon dioxide (CO2) impacts — including from SAFs — and how they interact with climate over time with the view to identifying benefits, mitigation options, informing industry and government policy decisions. | £10 million (~£8 million funded) |
| Tomorrow’s Engineering Research Challenges | – EPSRC | Funding opportunity supporting diverse teams from across disciplines to forge new research capabilities. | £10 million total (awarded 2025) |
| Accelerating research outcomes to deliver a prosperous net zero | – Engineering and Physical Sciences Research Council (EPSRC) | Provides follow-on funding to research outputs that are ready to move beyond fundamental research and need additional resources to be taken up as a solution by users. Outline closed; full applications by invitation only. No new calls as of March 2026 — pilot scheme completed/awards disbursed. | £7.5 million follow-on funding for net zero engineering projects building on prior EPSRC grants (up to £800k FEC per project, 80 per cent funded, 2yr max) |
| Advanced Fuels Fund | – Department for Transport (DfT) – Ricardo – E4Tech | Grant funding to first-of-a-kind commercial and demonstration-scale projects in the UK at all development stages up to construction starting. | £135 million until to March 2025 (Windows 1 and 2) + an additional £63 million in Window 3 that opened February 7, 2025 which was fully allocated to 17 projects announced in July 2025 |
| Strategic Programme | – Aerospace Technology Institute (ATI) – Department for Business and Trade (DBT) – Innovate UK | Targeting innovators, this programme provides funding for research and technology development in the UK to maintain and grow the UK’s competitive position in civil aerospace. | ≈£1.7 billion to 2025, with industry co-funding taking the total to ~£3-4 billion. UK Govt committed funding of £2.3 billion (2025-35) + prior = ~£4.5 billion |
| Future Flight Challenge Fund | – DBT – UK Research and Innovation (UKRI) – Innovate UK | This fund builds the aviation ecosystem needed to speed up the introduction of electric sub-regional aircraft, advanced air mobility vehicles and drones into the UK. | £300 million co-invested by government and industry (£125 million govt + £175 million industry) |
| Future Fuels for Flight and Freight Competition (F4C) | – DfT – Ricardo – E4 Tech | A fund to promote the development of an advanced low carbon fuels industry within the UK, including supplier capabilities and skills in relevant technologies, while maximising value for money for the taxpayer. | £20 million, fully allocated |
| Live | |||
| UKRI SME innovation loans | – UKRI | Funds businesses to develop innovative products, processes or services that can maximise return on investment to the UK’s economy and society. | Per-loan range: £100,000 to £2 million |
| Emerging Energy Technologies Fund (EETF) | – Scottish Government | Funding to accelerate low carbon infrastructure projects that will be essential to deliver net-zero. | £180 million (2022-2026) for hydrogen, CCUS/NETs in Scotland. £100m ringfenced for hydrogen (5GW production ambition), £80m for CCUS |
| SAF Testing Grants | – DfT – SAF Clearing House – Unniversity of Sheffield – Ricardo | Grant funding to support the cost of primarily pre-screening testing, and ASTM D4054 Tier 1 and Tier 2 targeted testing. Applications open until September 2025 or budget depleted; work must complete by 27 February 2026. | £400,000 |
| Aerospace Technology Institute (ATI) Programme | – UK Government | Funding for the ATI will help the next generation of aerospace innovators to thrive, through programmes such as the ATI Hub and the SME Programme. | £975 million |
| Heathrow SAF Incentive | – Heathrow Airport | Targets 5.6% SAF in 2026 (vs. 3.6% mandate). Self-funded by the airport via aeronautical charges. Separate pots for passengers and cargo ATMs. Rebates halve the SAF premium. | £80 million |
Possible government interventions
- Changes to the UK Emissions Trading Scheme (ETS): Where use of eligible SAF is reported on UK ETS routes, it is currently “zero-rated” and aircraft operators can claim a corresponding reduction in their UK ETS obligations. This is intended to help bridge the cost differential between SAF and conventional aviation fuel as the industry develops. When an airline uses eligible SAF, they can claim an “Emissions Reduction Claim (ERC)” under the UK ETS, meaning they can count that portion of their fuel as having zero emissions, reducing their overall emissions liability.
- The UK ETS Authority will develop proposals on how the UK ETS should treat the use of SAF by aircraft operators in the light of the SAF Mandate and are set to consult on this. As committed in June 2023, and reiterated in the UK ETS policy overview last update in January 202615, the Authority will consider full alignment with the SAF Mandate sustainability criteria. The UK ETS Authority has said it is working to align the sustainability criteria of the SAF mandate with the UK ETS to ensure that only truly sustainable SAFs are eligible for emissions reductions. While SAF will continue to be zero-rated under the UK ETS in the short-term for domestic flights >1,000km if RTFO-eligible, allowing operators to claim emissions reductions via certificates, the Authority will continue to explore alternative options to SAF being zero-rated in the future.
- A consultation was held in May 2024 to evaluate necessary changes to the enforcement and sanctions policy of the UK ETS in light of the establishment of the Carbon Offsetting and Reduction Scheme for Aviation (CORSIA)16. The consultation response was published in December 2024, confirming that the new UK ETS and CORSIA enforcement and sanctions provisions would be implemented largely as proposed. CORSIA “section H” mirrors UK ETS penalties but excludes SAF-specific rules.
