Vertical Take-off? Cost Implications and Industrial Development Scenarios for the UK SAF Mandate

In April 2024, the UK government released a proposal for a sustainable aviation fuel (SAF) mandate, with targets starting in 2025 and increasing to 2040. The central target of a 10% SAF blend by 2030 goes even further than the EU’s ReFuel EU SAF mandate. Achieving these emission reductions will heavily depend on drop-in fuels that replace fossil fuels, known as sustainable aviation fuels (SAF).

This report examines the cost implications of the proposed SAF mandate targets from an industrial development perspective. The scenarios in this study assess the proposed target ambition in the proposed SAF targets, using different assumptions about the mix of technologies used to supply those SAFs. A scale-up of alternative fuel production capacity is needed to comply with these targets. Different technology pathways might have varying implications in terms of costs — both for the up-front investment in fuel production facilities and for the price premium on aviation fuel. The report presents five scenarios from 2025 to 2035. Some conclusions of the study include:

• Meeting SAF mandate targets in the near term will be challenging. The high targets will require a combination of rapid development and deployment of domestic alternative jet fuel production facilities or the import of advanced fuels to avoid the buyout penalty.
• Fuel costs will increase by approximately £0.10–£0.12/liter in 2035 compared with prevailing rates for fossil jet fuel. Over the SAF mandate’s initial 2025–2035 period, model results indicate an investment requirement of £2.6 to £ 3.7 billion (around $3.3– $4.6 billion), depending on the scenario.
• Given the scale of the needed investment and the pace of capacity expansion, additional financial schemes, including government-backed revenue certainty mechanisms, are necessary to support the domestic SAF industry. Reinvestment programs that narrow the SAF price gap and create price certainty can catalyze investment in UK fuel production and stimulate investment.