Sustainable Aviation Fuel Bill
Wednesday 11th June 2025
(1 month, 2 weeks ago)
Commons ChamberSustainable Aviation Fuel Bill 2024-26 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Secretary of State for Transport (Heidi Alexander)
I beg to move, That the Bill be now read a Second time.
On the day when the Chancellor has set out this Government’s determination to deliver a decade of national renewal, I am proud to stand before this House to make good on our promise to deliver a sustainable aviation sector. If we are once again to be an outward, confident trading nation that is connected to the world and leading the way on innovation, we must run as fast as we can towards a greener, cleaner future for flying. The Bill before us today will enable us to do precisely that. We do not have time to waste.
Siân Berry (Brighton Pavilion) (Green)
Does the Secretary of State agree that this Bill has a missing half, which could cut aviation emissions by demand management, and that at the very least, if there is to be public money spent setting up this system, it should be raised from the most frequent flyers and private jets?
Heidi Alexander
I think the hon. Lady and I fundamentally differ on the issue of demand management, because demand for air travel is only going one way, and it is therefore our moral responsibility, if we are going to have more people in the skies, to reduce the carbon emissions associated with that.
As I said, we have no time to waste. That is why, when it comes to aviation, this Government have rolled up their sleeves and got on with the job, putting an end to the dither and delay of the past. In less than a year, we have approved the expansion of Luton airport and invited plans for a new runway at Heathrow, and I will be making a final decision on Gatwick expansion as soon as possible. We have invested in the future of aviation, not just with the help we have given to reopen Doncaster Sheffield airport or the work we are doing to strengthen connectivity around Liverpool John Lennon, but also by putting £1 billion towards aerospace technology. We have introduced the sustainable aviation fuel mandate and provided £63 million to the advanced fuels fund, helping the industry prepare for a sustainable future. Just last week, we kick-started the largest redesign of UK airspace since the 1950s, paving the way for cleaner flights, fewer delays and more direct routes. This is what governing for growth looks like.
Rachel Hopkins (Luton South and South Bedfordshire) (Lab)
I really welcome the Bill and the creation of a mechanism to increase the supply of sustainable aviation fuel. Can I add that, as we look towards airspace modernisation, we will have not only cleaner and quicker but quieter flights?
Heidi Alexander
My hon. Friend is completely right to highlight the benefits of cracking on and delivering airspace modernisation. It could mean not only more direct flights and therefore less use of carbon, but noise benefits for communities close to airports.
We are determined to make rapid progress on this issue because we have an iron-clad belief that our success as an island nation rests on our international connectivity. The flow of trade, exporting British expertise and the movement of people for business and leisure all depend on aviation continuing to grow and thrive. We could put our head in the sand and pretend that people do not want to fly, that the sector does not support hundreds of thousands of jobs, that people do not look forward to foreign holidays or family reunions and that air freight is not a significant part of our trade by value, but we would be on the wrong side of both reality and public aspiration.
The truth is that demand for flight is only going in one direction. According to the Civil Aviation Authority, passenger levels were 7% higher in 2024 than in the previous year. If we do not respond and if we do not set aviation up for long-term success, we do not just make ourselves poorer today, we kiss goodbye to the growth and opportunity this country needs in the decades to come.
I want a future where more passengers can take to the skies, not fewer. But like the rest of our economy, that must mean emitting less carbon, not more. This Bill will help secure that future. It builds on the fantastic work across Government and industry, led by my hon. Friend the Aviation Minister, which saw the SAF mandate come into effect earlier this year. As we run towards a future of green flight, we know that sustainable aviation fuel is one of the biggest levers we can pull. It emits 70% less greenhouse gases on average than fossil fuels. It can be used in existing infrastructure and aircraft engines, and it is now backed by a mandate that is rightly ambitious: 10% SAF in the fuel mix by 2030 and 22% by 2040. I want as much as possible to be made in the UK.
Monica Harding (Esher and Walton) (LD)
The mandate, which we welcome, calls for only 22% sustainable jet fuel usage by 2040, while the Chancellor has said that she wants a third runway in use at Heathrow by 2035. That would mean more aviation-related health hazards to my constituents. Does the Minister agree that we should not pursue Heathrow expansion until we can turbocharge the SAF mandate and bring non-sustainable fuel usage down further?
Heidi Alexander
The Government have been clear that we will permit airport expansion only when it is consistent with our legally binding climate change targets. SAF is one way in which we can clean up aviation, but the work we are doing on the development of new aircraft technologies, alongside the work we are doing on airspace modernisation, is all connected to how we bring those emissions down. I point out to the hon. Lady that the expansion of Heathrow has already been modelled in relation to the sixth carbon budget.
We have been clear that the mandate alone is not enough. Creating the demand for SAF but not the supply does not get us where we want to be. We have heard the industry’s concerns around risk and uncertainty for investment, and that is why we are acting today. The Bill creates a revenue certainty mechanism that will boost SAF production by giving investors confidence to choose the UK.
David Davis (Goole and Pocklington) (Con)
I declare an interest as a pilot. In this context, I spoke to one of the would-be producers—I think it is called Zero—and its primary concern with respect to the strike price mechanism that the right hon. Lady talks about is how that will be set and what input producers will have. Will she address that when she talks through the mechanism?
Heidi Alexander
There is more detailed design work to do on all that, and we will work alongside industry to ensure that we have a workable proposition.
The mechanism boosts SAF production and gives investors confidence in the UK by addressing one of the biggest barriers to investment: the lack of a clear, predictable market price for SAF. That starts with a guaranteed strike price agreed between a Government-owned counterparty and the SAF producer. If SAF is sold for under that price, the counterparty will pay the difference to the producer. If SAF is sold for above that price, the producer will pay the difference to the counterparty.
The revenue certainty mechanism will be funded by industry, specifically through a levy on aviation fuel suppliers. That makes sense for two reasons. First, it is the industry that will benefit from more and cheaper SAF production, so it is only right that industry, and not the taxpayer, should fund it. Secondly, placing the levy higher up the supply chain spreads costs across the sector and is the least burdensome option. It is important to note that the revenue certainty mechanism will not be indefinite. It will be targeted and time-limited, helping to get first-of-a-kind UK projects off the ground. The Bill’s sunset clause means that we can offer contracts only for 10 years, unless it is extended via the affirmative procedure. We will have a firm grip on costs throughout. We will decide the number and duration of contracts, limit support to a predetermined volume of SAF and negotiate acceptable strike prices. There is no obligation on the Government to enter into a defined number of contracts or to agree contracts at any cost.
I know that some hon. Members may be concerned about the impact on passengers, so let me reassure them: none of this will limit people’s ability to fly. We expect minimal changes to fares, with an average ticket increasing or decreasing by up to £1.50 a year. I am pleased to say that this is a product of many months of consultation with the industry. Airlines are calling for it, airports are calling for it, SAF producers are calling for it, environmental organisations are calling for it, and the Government are therefore getting on with delivering it.
Sir Julian Lewis (New Forest East) (Con)
I am sure that we wish the Government well in what they are trying to do. I gather that the International Air Transport Association highlighted only last week that, at the moment, sustainable aviation fuels cost approximately five times as much as conventional jet fuel. Will she explain how the measures in the Bill will bridge that gap to make it economical?
Heidi Alexander
Supply is constrained at the moment; the UK has one commercial production facility, in Immingham. We need to build investor confidence to commercialise some of the sustainable aviation fuel demonstration projects around the country. More supply and lower prices are good for the aviation sector and, ultimately, good for those who wish to fly.
I think it is worth taking a moment to reiterate what is at stake. When UK production of low-carbon fuels is up and running, it could support up to 15,000 green jobs, contribute £5 billion a year to our economy, and deliver clean and secure energy. What is more, fulfilling the SAF mandate could save up to 2.7 megatonnes of carbon dioxide equivalent a year by 2030. Seizing those opportunities will ensure that we deliver on our bold plan for change and that the UK and our world-class aviation sector are leading the way in the race towards sustainable flight.
This country cannot be open for business, open to investment and open to growth yet have a closed mind when it comes to international connectivity. The Bill is a clear signal that we will not accept false trade-offs that pit aviation’s growth against our commitments to net zero. We can and must do both. We have the opportunity of a lifetime and, I believe, a moral mission to future-proof aviation. When the sector succeeds, it is not only a source of growth, through trade, business and tourism, but a source of joy, aspiration and opportunity. It is as vital today as it will be for future generations. Their need to fly, explore the world and do business requires us to act now. That is what the Bill does, and I commend it to the House.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call the shadow Secretary of State.
Gareth Bacon (Orpington) (Con)
Let me begin by setting out an unambiguous truth: aviation is vital to the British economy. It is a cornerstone of our national infrastructure, our competitiveness and our connectivity.
When it comes to the impact of aviation on our economy, the figures speak for themselves. Aviation contributes £52 billion to UK GDP, supporting over 960,000 jobs across the country. That includes 341,000 people working directly in aviation—from air traffic controllers to aerospace engineers—350,000 jobs in the supply chain, and another 269,000 supported through consumer spending. Aviation also delivers nearly £8.7 billion in tax revenues, and aerospace manufacturing adds a further £9 billion directly to GDP, plus over £10 billion more when including its supply chains. Some 197 million passengers and 2 million tonnes of freight move through our airports each year. The economic case is therefore unanswerable. In short, we must all support this thriving industry with clear benefits to the country.
The Conservative party has always recognised the strategic importance of aviation, but, unlike the current Government, we understand the damage that can be done with poor policy choices—I regret to say that we have seen plenty of that from the Labour Government over the past year. Alongside their national insurance jobs tax, which is putting pressure on businesses and threatens to leave working people £3,500 a year worse off, Labour’s decision to hike air passenger duty threatens the vitality of this thriving industry. The Office for Budget Responsibility confirms that rises planned by the Chancellor of the Exchequer will raise an extra £555 million in taxes over five years, pushing up the costs for businesses and passengers alike.
In a speech that will have a lot of common ground with the Secretary of State’s speech, I regret to say that Labour’s handling of its professed desire to expand aviation raises more questions than answers. The decision to approve a second terminal at Luton airport, which we support, will be judicially reviewed. The proposal for a second runway at Gatwick has been kicked down the road for surprising reasons, to say the least, and the supposed support for a third runway at Heathrow is no more credible. The Chancellor has promised that the latter proposal will be operational by 2035, with spades in the ground in this Parliament, but that ambition looks very far-fetched, and there are substantial logistical and financial barriers to its construction. So far, the Government have provided no solutions on those points, so we will watch developments in the next few weeks with considerable interest.
It is against that backdrop that we come to the Bill before us. When we entered opposition, we made it clear that we would not oppose the Government just for the sake of it. We made it clear that where the Government’s choices would benefit the country or the economy, we would welcome them. That is why we will not seek to divide the House on this legislation on Second Reading. This Bill is a logical follow-on from the statutory instrument passed in September last year that established the SAF mandate, the first stage of which came into effect in January. Having mandated that airlines will be required to use a specified percentage of SAF—2% this year, rising to 10% in 2030 and 22% in 2040—it is logical to take steps to ensure adequate levels of locally produced fuel.
While the mandate requires the consumption of SAF, it is a new technology, and its production carries a high risk for investors. Encouraging the development of the plants required to produce this fuel is the purpose of this Bill and, to a very large degree, it is a continuation of the policy of the previous Government. In 2023, it was the last Government who committed to an industry-funded revenue certainty mechanism to support UK-based SAF production. In early 2024 we published the detail, with plans for a guaranteed strike price model to give price certainty to SAF producers. I hear the Minister say, “You didn’t do it!” He is completely correct, because unfortunately there was something called a general election that followed shortly after.
As the Secretary of State has outlined, under this model, producers will be topped up when the market price falls below a guaranteed strike price; when the market price rises above, they will pay it back. The system mirrors the successful contracts for difference model in offshore wind, and the economic benefits could be considerable. A cost-benefit analysis produced by the Department for Transport before the general election suggested that the SAF industry could add more than £1.8 billion to the economy and create more than 10,000 jobs in the country, but, more fundamentally, SAF is a product of what we know to work. As the Secretary of State said in her speech, it can be blended with conventional Jet A-1, used in existing aircraft and refuelled at existing airports. The capability exists. The challenge is not scientific; it is economic. That is why the concept of a revenue certainty mechanism was one of the six pillars in the previous Government’s jet zero strategy, and, as the Secretary of State outlined, the introduction of a revenue certainty mechanism has wide support in the aviation industry.
Let me be clear: while we will not oppose the legislation this evening, we will carefully scrutinise it as it progresses through the House. In that spirit, I will put some questions to the Minister, which I hope he will address in his summing up. The first is about passengers. In the press release announcing the Bill, the Government said that the revenue certainty mechanism would keep ticket price changes minimal:
“Keeping fluctuations to £1.50 a year on average.”
