SAF production to double in 2025 – but ‘policy shortcomings’ are hiking up prices

Sustainable aviation fuel (SAF) production should reach 2 million tonnes in 2025 – double from last year – but EU and UK usage mandates are hiking up prices and putting pressure on the industry, IATA warns.

At 2 million tonnes, SAF would represent 0.7% of airlines total fuel consumption in 2025 – up from 0.3% last year but still insufficient to make a significant dent in the aviation sector’s carbon footprint, according to the International Air Transport Association (IATA).

“While it is encouraging that SAF production is expected to double to 2 million tonnes in 2025, that is just 0.7% of aviation’s total fuel needs. And even that relatively small amount will add US$4.4 billion globally to the fuel bill. The pace of progress in ramping up production and gaining efficiencies to reduce costs must accelerate,” said Willie Walsh, IATA’s Director General.

SAF mandates causing ‘unacceptable’ cost increases

According to the association, which is currently meeting in New Delhi for its annual conference, EU and UK regulation mandating a 2% ratio of SAF from 2025 has “unacceptably” led to a doubling of SAF costs for European airlines, due to compliance fees for producers.

An expected one million tonnes of SAF will be purchased this year to meet the European mandate – half the global production – at a current market price of US$1.2 billion. But compliance fees are projects to add US$1.7 billion to this bill – an amount that could have been used to abate “an additional 3.5 million tonnes of carbon emissions”, IATA says.

In total, the association estimates that Europe’s SAF mandates have made SAF five times more costly than conventional jet fuel.

“This highlights the problem with the implementation of mandates before there are sufficient market conditions and before safeguards are in place against unreasonable market practices that raise the cost of decarbonisation. Raising the cost of the energy transition that is already estimated to be a staggering US$4.7 trillion should not be the aim or the result of decarbonisation policies. Europe needs to realise that its approach is not working and find another way,” added Walsh.

IATA’s recommendations for governments

In order to truly support the development of sustainable aviation fuels, IATA believes that governments should first and foremost focus on redirecting a portion of the US$1 trillion of subsidies they grant to fossil fuels towards renewable energy producers, eliminating a competitive disadvantage for SAF suppliers.

They should also develop a comprehensive approach to energy policy that prioritises an increase in renewable energy production (from which SAF is derived), ensuring that SAF is allocated an appropriate portion of clean energy.