Sustainable Aviation Fuel (SAF) mandates are catalysing energy innovation in one of Europe's most challenging sectors
In a critical year for climate regulation, two major developments have landed with potentially transformative implications for the decarbonisation of transport: the EU's sustainable aviation fuel (SAF) mandate and the International Maritime Organisation's (IMO) agreement on cleaner shipping fuels.
These moves will not only introduce compliance obligations for carriers and fuel suppliers, but they also signal an accelerated shift toward alternative fuels, prompting questions about the state of innovation, investment readiness, and market maturity.
Transport accounts for around 25 percent of global carbon dioxide emissions, but aviation and shipping have long remained stubbornly hard to decarbonise. They are, however, now being pulled into sharper regulatory focus.
Under the EU's climate target plan, SAF is recognised as a key lever to cut emissions. The European Commission's ReFuelEU Aviation initiative promotes increased use of SAF as "the single most powerful tool to decrease aviation CO2 emissions", and is a key tool for the bloc to meet its emissions reduction target of 55 percent by 2030.
ReFuelEU outlines a rising trajectory for SAF blending requirements: from 2 percent in 2025 to 6 percent by 2030, 20 percent by 2035, and a highly ambitious 70 percent by 2050. It also has a target of 35 percent synthetic aviation fuels in all EU airports by 2050.
The UK has finalised a parallel mandate, with a more aggressive 10 percent target by 2030 but a slower climb thereafter. Though aligned in spirit, the two regimes differ in scope, definitions and support mechanisms, adding a further layer of complexity for operators working across both jurisdictions.
How to get there
Meeting these targets will require a major scale-up of SAF transactions, says Andrew Williams, a finance partner at law firm Norton Rose Fulbright in London.
"We are speaking to an increasing number of developers and financiers that are already looking at SAF investment as a recognisable asset class, with its own challenges and complexities to navigate, before final investment decisions are made," Williams tells EEI. "Clearly, though, the overall volume still remains low compared to conventional fuel transactions and indeed other more established alternative fuel and energy markets."
Williams believes that mandates and targets alone are simply not enough to achieve sustained private sector interest and investment in the alternative fuels industry. He points to the UK's "revenue certainty mechanism", on which the government recently consulted the industry as a helpful policy instrument.
Funded by the industry, the mechanism would determine levies based on airlines' market share of fossil-based aviation fuel, and would reduce revenue uncertainty risks for emerging SAF producers.
In the US, policy interventions have been more focused on the carrot than the stick; the Inflation Reduction Act has provided a tax credit of $1.25 per gallon for SAF achieving at least a 50 percent lifecycle GHG emissions reduction compared to conventional jet fuel.
"Mandates without financial incentives lead to pretty costly regulations — for me it makes sense to blend these instruments together," says Andre de Fontaine, managing director at non-profit Center for Green Market Activation in Washington DC, which serves as secretariat for the Sustainable Aviation Buyers Alliance (SABA). Finland's Neste is the biggest SAF producer globally, creating fuel from 100 percent renewable waste and residue including animal fats and cooking oil. A spokesperson for the company agrees that policy support can take a range of approaches, but tells EEI that the company would also like to see measures to protect the European biofuels industry from unfair competition. This would "help safeguard the industry's competitiveness" and ensure that Europe does not "become dependent on biofuels imports in the future".
Creating the market
Neste's spokesperson also points to airports like Amsterdam Schiphol and London Heathrow, which offer incentives for SAF use which "helps airlines mitigate the cost gap with fossil jet fuel".
"Above-and-beyond" policies, such as companies purchasing SAF from airlines or directly from fuel producers to reduce their own business travel emissions, are also helpful in accelerating SAF production and adoption, Neste says.
This is where SABA focuses its efforts. In April 2024 it announced a $200 million investment in SAF certificates from more than a dozen major corporations. The companies, which included AstraZeneca, JPMorgan, Chase and Netflix, committed to buying certificates representing 50 million gallons of high-integrity SAF to reduce aviation-related carbon emissions.