The Secretary of State said the same in her speech. Perhaps in his speech the Minister could outline what this figure is based on. Do the Government stand by it? Is it a commitment, or a rough estimate?
The second question is about what type of SAF the Government favour and how it will be produced. While the SAF mandate permits the production and use of hydroprocessed esters and fatty acids SAF in the early years of the mandate, and also contains a small but increasing requirement for power-to-liquid SAF in later years, the bulk of the SAF to be developed and used under the terms of the mandate is second generation SAF, which is to be made from municipal waste, non-edible crops and woody biomass. The UK is a small island, with insufficient spare land to enjoy self-sufficient food security or to grow new forests at scale. Does the Minister think we will be self-sufficient? If not, what proportion of the ingredients necessary for making second generation SAF does the Minister think we will need to import?
Relatedly, the HEFA cap comes into force incrementally from 2027, despite there currently being no domestic production of second generation SAF in the UK and low levels of second generation SAF produced globally, removing the opportunity to source mandated volumes through imports. This risks making the costs of hitting SAF mandate targets very high indeed, because suppliers will soon be forced to buy out of their mandate obligations—a significant cost that will be passed on to the airlines and, ultimately, to passengers without delivering any decarbonisation benefit at all. Will the Government consider revising the timelines for phasing out HEFA SAF to bring them more in line with the timescales for domestic second generation SAF production, in order to minimise the costs for passengers?
The next area of interest is planning. The plants in which the Government are seeking to encourage investment will be large, and—as the Minister no doubt knows—large developments tend to attract a lot of local opposition, often leading to planning inquiries, judicial reviews, vast expense and years of delay before any construction work begins. If this does not change, the revenue certainty mechanism may not be sufficient to attract investors, so what will the Government do to minimise delays in the planning process?
I turn now to timescales. When will the first contracts be awarded under the RCM? Will there be a timetable for reaching full mandate compliance? As my right hon. Friend the Member for Goole and Pocklington (David Davis)—who is no longer in his place—touched on, the issue of the strike price is critical to the success of the proposal. What criteria will be used to set the strike price? Will the methodology be published, and will there be regular reviews? Finally, will the Government commit to regular reporting to Parliament on industry take-up, production capacity and cost trajectory, to ensure that they remain accountable for the Bill over time?
The importance of this Bill is clear. Backing UK production of sustainable aviation fuel is necessary if we are to meet our net zero goals without undermining the competitiveness of the aviation sector. However, let me be clear: as the Bill moves through the House, we will continue to look closely at the detail and press for changes where necessary, where improvements can be made to ensure that the scheme delivers on its promise.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call the Chair of the Transport Committee.
Ruth Cadbury (Brentford and Isleworth) (Lab)
I start by thanking the Secretary of State for Transport for her speech. I also thank her and the Aviation Minister, my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane), for coming to speak to the Transport Committee earlier this year about aviation and, of course, wider matters.
I welcome the introduction of the Bill, and I was pleased to hear the remarks of the shadow Secretary of State, the hon. Member for Orpington (Gareth Bacon). The Bill will play an important role in our work to decarbonise our aviation sector. Some 7% of domestic greenhouse gas emissions come from domestic and international flights, and it is estimated that this figure will increase to 11% by 2030 and 16% by 2035. We all know the huge challenges involved in decarbonising aviation, and this Bill is a much-needed step towards addressing them. I am glad that the Government are taking action, and I know that many in the industry want to ensure that the Bill is operational as soon as possible.
As I am sure the Transport Secretary will appreciate, I have a few questions about the Bill, which I am sure will also be raised at later stages of its progress. However, I start by saying that it is rare to find a Bill on which there is so much agreement; every major airline I have met has mentioned its support for SAF, and there is widespread agreement that we need a price certainty mechanism. That is a sign that the Government have been pragmatic, working with business and—in the case of SAF—working to ensure that we have domestic capacity here in the UK.
I am glad that the Bill will start to move us away from our dependency on imported fossil fuels, particularly for aviation. This House may forget that our reliance on foreign fossil fuels meant that in 2022, we had to spend more than £35 billion bailing out our energy market. That reliance leaves us reliant on the whims of autocratic regimes across the world. We need to move away from that costly model and, in turn, bring investment into our regions, growth to our economy and much-needed tax revenue to our Treasury.
I am glad that the UK Government are working to make sure that we continue to lead on decarbonisation and to reduce our carbon emissions in line with the Paris agreement. I want to touch on the nature of the SAF we will be using. First and second generation SAFs are made from waste—the first from used cooking oils predominantly, and the second from waste such as household black bin bag waste. Where do the Government see that waste coming from in the future? How does that tie in with our efforts to reduce our residual waste, particularly black bin bag waste, and wider efforts to reduce the non-recyclable waste that we produce? Is a large part of our household waste not already going to waste-to-energy plants, providing electricity that we depend on?
There is a lot of support for SAF in America and, as with ethanol, it offers a huge chance for large-scale agricultural businesses to profit from the sale of their waste and their oil. Ethanol is often produced in the same plants as SAF. In seeking to secure UK domestic production of SAF, what could the challenges of the US-UK trade agreement mean for our biofuel industry and its ability to transition to producing SAF? Has the Department modelled the economic and environmental impact of providing resources for second generation SAF? What is the timescale to bring on third generation SAF?
One issue that has been raised with me is whether companies looking at producing SAF will be able to enter negotiations with the Government before the Bill reaches the statute book. I understand that that has been the case for the mechanism for renewable energy projects, where negotiations began early to ensure that the investment is locked in.
We need to see changes in aviation to meet our ambitious climate goals. Now that aviation and shipping are included in our carbon budget, those changes are even more important, and I hope that the Government will also look beyond SAF when thinking about decarbonising aviation. SAF is not and will not be the silver bullet solution to the sector’s responsibility to this country’s decarbonisation strategy.
Deirdre Costigan (Ealing Southall) (Lab)
My hon. Friend, like me, represents a west London constituency. Brentford and Isleworth is very close to my constituency of Ealing Southall. She will know that while our constituents support the work towards a more sustainable air industry, they also want to see work to reduce the noise we hear in west London from the airline industry. Does she agree that the airline industry must also look at new, quieter planes and airspace modernisation for those communities?
Ruth Cadbury
My hon. Friend and neighbour is absolutely right, and I know that the plane and engine manufacturers are continuing to work—as they have done for decades, to be fair—on quieter and less polluting aircraft. Sometimes there is a tension between those two. Airspace modernisation will not make a lot of difference to my constituency in terms of landing aircraft, but overall airspace modernisation will play a part in reducing emissions and flight times for passengers.
As I have said, SAF is not and will not be the silver-bullet solution to the problem of aviation’s responsibility for decarbonisation. The Climate Change Committee warned Parliament in 2023 that relying on SAF alone was “high risk”. For example, Heathrow airport is already the single greatest source of carbon emissions in the UK, and the current plans for expansion would add an extra 8 to 9 megatonnes of carbon dioxide a year. If the Government do expand Heathrow, other airports across the UK will have to make cuts to ensure that aviation does not breach its carbon targets. Furthermore, continuing increases in aviation emissions will have to be offset against significant cuts in emissions in other sectors. I should like to hear from the Transport Secretary what the Government are doing to address that particular challenge.
When the Transport Committee considered SAF during the last Parliament, we found that it had “significant potential”, and I know that there is support throughout the House for us to reduce carbon and other greenhouse gas emissions from aviation. As Chair of the Committee, I also know how widespread support across the sector is for decarbonisation, and that many private companies are already way ahead in preparing for the future. This country needs to stay ahead of the game internationally, and I am glad that by introducing the Bill the Government are showing their commitment, investing in UK industry, and showing that the UK can be a leader on sustainability.
Mr Paul Kohler (Wimbledon) (LD)
I thank the Secretary of State for her speech, and congratulate the Aviation Minister on the Bill.
The challenge facing the aviation sector—as with our entire economy—is decarbonisation. Reaching net zero by 2050 is essential, and given the scale of the scientific and technical challenge, it is clear that decarbonising aviation will not be easy. Sustainable aviation fuels have an important role to play in this effort. We consequently welcome the establishment of a SAF revenue certainty mechanism, which has long been called for by many in the aviation industry and which, as we have heard, is vital to ensuring that the SAF mandate is both feasible and achievable for airlines. Providing SAF producers with a guaranteed level of revenue will be key to unlocking investment in the sector—which, I think, answers some of the questions posed by the shadow Minister, the hon. Member for Orpington (Gareth Bacon). It will help to stimulate private capital at this early stage, and will support the UK’s ambition to become a global leader in SAF development and production. The growth of the industry also has the potential to generate jobs and economic activity across the country.
However, while my party supports the Bill, there remain important questions, regarding in particular the scrutiny of the mechanism, international alignment, and the wider strategy for aviation decarbonisation. The Bill sets out the broad principles for the revenue mechanism, but leaves much of the detail to secondary legislation and ministerial discretion. That is, to a degree, understandable—the early stage of SAF technology and the uncertainty in market development mean that flexibility is crucial and necessary—but the Government must ensure that Parliament has an adequate opportunity to scrutinise the development of the mechanism, and the SAF sector more broadly. Given the importance of SAF to achieving net zero in aviation, it is vital that the House is updated regularly on progress in the industry, and on whether any adjustments to the mechanism are necessary. That is especially important in the light of previous Government promises to kick-start the domestic SAF industry—promises that have yet to materialise. In 2022 the Conservatives promised to have five commercial SAF plants up and running by 2025, but, as so often, they failed to deliver. I will therefore be pushing in Committee for the Bill to increase the level of ongoing scrutiny.
It is also crucial for the UK to work collaboratively with international partners on net-zero aviation technologies. Currently, the criteria for both what qualifies as SAF and what levels of different technologies should be used differ between the UK and the EU, with each jurisdiction prioritising different fuel types at different times. Given the inherently international nature of the aviation sector, closer regulatory alignment with the EU and other key partners is essential to fostering growth in the industry and ensuring that there are sufficient levels of SAF production internationally to support the transition. The Government must therefore work more closely with the EU and others to ensure that our frameworks dovetail.
Finally, while we welcome this Bill, it is important to acknowledge that SAF alone will not be enough to decarbonise aviation, as the Chair of the Transport Committee made clear. Although SAF can significantly reduce the carbon intensity of air travel, flights using SAF will not be carbon neutral, so many of the necessary emission reductions to reach net zero will need to come from other areas. By the Government’s own estimates, SAF could cut emissions by 6.3 million tonnes of CO2 equivalent by 2040. That is not insignificant, but given the projected growth in passenger numbers, it would represent only a 0.8% reduction in overall aviation emissions compared with today.
While the Lib Dems support the Bill, we continue to urge the Government to take more ambitious action to decarbonise the aviation industry. With plans for airport expansion still on the table, the Government must clearly articulate how net zero aviation will be achieved by 2050.
Sadik Al-Hassan (North Somerset) (Lab)
I thank the Secretary of State and the Aviation Minister for their engagement while bringing forward this legislation. This Bill is vital not only to meet our national climate commitments, but to ensure strong regional economic growth, such as in my constituency of North Somerset, where Bristol airport, a beacon in the UK’s transition to sustainable aviation, is located.
Bristol airport has long demonstrated real leadership in this space. In March 2021, it became BP’s first UK customer to receive a supply of sustainable aviation fuel. In March 2024, nearly a year before the Government’s mandate, Jet2 began operating flights from Bristol airport using a blend of sustainable aviation fuel, reducing the emissions that these flights generated by an astounding 70%. In recognition of the airport’s leadership in this area, in December this Government made the very wise decision to appoint it to the jet zero taskforce, where it will be able to share its years of experience and expertise with the group.
The leadership and vision shown by institutions such as Bristol airport are not just laudable, but necessary, if we are to reach net zero by 2050. Aviation has been a domestic economic success story in recent decades. It now contributes £40 billion to the UK economy annually, including £20 billion in exports, and supports over half a million jobs across the country. With over 60% of the Members of this House having 500 or more constituents who work in aerospace, aviation or the wider supply chain, I will not be alone in recognising how vital it is for the economic future of our country to ensure that this industry remains a success. However, the ugly truth is that the sector accounts for around 7% of the UK’s total emissions, and if we are to decarbonise the aviation industry while ensuring that flying remains affordable and accessible, it is to innovations such as sustainable aviation fuels and hydrogen in aviation that we must turn.
As the sustainable aviation fuel mandate begins to ramp up demand in the years to come, domestic production will sadly continue to lag behind, so this Bill’s revenue certainty mechanism is essential. Learning from the success that contracts for difference have led to for renewables, the revenue certainty mechanism will unlock the UK’s production by providing certainty for investors, and could see up to 60,000 skilled and well-paid jobs created by 2050.