- The SAF Mandate Statutory Instrument (i.e, the Renewable Transport Fuel Obligations – SAF Order 2024), and the first compliance guidance, were published in December 2024. They were effective from the scheme’s start on 1 January 2025. They established that the DfT’s SAF Mandate administrator would be tasked with SAF compliance breaches (e.g. blending obligations) that would trigger civil penalties.
- The non-CO2 impacts of SAFs may also be introduced, which vary vastly between different fuels, but with research ongoing17. There have been no proposed policies to advance on this front, unlike in the EU, where the EU ETS mandates non-CO2 Monitoring, Reporting, and Verification (MRV) from 2025.
- Only domestic flights and those departing to the European Economic Area are included in the ETS, but not long-haul flights, which account for most of the UK’s aviation carbon emissions18.
- Kerosene tax: At present, aviation is the only transport sector that doesn’t have to pay a duty on its fuel. Implementing a kerosene tax of 9p per litre, as some are calling for19, would help to level the playing field between the cost of conventional jet fuel and SAFs, and particularly PtL fuels. Many advocates for this policy — including the Committee on Climate Change20 — also see it as necessary from an equity and just transition perspective, arguing that airlines should not be spared fuel tax when truckers and motorists are not. By some estimates, the revenues generated could be “between £0.4 to 5.9 billion annually depending on the routes covered and tax rate applied”21.
- Safety regulations via Civil Aviation Authority (CAA): SAF can currently be used in jet engines to a maximum blend of 50 per cent with traditional kerosene without the need for any modifications. In late 2023, the CAA granted a permit to Virgin Atlantic to fly on 100 per cent SAF between the UK and US22, which took place without incident. Safety is paramount within the aviation industry and therefore shouldn’t be compromised, yet there are still regulatory barriers that need to be overcome for alternative fuels to be used in higher percentage blends and eventually at 100 per cent.
- Carbon pricing measures: The UK Government has planned to implement a new import carbon pricing mechanism from January 202723, similar to the EU’s CBAM, on carbon-intensive products including steel and hydrogen, which will have an impact on aviation value chains, and apply to scope 1 and 3 emissions. The primary legislation was introduced in the Finance (No.2) Bill 2025-26, which received Royal Assent as Finance Act 2026. The draft secondary regulations were published on February 10, 2026, for a technical consultation closing March 24, 2026. Final versions will be laid before Parliament later in 2026. The full mechanism takes effect January 1, 2027, regardless of exact enactment timing for secondary rules
- Jobs and skills: The UK Government is looking to the aviation industry to create high quality jobs and invest in apprenticeships in the sector, as seen from their Reach for the Sky programme in 2024, which aimed to encourage young people from under-represented groups to pursue a career in aviation.
- Airport expansion: Several airports — primarily in the south of England — are being considered for or have gained approval for expansion, including London Heathrow, London Gatwick, London Luton, Farnborough Airport and London City Airport. This goes against the advice of the CCC’s Seventh Carbon Budget, which urges for airport expansion to be limited24. The UK Chancellor has used SAF as the justification for how these expansions could be delivered sustainably and in support of economic growth, which has been widely criticised by NGOs25 and the fuel industry itself26. The debate surrounding airport expansion is ongoing and updates to the Airports National Policy Statement in 2026 will be critical to this27.
Key recommendations
The UK Government is taking positive steps to support the growth of the alternative fuels market as part of an evolving global industry, but further action is needed:
- The government must not allow crop-based biofuels to be permitted within the SAF Mandate due to the risk of indirect land use change, lower lifecycle emission reduction potential and impacts to biodiversity. Aviation fuels should be renewable sources where possible, not food, farms and forests.
- The RCM should strongly incentivise high-integrity e-fuels over biofuels, which, in some cases, should be penalised (as seen via HEFA caps and exclusions). Longest term lengths should be allocated to e-fuels to ensure sufficient certainty from debt finance.
- The RCM should remain industry funded in light of the historical benefits aviation has incurred through not paying tax on fuel use, which is a position the government shares. This is seen, for example, in the London Heathrow airport SAF supporting scheme28. On a just transition pathway, the levy should fall on the fuel suppliers — most of which are Big Oil companies — in light of their position in the aviation fuel value chain and environmental impact to date.
- The RCM should have a limit to the amount of financial support available and be established for a set period of time to respond to the failure in the market but so as not to provide ongoing subsidy.
- The government could consider permitting double stacked incentives i.e. Hydrogen Production Business Model. This would still meet Subsidy Control rules as they contribute to the development of separate supply chains.
- The government should consider how to prioritise access to critical feedstocks like green hydrogen through the UK Industrial Strategy and UK Hydrogen Strategy for use in e-fuel production and to facilitate the acceleration of zero emission flight.
- In line with ensuring the aviation sector has a viable pathway to achieving net-zero and that the UK is able to keep to its climate commitments, no airport expansion should be permitted without assurance that it is compatible with hydrogen and battery-electric flight.
- Growth in aviation demand is at odds with a sustainable and viable pathway to net-zero for the sector and as such, the UK Government must enact significant demand management measures such as banning private jets, a frequent flyer levy, kerosene taxation and subsidised rail travel.
Activities from the public sector alone will not be enough to see this market take off, and we are working closely with the investor community to accelerate action. To find out more get in touch.
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