As SABA said in a statement at the time, this allows corporate travellers to capture the environmental benefits SAF offers "even if the fuel does not flow directly into the planes they fly on".
In the UK, the Advanced Fuels Fund will provide £135 million of grant funding for early-stage SAF projects. But while this will play an initial de-risking role, Norton Rose Fulbright partners Rob Marsh and Alistair Black say that the revenue certainty mechanism is likely to "be more critical in unlocking long term funding".
Norton Rose's Williams says he is already speaking to developers and financiers that view SAF as a recognisable asset class, but "clearly the overall volume remains low compared to conventional fuel transactions".
Strong tailwinds
Compared to other decarbonisation tools, SAF has a lot going for it. It is a drop-in fuel, meaning it can be used in existing aircraft and related infrastructure. Its use can cut lifecycle emissions by up to 80 percent compared to conventional jet fuel, and it also helps reduce air pollutants like carbon monoxide, nitrogen oxides, and particulate matter.
However, cost remains a major drag: SAF tends to be 3 to 10 times more expensive than fossil kerosene. Bringing that cost down will depend heavily on producers' ability to scale up dramatically — but that is not as easy as it sounds.
REFuelEU is open-minded about the forms SAF can take, including synthetic fuels from renewable hydrogen and captured carbon, advanced biofuels from waste, oil and fats, and recycled carbon aviation fuels.
That is helpful because all of these options depend on finite resources, explains de Fontaine. He says there is a real risk that biofuels producers end up competing with agriculture for land.
"We really want to avoid a situation where producers are growing crops for fuel that could have been used for food, then land use conversions are happening elsewhere, and it all results in increased emissions," he says. And although used cooking oils and animal fats do not pose a land use risk, there is only so much of these resources available.
For this reason, SABA is highly focused on "next generation" e-fuels, which have greater scaling potential. The alliance also believes electrification over biofuels should be the priority for road transport, to preserve "the limited supply of bio-based feedstocks" to service the aviation sector.
In the meantime, though, Neste insists that there is enough SAF available globally to meet ReFuelEU'’s annual targets up to 2029, and enough bio-SAF for the 2030 mandate.
Shipping's major breakthrough
In April, the UN's International Maritime Organisation reached a long-awaited agreement that imposes emissions reduction requirements on commercial shipping for the first time.
Shipping accounts for roughly 3 percent of global greenhouse gas emissions, yet it has lagged behind other industries in technological transformation. Ninety percent of all global trade moves by sea, and the industry remains largely dependent on fossil diesel.
Starting in 2028, ship owners will be required to transition to cleaner fuels — or face a penalty of up to $380 per tonne of CO2, with proceeds directed into a global net zero fund.
The agreement marks the culmination of nearly a decade of negotiation and makes shipping the first industry with a globally mandated emissions reduction pathway. And it nearly did not happen: Saudi Arabia forced a last-minute vote, and the US — representing less than 1 percent of world shipping by tonnage — pulled out of negotiations.
"The issue is that there is no alternative to fossil fuels," says Norton Rose Fulbright partner Philip Roche. While blended biofuels are increasingly available, competition is high and certification is difficult — so these fuels are likely to "remain a niche in comparison with fossil fuel".
Liquefied natural gas is the other "immediate solution" for shipping, adds Roche. But, unlike SAF, LNG requires major design alterations or conversions.
New fuels like hydrogen, e-methanol and green ammonia show promise, but are three to four times more expensive to produce, and infrastructure is sparse. These are all "unlikely to be more than a niche alternative for some time to come", adds Roche.
Mandates as catalysts — not solutions
The new SAF and shipping mandates represent top-down pressure to accelerate innovation. But bottom-up momentum will hinge on whether investors, producers, and carriers see a viable business case.
The long term outcome will depend on how governments, industry, and finance respond to these early signals: whether hydrogen, synthetic fuels, and ammonia can attract the same level of investment seen in solar or EVs.
It will also depend on broader macroeconomic and geopolitical factors — including the price of oil. "How attractive investment in clean fuel innovation is at any given time will in part be determined by the overall energy market," says Norton Rose's Williams.