My constituents in North Somerset will welcome the news that the Government continue to balance the need to support regional economic growth with meeting our net zero commitments, and I look forward to seeing the local jobs and cleaner skies that this Bill will deliver in the years to come.
Blake Stephenson (Mid Bedfordshire) (Con)
The UK has a real opportunity to lead the world in the production of sustainable aviation fuels, and this Bill aims to provide the investment certainty needed to scale up domestic SAF production and achieve just that.
My constituency is located a stone’s throw from London Luton airport. It is a rapidly expanding regional airport, and that expansion will bring with it huge economic benefits, including jobs for thousands of my constituents and better connections for business and leisure. Indeed, airport expansion will help to bring millions of people to the Universal UK theme park—which I have to mention every time I stand up—and play a key role in driving local economic growth. But just as it is important to support the growth of airports such as Luton, it is important that expansion happens as sustainably as possible to ensure that we get as many of the benefits, and as few of the harms, as possible.
This is the subject of a current Environmental Audit Committee inquiry, which I was pleased to secure, investigating how the Government can deliver airport expansion while meeting their legally binding climate targets. Some, such as the Climate Change Committee, say that it is not possible, and the Government need to square that circle. With around 7% of greenhouse gases derived from aviation in the UK, we should not underestimate the challenge, but it is clear to me that sustainable aviation fuels are an important piece of the jigsaw.
In my constituency of Mid Bedfordshire, Cranfield University and local industry are already working at the cutting edge of developing new technologies in this area. I have heard from them and other experts about the potential of British-made sustainable aviation fuels. I have even learned about second-generation SAF—not something that I thought I would get into this time last year—which turns the waste we all put in our black bins every week into the fuel that powers us to adventures abroad. That is a remarkable thing, and I am glad to have learned about it since coming into the House. If we get sustainable aviation fuels right, we can create and support thousands of highly skilled jobs in places such as Cranfield.
Doing more to stimulate the development of sustainable aviation fuels is an obvious route to economic growth, so will the Minister reflect on our global market position, explain how the mechanism compares with other approaches, and give an assurance that the measures in the Bill will be enough to avoid the UK aviation industry needing to import SAF from abroad? It would be a huge missed opportunity to later find that this mechanism and related policies have not been ambitious enough, leaving foreign countries to benefit from domestic mandates.
One thing that strikes me immediately as worthy of more thought—the Minister may wish to comment—is black bin waste. Taking waste that was heading to landfill and instead using it to power us into the sky would seem to be a simple way forward, although whether there is enough of it is another matter. I declare my interest as a Central Bedfordshire councillor, but will the Minister consider the merits of including, in this Bill or elsewhere, a requirement for the Secretary of State to provide local authorities with guidance on how they can take advantage of this opportunity to help in the national effort to scale up production? Unless it is financially prohibitive for them to do so, would it not be sensible and pragmatic to let them use our household waste in this way, rather than let it head to landfill or local incinerators?
Finally, I have a few questions for the Minister on the costs of aviation travel. As we all know, times are tight for many of our constituents. UK air passenger duty is the world’s highest tax levied on airline passengers, and following the autumn Budget, the OBR forecasts that it will increase 9% a year on average to a whopping £6.5 billion in 2029-30. On top of that, it is estimated that the impact of the Bill through the levy and administration costs will raise the cost of a ticket to travel. I know Ministers say that it is a modest increase, but that is why some may prefer the Government to use an alternative funding mechanism, such as the industry’s contribution to the UK emissions trading scheme. I am not saying that the Government should take that approach, but it would be worthwhile for them to explain why they have taken the approach they have. Reflecting on the fact that the costs of the Bill come on top of the increase to air passenger duty in the autumn Budget, will the Minister provide an assurance that the Bill will not clobber our hard-working constituents with yet higher prices when they jet off on their family holiday?
Baggy Shanker (Derby South) (Lab/Co-op)
I refer the House to my business interests in the Register of Members’ Financial Interests.
As a proud advocate of UK aviation, I am pleased to speak in support of the Sustainable Aviation Fuel Bill, and I add my thanks to the Aviation Minister for his determination in support of UK aviation and to the Secretary of State for her leadership. By backing industry with a revenue certainty mechanism, the Bill will turbocharge the production of UK SAF, reducing reliance on imports and generating jobs up and down the country. As one of the most carbon-intensive and hardest-to-decarbonise forms of transport, aviation is vital to get right. Alternative and sustainable aviation fuels will help us to safeguard the future of our planet, because without a decarbonised aviation sector, there will be no net zero.
Decarbonising will ensure that future generations can enjoy the opportunities that air travel brings without compromising the health of our planet. It will ensure that our regional economies continue to benefit from the growth that the aviation sector can offer, such as the whopping 6,000 jobs that East Midlands airport supports. In Derby, we are already making bold strides towards our net zero future. I am proud that Rolls-Royce moved quickly to confirm the compatibility of its long-haul aircraft engines, in both the wide body and business jet sector, with 100% SAF usage. The Derby factories will continue to play a significant role in shaping the future of aviation decarbonisation for years to come.
We recognise that decarbonisation will not be without its challenges. Sustainable aviation fuels offer a practical and innovative solution to those challenges, with SAF made from waste emitting a staggering 89% less carbon than burning conventional jet fuel. This is what the SAF Bill recognises. It is a bold and necessary step forwards to secure a sustainable net zero future for aviation. I am proud to support it.
Luke Taylor (Sutton and Cheam) (LD)
As chair of the all-party parliamentary group for the future of aviation, travel and aerospace, I very much welcome this step to push the aviation industry into a sustainable future. I encourage Members to join the APPG and come along to our meetings if they want to find out more about sustainability and the future of aviation. I worked in the aviation industry for 16 years before being elected to this place, and I studied aeronautical engineering for four years before that, so it would have been remiss of me not to come to the Chamber today to share with hon. Members my expertise on the subject, but I will try not bore them.
I welcome the support for future technology and the investment previously announced by the Government. We have massive and historical expertise in aviation here in Great Britain and Northern Ireland and we really must grasp the opportunity to develop those skills and that technology further. It is an incredible opportunity for UK plc and we need to grasp it. I want to pick up on a comment by the Secretary of State in her opening speech about airspace modernisation, because it is relevant to the discussion. We must grasp the opportunities of airspace modernisation, which have the potential, as she mentioned, to deliver shorter, more direct and more efficient flight routes. But as MPs, we must engage with the process. We must understand and learn about how that is happening around us. It is inevitable, but we must get the best for our communities. We must understand and engage with that process as it goes along. It is an incredible opportunity.
Over the past few months, the APPG has been hearing about the technologies that we have today. Of particular interest is ZeroAvia, which is already flying a hydrogen-electric, zero-emission aircraft in the UK—it has a hydrogen fuel cell with electrical propulsion, which offers completely zero-emission flight. As my hon. Friend the Member for Wimbledon (Mr Kohler) mentioned, this is only a stepping stone to the truly zero-emission flight that we really need to capture.
If hon. Members will forgive me for boring them slightly, the Breguet range equations that I learnt about for my degree are the reason why an Airbus A380 will take off from London at 580 tonnes and land in Sydney at around 340 tonnes. The burning of fuel throughout the journey means that it is able to maintain the range and maintain the flight levels that the burning of the fuel and the reduction in the weight require. That is one reason why liquid fuel will almost always be required for very long-haul flights, no matter how far we progress with hydrogen and electrical power plants for short and medium-haul flights.
That amplifies the need not just for the current second-generation SAF production, but for looking at alternative fuel sources such as algae-derived SAF. Others have correctly made the point about the reduction in residual waste, which is the current fuel source for a lot of biodiesel for the development of SAF. As those sources decrease and the cost potentially increases, we need to look at truly zero-carbon sources of SAF.
I will not bore hon. Members more. In closing, I will just echo the words of my hon. Friend the Member for Wimbledon and of my party and encourage the Minister to go further and faster to achieve truly zero-carbon and lower-noise aviation technology so that we can continue to enjoy the incredible freedoms and opportunities in both economic activity—jobs, skills and trade—and the broadened horizons that aviation has offered us for more than a century. Long may it continue.
Madam Deputy Speaker (Ms Nusrat Ghani)
Order. I will now announce the result of today’s deferred Division on the draft Contracts for Difference (Miscellaneous Amendments) (No. 2) Regulations 2025. The Ayes were 350 and the Noes were 176, so the Ayes have it.
[The Division list is published at the end of today’s debates.]
Sally Jameson (Doncaster Central) (Lab/Co-op)
Since entering this place almost a year ago, I have been proud to be a part of the campaign led by my hon. Friend the Member for Doncaster East and the Isle of Axholme (Lee Pitcher) to reopen Doncaster Sheffield airport and unleash the economic potential of the surrounding land as a hub for sustainable aviation. Our airport is a source of pride for all of us in Doncaster and South Yorkshire. We all eagerly anticipate the first flight for holidaymakers, but also—perhaps more importantly—we are looking forward to the high-skill, high-wage jobs that the airport will bring, and not just for people in Doncaster and South Yorkshire today, but for young people for generations to come.
That is why my right hon. Friends the Members for Doncaster North (Ed Miliband) and for Rawmarsh and Conisbrough (John Healey), my hon. Friend the Member for Doncaster East and the Isle of Axholme (Lee Pitcher) and I, along with Mayor Ros Jones and Mayor Oliver Coppard, and indeed the whole of South Yorkshire, were delighted that this Labour Government backed £30 million of devolved funding into our airport. I thank the Secretary of State for Transport and the Minister with responsibility for aviation for their support in our airport, our area and our potential.
A Government who prioritise growth must ensure that it is place based and felt in every corner of the country.
Lee Pitcher (Doncaster East and the Isle of Axholme) (Lab)
I thank my hon. Friend and neighbour for giving way and for what she has said today. Does she agree that there is real potential for farmers to contribute by supporting feed stock from winter crops, creating a circular environmental economy that helps the local economy to grow further with new kinds of jobs, including for people who live in rural areas?
Sally Jameson
I absolutely agree. The Bill is not just about the small, narrow element of sustainable aviation; it is about what every industry across the country can do in the shared endeavour to make our aviation sustainable.
If this Government’s growth agenda is to be a success, it must be felt in every corner of the country, including Doncaster and South Yorkshire, and I am pleased that with our airport investment and the backing from the Prime Minister—reiterated just today by the Chancellor—this Government have proved that they will do just that.
As the Secretary of State said, low-carbon fuels could support up to 15,000 jobs and contribute £5 billion to the economy by 2050. The Sustainable Aviation Fuel Bill is a promising boost to our ambition in Doncaster to create a sustainable aviation hub linked to our airport, proving, despite what some on the Opposition Benches may say, that the green agenda and the sustainability agenda are firmly woven into—and are, in fact, essential to—the regeneration of areas that have often been forgotten, such as mine, and to the industries of the future, good jobs for young people and the security of the nation.
The Bill’s revenue certainty mechanism will widen opportunities for innovators, entrepreneurs and producers of fuels, propelling our aviation industry to world-class levels and helping us to become world leaders in an emerging market that will benefit our economy, our industry and our climate.
Perhaps most importantly, this critical infrastructure is sorely needed in Doncaster, and indeed across the country, to bring about the high-skill, high-wage jobs for my constituents and for young people across South Yorkshire. I know that our airport will champion the Government’s aviation fuel ambitions, as will I.
Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)
The SNP welcomes the Bill, which will support the expanding use of sustainable aviation fuel. We view that as an important action among the range of actions that are needed to meet our legal and—most importantly —moral obligations to reduce carbon and support global efforts to tackle climate change.
My constituency has already played an important role in the use of SAF, with RAF Lossiemouth being the first Air Force base to use a SAF fuel blend for routine operations, for both the Poseidon submarine hunters and the Typhoon squadrons operating with a SAF mix. The RAF has also conducted demonstrator flights with 100% SAF-fuelled aircraft, and refuelled jets in the air with SAF. Indeed, Group Captain Sarah Brewin, the station commander at RAF Lossiemouth, has stated:
“The use of sustainable aviation fuel represents a significant milestone in the RAF’s journey towards helping mitigate against climate change. By integrating sustainable practices into our operations, we are not only enhancing our ability to protect the nation and deliver excellence on operations, but also contributing to a more sustainable future for generations to come.”
I welcome the fact that the RAF has some ambitious targets to reduce its aviation carbon emissions.
Inverness airport, publicly owned by Highlands and Islands Airports Ltd and responsible to the Scottish Government, has offered SAF to operators since 2023—a vital piece of work towards the Scottish Government’s deliberately ambitious goal of creating the world’s first net zero aviation region by 2040.
