UK government proposes variable levy on aviation-fuel suppliers to fund SAF revenue-certainty mechanism

The U.K. government published a consultation March 3 setting out how it intends to support the green-fuels sector and provide certainty for sustainable aviation fuel (SAF) producers in the latest step in its plan to support the aviation sector and kickstart economic growth.

As this is still a new and emerging industry, the proposals will tackle the current uncertainty in the sector by introducing an industry-funded price guarantee—known as the revenue-certainty mechanism (RCM)—to ensure a steady income flow for producers even if the price of SAF fluctuates, helping to keep down costs for airlines and holidaymakers.   

The proposed approach to funding the revenue-certainty mechanism is through introducing a variable levy on aviation-fuel suppliers.

The U.K. government said the RCM will help deliver certainty in the green-fuels market, supporting stable production of the SAF needed for aviation decarbonization.

The scheme is similar to that used in the U.K.’s world-leading renewables sector and could now boost domestic sustainable fuel production, driving investment in the U.K. SAF industry and boosting the economy through more green jobs. 

“This is a temporary measure, while SAF market prices are uncertain, to help scale early technologies while supporting a competitive market for SAF production,” the U.K. government said. “The government will monitor its impacts and can manage liabilities by capping the support to a pre-agreed volume of SAF, as well as agreeing the strike price within contracts.”

The proposals will help to reduce risk, give investors the confidence they need to invest in U.K. SAF plants and help the sector secure the supply it needs to bolster the SAF industry in the U.K.

The mechanism is also designed to limit costs and protect holidaymakers and working people against significant cost increases, with any rises expected to be in line with the usual variation of ticket prices.

The revenue certainty comes alongside the introduction of the SAF mandate in January, which requires a growing percentage of aviation fuel to come from sustainable sources to support the industry by securing demand and driving production in the U.K.

The mandate was one of the first in the world to be put into law.

The revenue-certainty mechanism combined with the mandate will contribute to the U.K.’s net-zero goals, enabling the aviation sector to continue to grow, including through airport expansion. 

This is also expected to drive significant investment into the SAF sector, creating green jobs, fostering innovation and driving growth as part of the U.K.’s “Plan for Change.”

“We are committed to building the technology and fuel supply that will see greener flying become a reality in a way that protects consumers,” said Mike Kane, the U.K.’s aviation minister. “As part of our ‘Plan for Change,’ these proposals will power up SAF production in the U.K., support thousands of green jobs and bolster expansion plans.”

Tim Alderslade, the CEO of Airlines U.K., said, “U.K. airlines support the RCM as a means of driving production in SAF and ensuring the industry can comply with the mandate. We look forward to working with government on its design with a particular focus on encouraging a competitive market and supporting [first-of-a-kind] plants. The goal must be the production of as much SAF at the cheapest possible price for consumers, to help the industry get to net zero, support growth in U.K. aviation whilst minimizing the impact on passengers.”

Gaynor Hartnell, CEO of the Renewable Transport Fuel Association, added, “The RCM is essential if SAF is to be manufactured here in the U.K. rather than imported. Home-produced SAF leads to more jobs and improved fuel security, plus it’s a better way of dealing with household and commercial waste than burning it for electricity generation.”

The consultation will run March 3-31, with the SAF RCM bill being laid in Parliament in the spring.