Jetting Towards Jet Zero: Inside the UK’s Sustainable Aviation Fuel Bill

The King’s Speech in July 2024 announced new legislation to support sustainable aviation fuel (SAF) production in the UK.

This legislation – the Sustainable Aviation Fuel Bill – was introduced in Parliament earlier this month and represents another important step forward in the UK’s journey towards Jet Zero by 2025 and becoming a world leader in SAF. It introduces a revenue certainty mechanism, which is an important factor in raising finance for SAF projects – see our blog post here. 

The SAF Bill follows the UK’s SAF Mandate that commenced from 1 January 2025 and requires aviation fuel suppliers to ensure a proportion of their fuel supplied is SAF; the starting figure for this is 2% in 2025, before it rises on a linear basis to 10% by 2030 and to 22% by 2040. The revenue certainty mechanism contained in the SAF Bill has been developed following a recent consultation – see our blog post here. 

Revenue certainty contracts

The option chosen by the Government was a guaranteed strike price for SAF. Through this, the SAF Bill aims to reduce risks for companies investing in SAF production through revenue certainty contracts. Such contracts are entered into between SAF producers and the Government guaranteeing a stable price for SAF over a set period: 

• If the producer sells SAF below the strike price negotiated between the parties, the Government will pay the difference. 
• If the producer sells SAF above the agreed strike price, it will give the extra money to the Government entity.

Levies on current aviation fuel producers to provide funding

The Government has decided that funding for SAF should be paid for by the airline industry and its customers rather than from general taxation. Levies on aviation fuel producers will fund Government companies' payments to SAF producers under the revenue certainty contracts.

If the Government entities end up with a surplus under the scheme, resulting from excess funds collected from levies or overpayments by SAF producers, the surplus will be refunded to those who paid the levy. 

Financial penalties for failure to pay levies

The Secretary of State for Transport – currently Heidi Alexander – will have the power to impose a financial penalty on producers of aviation fuel who do not conform with the levy regulations. The fine will not exceed the lower of £100,000 or 10% of the recipient’s turnover. 

Next steps

The SAF Bill will enter its second reading in the House of Commons, after which it will progress to the House of Lords before receiving Royal Assent. The Government expects the legislation to be in place by the end of 2026.  The reaction from key stakeholders to the SAF Bill so far has been positive although we wait to see it become UK law and the true effect it has on securing investment and scaling up SAF production in the UK.

For further information or advice on SAF or other aviation sector decarbonisation opportunities, please contact Nick Churchward, Chloe Challinor, Greg Fearn or Patrick Bettle.

This article was written by Fergus McLaverty.