Offshore supply flights are one of the most promising parts of our aviation sector for SAF potential. With Scotland having the lion’s share of these flights from Aberdeen airport, it is vital that we see investment in SAF production in Scotland. Aberdeen airport, operated by AGS Airports, has supplied SAF since 2022, helping offshore industries to reduce their emissions. In 2021, one of the first fully-SAF helicopter flights in the UK took off from Aberdeen airport. BP is working with Bristow Helicopters to ensure that flights to BP platforms have used a SAF blend for more than two and a half years.
Scotland has an immense SAF production potential. The Bill alone is insufficient to see us reach that potential, but it is an important part of that. Scotland’s SAF progress has been held back by the inaction of successive UK Governments on funding the Scottish carbon capture, usage and storage cluster. The CCUS cluster is, in turn, integral to the investment in SAF production at Grangemouth.
Industry body Sustainable Aviation found that a UK SAF industry could deliver £2.9 billion annually to the UK economy, and create more than 20,000 jobs. It is vital that, with long-overdue funding finally confirmed today—something that the SNP has campaigned on for over a decade—the full detail is rapidly made clear and that pace is further injected into the process if that overdue cash is to be converted to construction and processing.
My SNP colleague and Transport Secretary in the Scottish Government has put in place an expert working group on sustainable aviation fuel to exploit the potential for the Scottish economy.
I have covered our broad welcome for the Bill, but there is one area that the Government must address, which is ensuring that feedstocks are coming from sustainable sources. We welcome the Secretary of State’s comments on further design work in the process and we will see that come through in the passage of the Bill. However, the Government must set out how they plan to manage the sourcing of sustainable aviation fuel feedstocks, so that the waste hierarchy is adhered to, and that existing businesses are not damaged by the introduction of the revenue certainty mechanism.
The most obvious illustration of this is the potential use of high-quality wood as one potential feedstock for SAF production. Some Members, but I suspect not all, will be aware that current demand for wood will outstrip supply by 2035. It will be obvious to everyone that it takes more than 10 years to grow a forest, so there is a real and well-articulated concern from organisations such as the Wood Panel Industry Federation and the many sawmill operators throughout the UK.
The UK wood panel industry currently supplies 65% of the UK’s demand for wood panel products, utilising 25% of the annual roundwood harvest basket and 25% of the annual waste wood basket. Fully 10% of the UK economy utilises wood panel products and, again, it will not be lost on the Government that, in order to achieve a 1.5 million new homes target—something the SNP welcomes, given our own substantial success in social and affordable housing build in Scotland—protecting and growing wood supply will be absolutely vital.
The eligibility criteria for the SAF mandate stipulates that feedstock materials must be waste that cannot be prevented, reused or recycled in accordance with the waste hierarchy. While the mandate acknowledges the waste hierarchy, which in principle would prioritise the use of waste wood for recycling before energy recovery, it is not clear how it will be monitored and enforced, leaving supplies of waste wood vulnerable to being used in SAF, against the eligibility criteria. There is a risk that the introduction of a revenue certainty mechanism will incentivise producers wishing to use this essential raw material for SAF production.
There will be time during the passage of the Bill for Ministers to mitigate this risk and address this issue across the Departments involved, of which there are several. I particularly hope that the Deputy Prime Minister’s responsibility for housing will help to focus ministerial and wider departmental minds on ensuring that the final iteration of the Bill supports sustainable SAF feedstocks. There are many good ways to manufacture SAF, and there are some bad ones. Let us get the mix right in this Bill.
Euan Stainbank (Falkirk) (Lab)
I welcome this tremendous legislation, which comes not a minute too soon after the previous Government self-admittedly sat on their hands. The Bill will enable the essential move to the production of British sustainable aviation fuel, and I put on the record my thanks to the ministerial team and officials for bringing the Bill forward and for their answers to my extensive written questions.
Unless it is the will of the House to cry for the end of aviation as a practice, it is imperative that we back the sustainable use of biofuels, municipal waste, cover crops, ethanol, and even carbon dioxide straight out of the atmosphere, for aviation fuel. The mandate provides a modest progression for the aviation industry towards incorporating this fuel into its mix. We have genuinely world-leading research and development on Teesside, such as through Project Speedbird and Lighthouse Green Fuels. The green shoots of industry there must be supported by Government to enable their outcomes.
Both airlines and airports recognise the environmental and economic imperative of building a domestic SAF market. They understand that relying on imports to meet the mandate increases costs and introduces risk to our energy security, aviation resilience and national competitiveness, and there is the geopolitical risk of exposing ourselves to a cheap Chinese market. We shamefully saw the previous Government be willing to do that, as exposed by the hundreds of jobs now on the line at Alexander Dennis in my constituency due to aggressive state-subsidised Chinese industrial practices capturing an incrementally increasing share of the British bus manufacturing market. It is also in no small part thanks to the SNP Government recently buying four times as many Chinese buses as buses from Scotland, but I digress.
There is credible investment interest from traditional jet fuel producers and aviation operators, which have shown their willingness to put capital behind UK SAF projects. That investment is waiting for the RCM to be put in place, for private law contracts with manufacturers to be agreed, and for the industry to have complete certainty in investing in what is a nascent and uncertain technology.
The Bill must pass through the House as quickly as possible. One of the places that cannot afford to wait for investment is Grangemouth. The closure of the Grangemouth refinery has marked the end of over a century of oil refining on Falkirk’s doorstep, and jobs in the wider supply chain are at risk daily due to the loss of the economic anchor that the refinery provided the community. Petroineos’ conversion of the refinery into an import terminal compounds the concerns within the community that we will be reliant on cheap Chinese imports instead of growing our own SAF.
Grangemouth has the infrastructure, skills, logistics and the will to be a cornerstone of our domestic SAF industry and strategy in Scotland and across the United Kingdom, and it already has a commitment from the Government of £200 million from the national wealth fund. Organisations such as Scottish Enterprise and the team around Project Willow are already assessing investable proposals centred on SAF in Grangemouth. However, the dates for commencement of operations suggested in the report are still far too remote from the practical reality of workers who need to feed their kids and pay their mortgage.
With strategic support and the wise and expedient deployment of the £200 million dedicated by this UK Labour Government to Grangemouth, I firmly believe that we can rapidly transition Grangemouth from aviation fuel to SAF, serving as a model of industrial renewal. There are implications for fuel security in Scotland, for jobs in my constituency and the cost of heating and industrial fuel across the country. We cannot allow this to become another missed opportunity. For Grangemouth to have a chance of succeeding, we need acceleration.
With that in mind, I would like the Minister to answer the following questions. Considering that industry is raising concerns that we may have to wait up to nine months between the commencement of this legislation in quarter 4 of 2026 and the first private law contract being confirmed, what work can be done prior to the introduction of this legislation to bring the first of the contracts into effect as soon as humanly possible? How does the Bill intersect with Project Willow proposals for SAF at Grangemouth? Does the Minister understand the need to back and deliver that at pace? Would he like to touch on how the Project Willow report recommends delaying the HEFA cap? Does he consider the use of waste feedstocks for sustainable aviation fuel to be dirtier, cleaner or the same as waste incineration? What conversations has he had with colleagues at the Department for Environment, Food and Rural Affairs regarding the waste hierarchy implications?
In summary, we need the RCM rapidly, and we need to develop the industry at scale, and affordably. I hope that we can genuinely back British SAF, safeguard fuel security, protect skilled jobs and anchor the energy transition in communities such as Grangemouth, Teesside and all across the United Kingdom.
Lillian Jones (Kilmarnock and Loudoun) (Lab)
I rise to speak in this important debate as we address the challenge of modernising fuel sources and reducing our dependency on fossil fuels. I declare my interest as chair of the all-party parliamentary group for the wood panel industry. The transition to net zero in aviation is not just a climate imperative but an industrial opportunity. I commend the Government for bringing forward the Bill, which aims to provide long-term certainty for investors in the UK’s growing sustainable aviation fuel sector. However, in our efforts to decarbonise aviation, we must be careful not inadvertently to harm other strategically important industries that also contribute to our economic growth and environmental goals.
The UK wood panel industry is one such sector. It generates more than £1.1 billion in gross value added and supports more than 10,000 jobs across the UK, many in high-skilled manufacturing roles in Wales, the north of England and Scotland, including my home of Ayrshire and beyond. Those are well-paid, productive and future-facing jobs.
The sector is one of the UK’s largest industrial recyclers of post-consumer waste wood. It takes what would otherwise be discarded and turns it into essential materials for furniture, interior design and—crucially—the homes we are building, yet there is genuine concern that the SAF revenue certainty mechanism could distort markets by incentivising the diversion of recyclable wood and forestry products to fuel production. We have seen that before with the renewable heat incentive, where subsidies inflated virgin wood prices and squeezed out established manufacturers. We cannot afford to repeat that mistake. I am pleased to hear that Ministers have met industry representatives, listened to their concerns and responded positively. I would like to invite my hon. Friend the aviation Minister to come and speak to the APPG so that he can hear from the industry at first hand.
The SAF mandate rightly references the waste hierarchy, prioritising reuse and recycling before energy recovery. However, the enforcement mechanisms remain unclear. If high-quality waste wood is drawn into SAF production, prices will rise, availability will fall and our domestic supply chain will suffer.
Let me be clear that I support the ambition of SAF. I also support the Government’s ambition to build 1.5 million new homes, but that will not be possible without affordable, sustainable construction materials, including wood panels. I urge Ministers to maintain the current safeguards in the SAF mandate, uphold the exclusion of virgin and recyclable wood from eligibility, ensure robust enforcement of the waste hierarchy so that only truly non-recyclable wood can be used, and put in place transparency mechanisms so that we can track what feedstocks are being used. If we get the balance right, we can deliver cleaner skies and affordable homes, and we can decarbonise aviation without decimating domestic manufacturing. Let us make SAF sustainable in every sense: environmentally, economically and industrially.
Alice Macdonald (Norwich North) (Lab/Co-op)
I thank the Minister for all his engagement on the subject. I am definitely not an expert on sustainable aviation fuel—it is nice to be in a debate where we can learn so much—but I will focus on what it could mean for my area of Norfolk and the east of England.
As we have heard, the Bill has the power to support a sustainable aviation industry that will reduce carbon emissions, protect highly skilled jobs and drive green growth. Norwich airport in my constituency has been a user of sustainable aviation fuel since 2023. SaxonAir, a local flight operator, reported that it used nearly 3,000 litres of sustainable aviation fuel for a single aircraft alone in 2024. That usage shows us what a substantial reduction in carbon emissions can be made compared with regular jet fuels, but much more needs to be done.
Recently, Norwich airport, Suffolk and Norfolk county councils and SaxonAir launched Aviation East: a vision to make East Anglia an innovation hub for sustainable aviation. Sustainable aviation fuel was referenced as one of the vital building blocks for that mission, but that and what we are discussing today is part of a much broader landscape of innovation and decarbonisation in aviation. The east of England is already seeing amazing work to revolutionise the way we travel, resulting in faster, cleaner transport solutions such as electric aircraft and drone taxis. In fact, as the Minister said recently, we could have flying taxis in the Norfolk sky by 2028—the Jetsons are coming to Norwich, and the Minister will be coming too, to go in an electric plane.
Alongside this important Bill, I welcome action that the Government are taking to decarbonise aviation through airspace modernisation, low and zero-emission aircraft, and carbon pricing. I welcome the £1 billion of funding for the Aerospace Technology Institute, and the work that the Civil Aviation Authority is doing in the regulatory environment for zero emission aircraft.
The potential in our region, the east of England, is huge, including for our local economy and—importantly—our young people. Young people growing up in Norfolk and Norwich, as I did, want lots of different opportunities, but too often those opportunities are not there, and especially not on their own doorsteps. I know we can deliver many more jobs and apprenticeships, including at the International Aviation Academy in Norwich, which counts KLM as one of its partners. I am also on a mission to work with local stakeholders, so that that academy is working at full capacity, opening up opportunities to local people both now and for future generations.
Delivering the vision of Aviation East, and the measures in the Bill, feeds clearly into the Government’s growth missions, by delivering highly skilled, sustainable, world-leading engineering jobs. However, all fledgling innovations need protection, and sustainable aviation fuel is no different if it is to grow into an industry that could transform air travel for the better. I welcome the sustainable aviation fuel mandate that came into force this year and requires the blending of SAF into the UK-wide aviation fuel mix. I support that goal, but I recognise that it is achievable only when suppliers are protected and supported, by ensuring that a price is guaranteed, regardless of market forces. I recently met members of the East Anglian air ambulance, and I pay tribute to the amazing work they do, based out of Norwich airport. They told me that they use a mix of SAF, but that it is expensive and perhaps they could use a bit more if the price came down.
If the Government want to encourage innovation and drive growth in regions such as the east of England, providing a backstop price is the signal that shows investors we are serious about good green growth. With the Bill supporting sustainable aviation fuel producers, regional innovation hubs such as Norwich airport will only benefit, helping to increase their contribution to the UK’s sustainable aviation industry, reducing carbon emissions, tackling climate change, and driving green growth. I fully back the Bill.
Brian Leishman (Alloa and Grangemouth) (Lab)
My contribution comes from a slightly different angle compared with that of other hon. Members, but from the outset let me be clear: I welcome the Government’s plan for sustainable aviation fuel, and I thank my hon. Friend the Minister for his generous time discussing the matter. We can, however, hold different feelings at the same time, and while I approve of the plans, I feel a lot of anger and frustration at what has happened to my constituency. A joint venture of private capital through Sir Jim Ratcliffe’s INEOS and the Chinese state, called Petroineos, has closed the Grangemouth refinery. Hundreds of workers on site, and thousands in the wider supply chain, are to lose their jobs. Scotland no longer refines our oil and fuel, and national security has been weakened as a result.
Everyone is aware that the previous Conservative Government did not want to know about that issue, and the current SNP Government tried their very best to conceal their knowledge of the closure years ago. So while my Government have committed £200 million from the national wealth fund for new industries to come at some point down the line, that frankly is not enough. At Grangemouth we have seen another unjust transition. Four decades ago, it was the miners who were cast aside; now it is refinery workers. I understand why oil and gas workers in the north-east of Scotland are anxious, and they have every right to be.
The last four decades of privatisation have also highlighted the danger of private capital and foreign Government ownership of our vital industry. At Grangemouth, conversion from a traditional oil refinery to a plant that would create sustainable aviation fuel was a viable alternative to closure and would have meant a truly just transition for workers and my local community. It would also have helped the Government meet our ambitious SAF mandates and supported the UK aviation industry. Yet conversion was not deemed profitable enough for Petroineos, and the Scottish and UK Governments both meekly accepted the company calling the shots, with minimal pushback, in an example of working-class communities being let down by the collective political class.
Only yesterday, in questions to the Department for Energy Security and Net Zero, I asked what ownership stake the Government would take in future industries at Grangemouth. I am still waiting on a coherent answer. Let me be clear: if there is no Government ownership stake taken and we surrender all the new, greener industries, such as SAF, to private capital, the Government will have learned no lessons at all from the past four decades and we will never free ourselves from being at the mercy of those who put corporate profit ahead of our country’s needs.
Earlier today, the Chancellor said that she and the Secretary of State for Business and Trade were not ready to let a working-class community in Scunthorpe go to the wall. That is why they intervened to save steel there and that was absolutely the correct decision. However, the Chancellor and the Secretary of State should have treated the refinery workers of Grangemouth in the same way as they did the steelworkers of Scunthorpe. I urge the Government to take responsibility and to take ownership of vital industry in our national interest.
Chris Vince (Harlow) (Lab/Co-op)
I take this opportunity to wish everybody across the House a happy Carers Week.
It is a pleasure to speak on Second Reading of the Sustainable Aviation Fuel Bill. I know that many Members think that I make my speeches up as I go along, but I want them to know that I wrote this in advance and I did not wing it. Members will also be happy to know that that was my last joke in this speech. I will just say quickly to the hon. Member for Sutton and Cheam (Luke Taylor) that he should never apologise for using an equation in a speech.
As Members across the House will be aware, although I do not have an airport in my constituency, Harlow starts at the very end of the runway at Stansted airport, and thousands of its residents work at the airport in a variety of roles. I briefly pay tribute to the work of Stansted airport college in investing in training the local workforce.
As the Minister is aware, Stansted is part of Manchester Airports Group, which is focused on the development of SAF. Like this Government, the group recognises that SAF is the future. I will also briefly give a plug for the Harlow Group, which is involved in machining vital aircraft components, and so is in line with the airport on that.
As Members will recognise, the UK has a world-class aviation sector and a proud history in the field, from R. J. Mitchell to Morien Morgan. I am proud that this Labour Government are promoting growth, as well as decarbonisation, in the sector. SAF will help us deliver our clean energy mission and our growth mission, allowing the UK to be a world leader in the field once more.
Compared with fossil jet fuel, SAF will reduce gas emissions by around 70%, and we can all welcome that. The Bill will introduce a revenue certainty mechanism to provide a price guarantee for SAF producers. The Government believe that that will increase investor confidence in SAF production, and having spoken in depth about the issue with Stansted airport, it is clear that that is the stumbling block for greater SAF production and use.
In conclusion, I welcome the Bill and the Government’s ongoing commitment to decarbonisation and tackling climate change. I also welcome their commitment to being a world leader in the field.
Mrs Sureena Brackenridge (Wolverhampton North East) (Lab)
I thank my hon. Friend for giving way right at the end. Just like him, I welcome the announcement. As we hear from across the aviation sector, there is much to be championed in the transition to sustainable aviation fuel that will be enabled by the Bill. Although Collins Aerospace in my constituency does not produce SAF, it does develop the components and systems that mean that 100% SAF flight is a reality. Does my hon. Friend agree that that backs both the green transition and the industrial future for places such as our regions and Wolverhampton and Willenhall?
Chris Vince
I thank my hon. Friend for her contribution. She managed to get in just before my last words, so I shall have to make up a new conclusion. I absolutely agree with her point. The point I was going to make in my conclusion is that this Bill is really important for climate change and meeting our decarbonisation targets. We all know about the impact of climate change on the planet that we live on, and we only have one planet so we have to get this right. She is right to say that there is also a massive economic advantage to this.
I was really proud to mention two aviation pioneers from the United Kingdom earlier, and I think this country should be ambitious. We should once again be at the front of the queue when it comes to aviation technology and aviation pioneers. SAF is a huge part of that. This is not just about climate change; it is also about jobs and opportunities, and I am really excited that this will mean more jobs and opportunities for my constituency of Harlow as well as for Wolverhampton. I am delighted to support the Bill today, and I look forward to hearing many more contributions. I also look forward to this Government continuing with their flying start.
Amanda Hack (North West Leicestershire) (Lab)
It has been said by the Secretary of State and echoed across the Chamber that the UK has a world-class aviation sector that is key to growth in our economy. I welcome the introduction of the Bill as it will provide certainty for producers of sustainable aviation fuel, allowing the sector to grow and invest.
We all know the benefits that airports have for our communities, which is why my hon. Friends the Members for Doncaster Central (Sally Jameson) and for Doncaster East and the Isle of Axholme (Lee Pitcher) will welcome the Chancellor’s investment in Doncaster Sheffield. When we think about airports, we may automatically think about Heathrow, Gatwick, Luton, Birmingham and Manchester. However, as East Midlands airport is in my constituency of North West Leicestershire, it will be no surprise to anyone here that that is the airport I automatically think about.
The airport provides huge benefits to my local economy, as well as making an important contribution to the wider UK economy. As the second largest air freight terminal in the UK, East Midlands serves as the hub for DHL, UPS, FedEx and Royal Mail. This growth is backed by investment in the nearby east midlands rail hub, which transports our goods from port to port. In addition, the airport serves as a base for RVL, a specialist airline that provides support to the Environment Agency and the Maritime and Coastguard Agency. The transition to sustainable aviation fuel is going to be key if those organisations are to grasp the nettle on net zero.
My airport also serves millions of passengers every year, with the likes of Jet2, easyJet and Tui operating out of it, supporting my constituents and those from those across the midlands to take a well-deserved holiday. Having met representatives of Jet2 recently, I know that there is huge support for the introduction of the revenue certainty mechanism, and it will be interesting to hear more about the transitional arrangements to ensure that airlines such as Jet2 have the fuel they need to decarbonise and meet the mandated mix over the short term, as well as to see the SAF industry develop for the future.
As East Midlands airport’s thriving cargo facility extends to meet the demands of exporters from across the UK, cutting greenhouse gas emissions via sustainable aviation fuel will not only have significant benefits for net zero, but will put an estimated £5 billion a year back into our economy by 2050. It will also create additional jobs, securing a long-term sustainable future for the industry. It also puts forward a clear commitment to jobs at the airport, which will benefit my constituents and those of neighbouring MPs in the east midlands. I would welcome assurances from the Minister that North West Leicestershire will see the full strength of these training and work opportunities when they come about, because we have a lot to offer.
I know that the measures in this Bill, alongside the work announced to modernise airspace, will be welcomed by the sector. May I take this opportunity to invite the Minister to the 60th birthday party of East Midlands airport on 21 July?
Madam Deputy Speaker (Ms Nusrat Ghani)
I notice that that was an exclusive invitation just to the Minister.
Graeme Downie (Dunfermline and Dollar) (Lab)
Like my hon. Friend the Member for Harlow (Chris Vince) said, the hon. Member for Sutton and Cheam (Luke Taylor) should never be ashamed of being a geek of any kind. I definitely do not have his knowledge of formulas or anything like that, but I certainly am a self-professed aviation geek who has spent probably far too long sitting at the end of runways watching planes land for hours on end. When I was in high school, I used to cycle with one of my friends who lived close to the end of Edinburgh airport runway to just sit and watch aircraft come in—to the point that one time, the police came along and asked why these two 14-year-olds were sitting at the end of the runway watching aircraft land. I can assure everyone that nothing untoward or illegal was happening—we were just being that sad and geeky. I think that was the problem the police had; they did not believe that that was what two 14-year-olds were intending to do.
Luke Taylor
I would challenge the hon. Member’s commitment to aviation spotting if, during university, he did not take a date to the final approach at Heathrow airport and have her observing the flights coming in for a good two hours. He may be a geek, but he is not quite there yet.
Madam Deputy Speaker
It would rather depend on whether the date ended up marrying him, wouldn’t it?
Graeme Downie
I thank the hon. Member for that intervention. I will not ask for a second intervention on how that relationship progressed.
Aviation is a critical part of our national story and our economy, as others have said. As an island nation, we rely on the maritime and aviation sectors to get goods and people in and out of our country, so it is clear that aviation must continue to play a role in our future. In Scotland and in my constituency, that includes the movement of products like salmon and whisky, as well as tourists, to and from Dunfermline and the rest of Scotland. However, with aviation expected to become the largest transport sector emitter of carbon by 2040, it is clear that a range of transformational, long-term changes are needed in the sector to make it sustainable.
I recently had the privilege of hosting a sustainable aviation technology showcase in Parliament with companies such as Airbus, Boeing, easyJet, International Airlines Group and others, including some of the ones that have been mentioned. There I saw technological solutions ranging from radical changes to aircraft design to hydrogen-powered aircraft, as well as a number of SAF producers. I have also heard from Edinburgh airport, one of the largest employers in my constituency, of the importance of airspace reorganisation and regulatory changes, all of which will have a role in modernising aviation and reducing the environmental impact. I know that the Minister has been relentless in pursuing all these avenues to improve aviation in the UK, and we should thank him, his officials and the ministerial team for that work and commitment.
For all those people from different parts of the aviation ecosystem, the issue of SAF has been prime. On taking office, this Government took action much faster than many expected with the introduction of the SAF mandate. It obligates companies supplying fuel to airlines operating out of the UK to either incrementally increase the amount of SAF in use or pay a buy-out fee. That mandate started at 2% and will rise to 10% in 2030 and to 22% in 2040. That is the kind of direction and steer that the industry needed, but it will mean nothing if we do not produce SAF in the UK and invest now in the much longer-term plans for third generation SAF to make that a reality here and to make the UK a world leader in this technology, as well as playing a part in the future of our fledgling hydrogen sector.
Developing a strong SAF industry is a major industrial opportunity for the UK, as others have said. The UK can lead the SAF industry with job creation and innovation. At the event I mentioned, Airbus told me that it is committed to enabling 100% SAF capability across its aircraft production by 2030. According to the Back British SAF campaign, there is potential for over 10,000 jobs in the UK by 2030 and 60,000 jobs by 2050, a number of which would be in Scotland and in my constituency, as well as in the constituencies of other Members across the country. In due course, I hope that some of that might include investment in different parts of the SAF infrastructure in Fife, with proximity to Edinburgh airport and excellent sea, road and rail links.
For these and other reasons, I am delighted to see the Bill come forward. It clearly sets out the revenue certainty mechanism and the framework for setting a strike price that will support businesses and investment cases to make SAF a reality in the UK. It also establishes the route for funding via a levy on suppliers, along with enforcement and oversight.
I hope the Minister might respond in his summing up to a few specific points, some of which have been mentioned by colleagues. Under clause 1, what process does he intend to use to shape precise price points for producers and to calculate the market reference price? Clause 11, on financial penalties, contains provision to amend amounts in the light of inflation. Are those the only circumstances in which penalty amounts can change? Under clause 14, what oversight does he envisage if financial assistance is required to ensure value for money?
Clear and stable policy frameworks like this SAF Bill will be essential to unlocking private investment, accelerating SAF supply chains and positioning the UK as a global leader in the net zero transition, but the pace at which the legislation is introduced will be key, so will the Minister consider what steps he can take to accelerate the creation of a successful SAF industry here in the UK? As my hon. Friend the Member for Falkirk (Euan Stainbank) asked earlier, will the Minister begin work to create strike price contracts so that they are ready as quickly as possible when the legislation is passed? Will he consider moving the start date for the revenue mechanism forward to allow projects to get started as quickly as possible?
The Bill will be a significant part of the future of British aviation, British industry and British growth. I look forward to seeing its progress through the House.
Luke Myer (Middlesbrough South and East Cleveland) (Lab)
I welcome the Bill, particularly the introduction of the revenue certainty mechanism, which is not only a sensible intervention but a timely one. It gives investors clarity, it gives producers confidence and it gives communities such as mine a sense that this transition will bring jobs rather than take them away. I thank Ministers for listening not only to the sector but to those of us who represent Teesside.
In our region, we have a number of producers with an interest in scaling up SAF production—principally Alfanar, which has already invested £2.5 billion in our region and wants to go much further by building a brand-new plant that will create 2,300 construction jobs and 300 permanent jobs. Alfanar is not alone, however; we also have Iogen, Willis, Nova Pangaea, Abundia, Arcadia and many active producers or others looking to scale up—serious players with serious plans. I spoke to one earlier this week; it said that the Bill is exactly what the industry is looking for.
May I put just a couple of questions to the Minister? What those producers need now is confidence that enabling work for final investment decisions can begin, ideally before the Bill completes its full legislative journey. Of course, there is a precedent for that in the Energy Act 2023. What engagement will the Minister have with the Department for Energy Security and Net Zero on the carbon capture track project. I know that a number of the producers are keen to benefit from track 1 expansion, so producing those two things in train seems like a sensible thing to do, and I hope that there is cross-departmental engagement.
Ultimately, I thank the Government and urge them to move at pace to deliver the jobs that we want for the industry in our region. I want to ensure that young people watching from working-class communities across Teesside know that these are not abstract opportunities that are distant from them, but opportunities for them that they can get into—like our expansion in skills training. This sector can be transformative for the Tees valley region—not only for Middlesbrough but for Redcar and Cleveland, Stockton, Darlington and Hartlepool. Our area suffered industrial decline for many decades, but now we are seeing new life and new industry. Finally, Teesside is taking off.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call Chris McDonald for the final Back-Bench contribution.
Chris McDonald (Stockton North) (Lab)
We heard earlier from my hon. Friend the Member for Doncaster Central (Sally Jameson) how proud the people of Doncaster are of their airport, but I challenge her to a “pride in your local airport” competition, because nowhere is more proud of its local airport than Teesside—to the extent that whether politicians promise the continuation of flights from Teesside to Alicante is the most important issue in local politics. Quite right, too, because working people in Teesside save all year round for their seven days in the sun, and that is important to me and to everybody else who lives there. People who say that we need to reduce flights and the opportunity for working people to go on holiday are not living in the real world —they are certainly not talking to the people I talk to and live with.
Deirdre Costigan
I support the right of my hon. Friend’s Stockton North constituents to go on holiday to Alicante. Equally, in my Ealing, Southall constituency, 53% of people—including me—were born in a different country. Does he agree that they have the right to go home and visit family and friends, so it is important that we accept the reality of air travel and focus our time and energy on realistic plans, such as the one before us, to invest in sustainable air fuels?
Chris McDonald
I could not agree more. As my hon. Friend the Member for Dover and Deal (Mike Tapp) said, we are indeed an island nation, if anyone had not spotted that, and the quickest way to get about is to go by air. What everyone wants is to wake up on a morning in Stockton and then be sat on a beach in Benidorm by lunch time, and of course they can do that at Teesside airport.
The people of Teesside know that our future is about decarbonising. This Government have invested £4 billion in carbon capture and storage. We have the largest offshore wind monopile factory in our area, and we are producing green hydrogen in Billingham in my constituency—in fact, Billingham produces 50% of the UK’s hydrogen, and Billingham and Teesside more generally is set to become Europe’s main centre for sustainable aviation fuel.
I am sure that sustainable aviation fuel will be produced in Grangemouth, Humberside, the north-west and south Wales, but the market is enormous and, as we heard from my hon. Friend the Member for Middlesbrough South and East Cleveland (Luke Myer), Teesside and Billingham in my constituency is best placed in the whole of Europe to deal with this. The biggest threat to that at the moment is not the fantastic plans of this Government, but the ideological adherence of members of Reform to anti-net zero. As usual, I find myself in this House standing up for new jobs for industrial communities in my area, alongside my hon. Friend the Member for Middlesbrough South and East Cleveland. Where are the Reform Members? They are not here—they are never here.
Lewis Atkinson (Sunderland Central) (Lab)
As well as the welcome developments that my hon. Friend alludes to in the Tees, this is about the wider north-east. In my constituency, Wastefront has a £100 million investment and is creating 100 good jobs on the River Wear. Does he agree that jobs are being made in the wider north-east through this Government’s policy and that they are under threat from the policies of Opposition parties that he mentioned?
Chris McDonald
I agree. Whether it is in Sunderland or, as I mentioned, the north-west and down in south Wales, we will see jobs in the supply chain throughout all this work. It will also benefit Heathrow and our other major airport hubs.
I thought it might be useful to make a few comments about why I believe SAF is the solution. The hon. Member for Sutton and Cheam (Luke Taylor) gave a great description of why the flight range equations essentially drive us in the direction of sustainable aviation fuel. Electrification certainly would be possible for short-haul flights, but the hydrogen simply does not have the density. As I think the hon. Gentleman also said, infrastructure is important—we heard that from the Secretary of State in her opening statement—because planes take off from one place, but they land somewhere else, and they need to be able to refuel there too.
Sustainable aviation fuel is certainly the right approach, but a couple of Members raised concerns in the debate about the raw materials for feedstock—my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) raised that issue. The hon. Member for Mid Bedfordshire (Blake Stephenson) said that he had learned about second-generation sustainable aviation fuels; it is probably just as well that he is not in his place, because I might blow his mind when I talk about third-generation and fourth-generation sustainable aviation fuels.
Essentially, there are concerns about the raw materials and municipal waste. Although the amount of waste per person will decline, a lot of it is put into energy from waste plants, and the new investments are really about future generations of SAF. We have heard about biomass. If that biomass is not from a feedstock, perhaps that verges into the second generation, but it is third-generation and fourth-generation sustainable aviation fuel that will enable us to scale up this industry. That will open it up to the direct combination of carbon dioxide and hydrogen using green electricity, which will enable us to scale it up. An abundant supply of those raw materials is needed, which is why I am so confident that we will see the industry spread around the whole of the UK.
Why do I say Billingham will become the UK and European centre for this work? There is a justification. Teesside already produces 50% of the UK’s hydrogen, and the chemicals cluster there is well-known for producing pharmaceuticals for fertilisers and various other chemicals. We produced synthetic petrol in Billingham in the 1930s, and we produced synthetic jet fuel there in the 1940s for the Royal Air Force during the second world war. I say that not to imply in some way that we still have the skillset—many of those people are quite rightly enjoying their retirement, or have perhaps moved on from that—but to demonstrate to the House that there is not a big technological risk associated with this technology. Third-generation SAF will rely on the Fischer-Tropsch process, which has been around for 100 years.
In fact, when I talk to investors in the industry and ask them what the big risks are, they highlight economic risks—with which the Government are getting to grips right now through this legislation—and political risk, which is about the consistency of Government policy. As I mentioned earlier, the biggest threat to these jobs and to this industry is the ideology of the Reform party. As we see the jobs and investment, I am confident that people in my local community will vote for jobs and investment in the future as well.
As such, I warmly welcome this legislation. I very much look forward to the day when I can welcome right hon. and hon. Members to Teesside international airport, and enjoy a drink with them in the bar before we jet off to Alicante for our holidays.
Greg Smith (Mid Buckinghamshire) (Con)
Before I begin, I draw the House’s attention to my entry in the Register of Members’ Financial Interests, with respect to a donation from P1 Fuels. Although it does not make aviation fuel, it was in the synthetics business, and—as the Minister well knows—I ran a classic Land Rover on that fuel last summer to prove the point that this stuff works.
The test that net zero must meet is that all our constituents must still be able to do everything they do today—be it fly on holiday, drive, or get a ferry or anything else that runs on a liquid hydrocarbon—and that businesses must still be able to move goods around the world and trade at the same price as today, or for an equivalent price, just greener. In that, technology is our friend, as is the innovation we see—particularly on these shores, but also innovation that is happening abroad. As my hon. Friend the Member for Orpington (Gareth Bacon), the shadow Secretary of State, said earlier in the debate, the Opposition do not seek to divide the House on Second Reading. This Bill is an extension of the previous Government’s agenda in this regard, and we fully recognise the need to replace fossil fuels over time and, in this instance, to replace aviation fuel with a cleaner, greener alternative. However, there will be key questions that the House should look at as this Bill goes through Committee and its later stages, which do need answers. We have heard some of those questions throughout this afternoon’s debate.
We have had a good and wide-ranging debate, with very little deviation from the core consensus that sits underneath the Bill. On the Conservative Benches, my hon. Friend the Member for Mid Bedfordshire (Blake Stephenson) made the important point that aviation will be critical to get the tourists into the new Universal theme park in Bedfordshire when it eventually opens. He also focused on the important role that Cranfield University and industry in his constituency are playing—they are providing part of the solution to the problem that this Bill seeks to support and deliver. Equally, he asked the legitimate question of how the United Kingdom mechanism and mandate compare with those overseas, which I hope the Minister will reflect on in his winding-up speech.
On the Government Benches, the chairman of the Transport Select Committee, the hon. Member for Brentford and Isleworth (Ruth Cadbury), spoke well and in an informed way on this subject. She and I both served on the Transport Committee in the previous Parliament, and we both worked on the inquiry and report on the fuels of the future that the Committee produced during that Parliament. She rightly made good points about the supply of waste for SAF technology and the trade-off with energy from waste facilities, for example. There will have to be some conversations within Government, particularly with the Ministry of Housing, Communities and Local Government, about the way in which so many councils, including my own in Buckinghamshire, now send all general waste to an energy from waste facility. Those incinerators and facilities have been financed through multi-decade deals, and if we are to get that waste into SAF production, some of those deals will inevitably have to be undone or renegotiated. Who will bear the cost of that?
The hon. Lady equally raised an important point about bioethanol—I do not know whether it was just shadow Ministers who received an email from Vivergo Fuels this week, or whether it was all Members of the House. That email gave a pretty stark warning, particularly about the impact of the US trade deal that the Government have done on the bioethanol space. Essentially, it warned that that deal could completely undermine the UK bioethanol industry. That is a serious concern that the Department for Transport and the Department for Business and Trade will have to work out if we are to have domestic bioethanol production, as much for sustainable aviation fuel as for petrol. We largely all fill up—unless we have classic cars—with E10 at the pump. E5 is still 5% bioethanol. As this Bill passes through the House and as the petrol debate for road cars moves on, that serious question will have to be answered. When we get a warning from industry as stark as the one from Vivergo Fuels, it needs to be addressed.
The hon. Member for North Somerset (Sadik Al-Hassan) mentioned the role of hydrogen in the mix, and I look forward to debating that with him when he has a debate on this issue in Westminster Hall next week, I think. He is absolutely right that there are other technologies and other fuels out there. The hon. Member for Derby South (Baggy Shanker) correctly pointed out that there can be no net zero without many of the elements of this Bill. The hon. Member for Doncaster Central (Sally Jameson) spoke passionately about Doncaster airport and the sustainable future that the Bill will help bring about.
The hon. Member for Falkirk (Euan Stainbank) spoke in support of the Bill, and the hon. Member for Kilmarnock and Loudoun (Lillian Jones) spoke in an informed way about SAF production, which forms such an important part of the Bill. The hon. Member for Norwich North (Alice Macdonald) rightly spoke of the innovative landscape, although the drone taxis did worry me a little bit—I am not sure we have completely got goods being delivered properly by drones yet, so we should do that before we start putting people in them. Equally, she rightly spoke about the world-leading engineering jobs that will be created.
The hon. Member for Alloa and Grangemouth (Brian Leishman) slightly broke the consensus, but he was entirely right to speak up for his constituents and his constituency interests so passionately. I think there is a legitimate debate about the refineries that we have lost, the refineries that we still have and how this debate intersects with them.
I will not dwell too much on the puns of the hon. Member for Harlow (Chris Vince). I thought he was a teacher before he entered this House, but perhaps he also wrote for Bobby Davro, given some of the puns he came up with.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
For the benefit of younger Members, Bobby Davro was a comedian.
Greg Smith
The hon. Gentleman shows my age, and no doubt his own, with that sedentary interjection.
The hon. Member for Harlow was right to focus on the skills agenda that underpins this legislation, on which I do not think we have heard so much from the Government. Likewise, the hon. Member for North West Leicestershire (Amanda Hack) rightly pointed out the lived experience of Jet2 and the impact on cargo. We have heard a lot in this debate about moving people around the country and the world using aviation, but not so much about cargo, which is an equally important part of our role as a global trading nation. The hon. Member for Dunfermline and Dollar (Graeme Downie), putting aside his little geek-off with the hon. Member for Sutton and Cheam (Luke Taylor), was right to focus on that agenda of moving goods as well as people.
We also heard from Teesside, with the hon. Member for Middlesbrough South and East Cleveland (Luke Myer) and the hon. Member for Stockton North (Chris McDonald). In fact, I am a little worried. This morning I was in Westminster Hall with the hon. Member for Stockton North, for a debate on the space industry, in which I agreed with every word he said, and I am a bit nervous to say that I agreed with him this afternoon, too. That does not often happen in this House, but he was absolutely right that all our constituents work hard and save hard. They want that family holiday or that weekend away or whatever it is every single year, and it would be a gross dereliction of duty for any of us to lumber them with higher airfares or to try to make their holidays more expensive. That is not what any of them send any of us here to do; they want us to ensure that they can still live their lives in the way they wish.
Briefly, the hon. Member for Sutton and Cheam warned us that he might be boring but, uncharacteristically for a Liberal Democrat, he actually was not. [Laughter.] I very much enjoyed his speech and the knowledge that he brought from his 16 years of work in the aviation sector. The hon. Member for Moray West, Nairn and Strathspey (Graham Leadbitter) was equally right to focus on another matter that a few Members have raised in the debate: the use of SAF by our armed forces, particular the Royal Air Force and the Royal Navy.
The use of technology, from fuels derived from waste and feedstock to pure synthetics, is where I think much of the debate will go in the coming years. In fact, the technology to enable us to move on from those feedstock and waste-derived fuels already exists. In 2021 the RAF flew a plane not on a blend of SAF, but on 100% synthetic fuel made right here in the United Kingdom by a company called Zero Petroleum, which was mentioned by my right hon. Friend the Member for Goole and Pocklington (David Davis).
Let me now turn to a part of the agenda on which I think we will need to have a conversation when the Bill goes into Committee. The Bill gives no detail on the approach to be taken regarding the specifics of the contracting between the producer and the counterparty, the Government contractor for the strike price. In the background material, especially that which can be found in the Government’s response to the consultation on the SAF revenue certainty mechanism, the ambitions are largely there, and we are not critical of the ambitions that sit within that document, but it might be beneficial to be sure that the contracting will follow those ambitions.
Given that the SAF mandate already in force includes a ringfenced mandate for an electro-sustainable aviation fuel quota, it is critical that eSAF projects are supported equally within the revenue certainty mechanism. It is important both to develop a UK market for SAF and eSAF, and local production as created by the Bill and the mandate, and to support and encourage the use of home-grown technology for the manufacture of SAF and eSAF, as that not only retains revenue within the United Kingdom but leverages a huge amount of revenue for future exports through technology licensing. Sadly, a great many projects supported by grants from the Advanced Fuels Fund are using foreign technology.
Perhaps I could suggest that the Government reflect, ahead of the Committee stage, on the possibility of adding another ambition to those that they have already set out: namely, to reward or incentivise the use of UK technology in projects supported by the revenue support mechanism. The House may be surprised to know that, despite the various programmes of UK Government support for SAF and eSAF, AFF grants, SAF mandates and the SAF revenue certainty mechanism, no UK Government bodies are mandated to support the development of the core technologies of fuel synthesis.
We have a great tradition of research and development in this country. Companies such as Zero Petroleum have been funded entirely by private capital—which is largely a good thing—and also through some of their RAF and Ministry of Defence contracts, for different reasons. Notably, however, the Aerospace Technology Institute is the Government-funded body that should be supporting SAF and eSAF manufacturing technology. It supports everything else, including hydrogen and electric aircraft, but, bizarrely, it is not permitted to fund SAF and eSAF technology programmes. That is a huge misalignment in the strategy, which I hope the Minister can address.
I have a few key questions for the Minister, and he is showing great enthusiasm about answering them. We will be spending three days in Committee, so there will be many more to come.
Greg Smith
We can negotiate more, I am sure. [Interruption.] The less we hear about the hon. Gentleman’s date at Heathrow, the better.
Are the Government able to outline their level of certainty about the costs to taxpayers? Is there confidence that the levy imposed on fuel suppliers will not lead to significant rises in ticket prices? In other words, what will ensure that the £1.50 variance in either direction is not a hope, not a dream and not a best-case scenario, but a reality about air fares?
It would also be helpful if details could be provided about the expected cost of importing SAF in comparison with the cost of producing it in the United Kingdom. If we are imposing costs on passengers through levies, is it expected that SAF can be produced more cheaply in other regions, or is the policy focused primarily on energy security? As I have said, our view is that we should make the fuel right here in the United Kingdom using our technology, but in order to get the right price from our technology in the UK, it is important that we understand the market overseas.
Can the Minister outline what proportion of the SAF used in the UK is expected to be produced domestically in the first instance? What would constitute success in the first iterations? The Government have suggested that financing a plant costs between £600 million and £2 billion. From a regulatory perspective, what can be done to ensure that plants fall towards the lower end of that cost range?
There are many questions to be answered in getting the Bill right. We want to get it right, and we want to see sustainable aviation fuel used in our aircraft. We will not divide the House today, but the test, as always, is this: have the Government got it right?
The Parliamentary Under-Secretary of State for Transport (Mike Kane)
I thank nearly all Members—no, all Members—for their consideration of the draft Bill and for their valuable contributions to this debate. I am grateful to the Opposition for their questions and scrutiny, and we will make sure as a House that we get this right for our nation.
I fully concur with the shadow Minister, the hon. Member for Mid Buckinghamshire (Greg Smith), that the Liberal Democrats have not been boring today, and I am grateful for their support in this matter. Having worked with the Liberal Democrats in the past, I know that they are always with you in the room until the fight breaks out, so let us see how we get on over the next period.
Max Wilkinson
Will the Minister congratulate innovators such as my constituent James Hygate, who was recently awarded an OBE for his work on green fuels? Over genteel tea and cake—as the House can imagine, this happens all the time in Cheltenham—he told me of his plans to turn human faeces into SAF. He is an innovator at the leading edge, and he says that the Minister might be able to work with his friends in the Department for Environment, Food and Rural Affairs to solve some of the problems that we have with sewage in our rivers, by taking it out at source. Is the Minister considering that as part of this legislation?
Mike Kane
I thank the hon. Member for his contribution and join him in thanking James Hygate OBE for his work in this area. On the serious point about waste, I sit on the small ministerial group for the circular economy. It is a big part of what this Government are trying to do, and we will see how that work progresses.
The UK stands at the forefront of global efforts to decarbonise aviation. When this Government came into power, we acted immediately by laying the statutory instrument for the SAF mandate, which has been in place since 1 January. We have established the UK airspace design service, a programme of work that will modernise the airspace above us by decarbonising and supporting cleaner flights with fewer delays. We are now the first legislature on the planet to introduce a revenue certainty mechanism, and the world is looking to us. I hope that this House can get behind us.
Jim Shannon (Strangford) (DUP)
We cannot help but be excited about the Bill because of its potential to deliver. The Minister is a good friend of us in Northern Ireland, and a good friend of all of us in this Chamber and across this great nation. There are innovative people in Northern Ireland who have the technology, and they wish to play their part. Is it the Minister’s intention to ensure that everyone across this great United Kingdom of Great Britain and Northern Ireland has the opportunity to feed into SAF and to gain the benefit from it?
Mike Kane
I am always delighted to answer questions from the hon. Gentleman, who represents a place that I love dearly. I have responsibility for maritime travel, and we see Artemis Technologies decarbonising our maritime sector. We have refineries in Belfast. I spoke to a major chief executive whose family emigrated to Canada from Belfast and who is very fond of the city. We expect him to talk to his companies about applying for the contracts when we eventually let them do so, and that will be key.
I have a lot of questions to get through. The £1.50 that the hon. Member for Orpington (Gareth Bacon) mentioned could be £1.50 more or £1.50 less, but I am happy to hand over £1.50 to him now, if he wishes. That is not going to have an impact on people’s ability to fly to destinations, as he rightly said. I think people flying for their annual holiday is key to the British way of life, and I do not want to damage that whatsoever. That analysis comes from Department for Transport business team itself.
Many of the questions were about going faster. I must gently point out that we were promised four plants by 2025 by the last Government, but I am not going to get into that. We could not go any faster—this is still the first Session—and we had to introduce the mandate and we are now introducing part 2, which is the RCM. So I would say we are going at as fast a pace as humanly possible.
We are neutral on when the contracts are bid for, so I say to those worried about waste or HEFA streams that these contracts change over time, and we will see what bids come in. The hon. Member for Orpington also mentioned large plants, and he will have seen Members—mainly those Government Members behind me—from our industrial north, south Wales and other places queuing up to get advanced, high-manufacturing facilities with well-paid, trade-unionised jobs. As we advance this, we are working with the industry on the strike price.
The Chair of the Transport Committee, my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury), said this is not a silver bullet, and it is not, but it is part of the package—airspace modernisation, sustainable aviation fuels, carbon pricing, carbon capture technology and zero emission flight—that this Government are pursuing to decarbonise aviation in our country, and we are investing £1 billion in the Aerospace Technology Institute to do that.
My hon. Friend also mentioned Heathrow, and my right hon. Friend the Secretary of State, who has shown great leadership in this space—along with other Members, officials and the industry—has pointed out that the expansion of Heathrow is accounted for in the sixth carbon budget. I thank the hon. Member for Wimbledon (Mr Kohler) for his thanks to me for getting on with what is part of a package of decarbonisation, as he rightly pointed out.
My hon. Friend the Member for North Somerset (Sadik Al-Hassan) is a doughty champion for Bristol airport—he mentions it every time I meet him in the Tea Room—and a champion for hydrogen. I look forward to visiting his airport and to replying to his Westminster Hall debate on Tuesday.
The hon. Member for Mid Bedfordshire (Blake Stephenson) takes any opportunity he has to plug the Universal theme park. He spoke about his support for Luton airport, and how it will be a gateway for regeneration in his area. On how the approach differs from those of other markets, we are the first ones to do it. If we get this done in the next few weeks, we will be the only legislature on the planet to have done so, and the world is looking to us to move this forward.
Coming to my hon. Friend the Member for Derby South (Baggy Shanker), there was a bit of an arms race between Members, if they do not mind my saying so, about who loves their airport the most—Teesside, Norwich, East Midlands and on it went. I think we should have an independent competition for who loves their airport—
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
Stoke-on-Trent does not have an airport, but we do use Manchester airport quite a lot, so while the Minister is sitting next to the Transport Secretary on the Front Bench, could he put in a word for a direct train link from Stoke to Manchester airport, so we can all enjoy his airport as much as he does?
Mike Kane
Personally, I disagree with my hon. Friend, because I think Stoke has a great airport—it is in my constituency, and it is called Manchester airport.
I can assure the House that I am not going to take any lessons on date nights from the hon. Member for Sutton and Cheam (Luke Taylor). [Laughter.] But it is great to hear his expertise in this area. We do value that expertise in the House and I hope he makes the Public Bill Committee. He mentions ZeroAvia, which I worked with in opposition and in government, and how well it is doing with zero emission flights. He may have to run that equation past me again—I did not pick it up the first time.
What a doughty champion for Doncaster Sheffield airport my hon. Friend the Member for Doncaster Central (Sally Jameson) is. It was great to hear the Chancellor mention it in her statement today.
I am glad that the hon. Member for Moray West, Nairn and Strathspey (Graham Leadbitter), the transport spokesman for the SNP, welcomes the Bill. It is really good to see how the military and our armed services are getting in on the decarbonisation agenda. The RAF Lossiemouth, in his patch, is showing good practice.
My hon. Friend the Member for Falkirk (Euan Stainbank) talked with passion about Grangemouth near his constituency. In direct answer to his question, we have no plans to review the HEFA cap. This is about security in a fragile geopolitical situation and also about competitiveness. I remind him and my hon. Friend the Member for Alloa and Grangemouth (Brian Leishman) that the Government are considering EY’s report and recommendations regarding the refinery. The national wealth fund stands ready, and we encourage investors to come forward and secure the long-term future at Grangemouth.
My hon. Friend the Member for Kilmarnock and Loudoun (Lillian Jones) is right. This industry produces well-paid, unionised jobs often in industrial areas that have been deindustrialised. I thank her for her work chairing the APPG for the wood panel industry, and I am happy to accept her offer to speak to it.
My hon. Friend the Member for Norwich North (Alice Macdonald) is another doughty campaigner for Norwich airport and its sustainable aviation hub. She is pushing that so hard. I was glad to meet her recently and I hope to visit Norwich in the near future. She talked about the jobs and apprenticeships that go with it.
My hon. Friend the Member for Alloa and Grangemouth —I will refine my remarks on Jim Ratcliffe; as a Manchester City fan, I had better be careful that I do not say anything out of turn—is right to talk about deindustrialisation. I saw that in east Manchester growing up in the ’70s, with the chemical and the mining industries. We are only now getting over that in parts of our great city. I just remind him that if we do this right, we are looking at 15,000 jobs and £5 billion to the economy by 2050.
I once tried a joke in the House and Mr Speaker said, “Don’t give up the day job.” I remind my hon. Friend the Member for Harlow (Chris Vince) of that advice. At every opportunity, he raises the work he does with Stansted airport. He ended his speech really strongly, saying that the country should be ambitious in this field. I completely concur.
My hon. Friend the Member for North West Leicestershire (Amanda Hack) talked about her love affair with East Midlands airport and how important it is to freight. I have had roundtables with the freight industry on how we grow our freight industry in the UK. If I can get to her airport’s 60th birthday celebrations, I will.
I wondered where my hon. Friend the Member for Dunfermline and Dollar (Graeme Downie) was going with that police story. And then we got into a very geeky arms race with the hon. Member for Cheltenham (Max Wilkinson). He is right to say that aviation, while a small emitter now, becomes a much larger emitter, or the largest, by 2040. That is why it is imperative that we do this now—another call to arms to go faster.
I think my hon. Friend the Member for Middlesbrough South and East Cleveland (Luke Myer) said he was a supporter of the airport near his constituency. Alfana, Arcadia, Iogen and a plethora of companies could bid for contracts in the region and support a manufacturing renaissance. Just to remind him about carbon capture, which he mentioned, the Prime Minister recently announced £22 billion of Government money to research carbon capture and technology at Stanlow.
In the arms race for who loves their airport most, my hon. Friend the Member for Stockton North (Chris McDonald) talked about hydrogen, wind, solar and clean energy.
Reform Members are not present, which is key because—[Interruption.] Oh, they are here now. Reform promises that it is going to re-industrialise these areas, but without a financial plan that adds up. This Government are actually getting on with it, and we will continue to get on with it.
This Government have demonstrated that we are committed to supporting our world-class aviation sector through what we have done in the first short few months of this Government. We have the third biggest aviation market on the planet, which is world class and competitive, and we want it to remain that way. We want more people to be able to fly, and we want them to do it sustainably, and that is why the transition to SAF is not a mere aspiration, but an imperative. I recognise that there will be challenges, but SAF will have our unwavering support, which is why we are backing it in the Bill, and I am grateful for the support around this Chamber today.
The revenue certainty mechanism will help new SAF plants to get off the ground, supporting good, green jobs in places like Teesside. Our SAF policies are helping to create the right environment for companies like Exolum, based in the constituency of my hon. Friend the Member for Chester North and Neston (Samantha Dixon), which pipes the sustainable fuel to Heathrow, Gatwick and, of course, the UK’s fastest-growing airport, Manchester.
The Bill is delivering on our growth and clean energy missions and on our manifesto commitment to secure the aviation industry’s long-term future through promoting SAF. I urge this House to give the Bill its full support, and I stand ready to work with Members across this House on that. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Sustainable Aviation Fuel Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Sustainable Aviation Fuel Bill:
Committal
The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 22 July.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Heidi Alexander.)
Question agreed to.
Sustainable Aviation Fuel Bill (Money)
King’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Sustainable Aviation Fuel Bill it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred under the Act by the Secretary of State.—(Heidi Alexander.)
Question agreed to.
Sustainable Aviation Fuel Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Sustainable Aviation Fuel Bill, it is expedient to authorise:
(a) provisions by virtue of which persons may be required to make payments, or to provide financial collateral, to a designated counterparty, and
(b) the payment of sums into the Consolidated Fund.—(Heidi Alexander.)
Question agreed to.
Sustainable Aviation Fuel Bill (First sitting)
Tuesday 15th July 2025
(2 weeks, 2 days ago)
Public Bill CommitteesSustainable Aviation Fuel Bill 2024-26 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 15 July 2025 - (15 Jul 2025)
The Chair
I remind Members to switch off or silence electronic devices. As Members know, tea and coffee are not allowed during our sittings. Date Time Witness Tuesday 15 July Until no later than 10.10 am Fuels Industry UK; Airlines UK; Renewable Transport Fuel Association Tuesday 15 July Until no later than 10.55 am International Airlines Group; Virgin Atlantic; EasyJet Tuesday 15 July Until no later than 11.25 am LanzaJet; Alfanar Projects Tuesday 15 July Until no later than 2.20 pm Zero Petroleum Tuesday 15 July Until no later than 2.40 pm Shell International Ltd Tuesday 15 July Until no later than 3 pm Heathrow Airport Tuesday 15 July Until no later than 3.20 pm Green Finance Institute Tuesday 15 July Until no later than 3.20 pm Green Finance Institute Tuesday 15 July Until no later than 3.40 pm Mr Philip New Tuesday 15 July Until no later than 4 pm Chartered Institute of Logistics and Transport Tuesday 15 July Until no later than 4.20 pm UCL Centre for Sustainable Aviation Tuesday 15 July Until no later than 4.40 pm Department for Transport
We will first consider the programme motion on the amendment paper; we will then consider a motion to enable the reporting of written evidence for publication and a motion to allow us to deliberate in private about our questions, before the oral evidence sessions. In view of the time available, I hope that we can take those matters formally, without debate.
I call the Minister to move the programme motion standing in his name, which was discussed yesterday by the Programming Sub-Committee for the Bill.
Ordered,
That—
1. the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 15 July) meet—
(a) at 2.00 pm on Tuesday 15 July;
(b) at 11.30 am and 2.00 pm on Thursday 17 July;
(c) at 9.25 am and 2.00 pm on Tuesday 22 July;
2. the Committee shall hear oral evidence in accordance with the following Table:
3. proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 11; Schedule; Clauses 12 to 14; new Clauses; new Schedules; Clauses 15 to 19; remaining proceedings on the Bill;
4. the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 22 July.—(Mike Kane.)
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Mike Kane.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room.
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Mike Kane.)
The Chair
Before we hear from the witnesses, does any Member wish to make a declaration of interest in connection with the Bill?
Greg Smith (Mid Buckinghamshire) (Con)
I made this declaration on Second Reading as well; I do not think it is strictly relevant, but I wish to be very transparent: I got a donation of sustainable fuel, to use in a road car, from a company that does not produce sustainable aviation fuel. It is recorded in the Register of Members’ Financial Interests.
Luke Taylor (Sutton and Cheam) (LD)
As the chair of the all-party parliamentary group for the future of aviation, travel and aerospace, I have met a number of the groups that will be presenting today. In fact, I met Rob only yesterday for information on the Bill and its content.
The Chair
That is noted and on the record.
Examination of Witnesses
Paul Greenwood, Rob Griggs and Gaynor Hartnell gave evidence.
The Chair
We will now hear evidence from Paul Greenwood of Fuels Industry UK, Rob Griggs of Airlines UK and Gaynor Hartnell of the Renewable Transport Fuel Association. You are all welcome.
I remind hon. Members that questions should be limited to matters within the scope of the Bill. I will call colleagues to order if they wander outside the scope of the Bill. We must stick to the timings in the programme order that the Committee agreed; for this session, we have until 10.10 am.
Before I ask the witnesses to introduce themselves briefly for the record, let me say that if I say, “Order, order” at the end, it is because we are on a very tight timetable, so please forgive any abruptness in calling you to order. Over to you.
Rob Griggs: Good morning, everyone. I am Rob Griggs, the director of policy and public affairs at Airlines UK. We are the trade association representing UK airlines.
Gaynor Hartnell: My name is Gaynor Hartnell. I am the senior adviser to the Renewable Transport Fuel Association and am its former chief executive. The RTFA is a trade association representing UK producers of renewable fuels.
Paul Greenwood: Good morning. My name is Paul Greenwood. I am the UK chair of ExxonMobil, ultimately responsible for all of Esso’s activities in the UK. I am here on behalf of Fuels Industry UK, the trade association for fuel producers and suppliers in the UK.
Greg Smith
Q
Rob Griggs: Our starting position as UK airlines is that we recognise that the Bill is principally an enabling Bill. Of the issues that we really care about, the revenue certainty mechanism is really important. We fully support the RCM: it is a critical way to drive the investment that we think we will need in the UK sustainable aviation fuel sector to support the advanced SAF industry in particular and that part of the mandate, which starts to become considerable by 2030.
We need to get the RCM right. The design matters to make sure that we get the most from it and deliver the most cost-competitive, efficient decarbonisation of the sector while supporting and protecting UK consumers as well as fliers. We think that we can do that with a well-designed RCM. We know that many of the design elements will come through in secondary legislation and further consultation after this point, so we do not see anything in the Bill that is particularly problematic.
At this point, we would not proactively suggest that any amendments are necessary. We recognise some of the important elements. We know that the levy will be on fuel suppliers, but we think it is really important that there is accountability in what happens to the money. In all likelihood, the costs of the levy will be passed through to airlines and ultimately to consumers and to the UK public, so there needs to be accountability about the levy and the funding mechanism. The Bill does not prevent that, but it will be important to get it right in future.
Greg Smith
Q
Secondly, you have talked about advanced SAF. Does the Bill do enough to safeguard any state involvement in encouraging the right long-term technology, rather than standing up earlier technologies that we can all see might well need to be stood down in 10 or 20 years when something better has come along?
Rob Griggs: We recognise the £1.50, and we absolutely welcome the commitment through the mandate that if there were price spikes as a result of SAF policy, steps would be taken to address that. For us, it is probably a little too early to say definitively what the price impact of the RCM will be. A lot of it depends on its ultimate scope and design, as well as the costs in the 2G market and the strike price.
We have to bear in mind that ultimately it is the market price of SAF that will drive the biggest impact on ticket prices and the costs borne by the sector. With the RCM, the costs relate essentially either to paying the difference between the cost of SAF and production or to the fact that money can come back the other way. Relatively speaking, although the RCM costs are very important and we need to do everything we can to make sure that they are kept as low and as efficient as possible, they are part of a bigger picture. There are a number of factors that will determine the cost of SAF for the UK. We need to get everything right; the RCM is just one part.
You asked whether the Bill will support the advanced 2G SAFs. The UK has taken a fairly unique route with SAF and the mandate. We have the sub-mandate for advanced SAF, which is about 300,000 tonnes by 2030. We think that it could be a pretty smart move for the UK to do that, because at some point 1G SAF will become feedstock-constrained. That could happen sooner rather than later. We could put ourselves in a really good position by having a domestic advanced SAF industry producing the scalable SAFs that will play an increasingly big role.
The Bill, as written, is technology-neutral. There a number of ways in which you can do advanced SAF. When we come to the design and how projects are chosen, allocated and prioritised, we think it will be really important that this RCM supports projects that are quickly deliverable, scalable and commercially viable to help us to meet the volumes that we will need come 2030. There is nothing in the Bill that says that that cannot happen, but the design stage and how we get into the detail will matter.
Gaynor Hartnell: I agree that no amendments are necessary for the Bill. It has a fairly discrete job, which is basically to get the counterparty established and engaged and to get the levy in place. All the detail on how the revenue certainty mechanism works will come through in secondary legislation. We are very engaged with the thinking and the development on that, as we have been in the lead-up to the RCM becoming a policy of both the former Government and this Government.
It is important to get the design right. Broadly, we are happy with this. The fuel producers are agnostic as to who pays the levy. It is good to hear you note that the cost is going to be small; indeed, it could go either way. There is quite a bit of confusion between the costs of the mandate and the costs of the revenue certainty mechanism. We are keen to make sure that the differences are understood.
Paul Greenwood: I fear I may be a slightly dissenting voice, after you have just heard some comments about how everybody is very supportive. I will start with our perspective at FIUK; I will talk very much as ExxonMobil, but please feel free to challenge me on how there may be some differences in view across the members of FIUK.
Let me start by saying that ExxonMobil owns and runs a very large refinery and petrochemical complex, the Fawley refinery in Southampton, which is actually the largest producer of jet fuel in the UK. We supply about 13% of the UK’s jet market and have recently invested $300 million in a new larger pipeline from Southampton to London. I say that just to highlight the fact that we take the aviation business and the supply of jet fuel very seriously.
One thing is absolutely clear: this is very well-intentioned. We all wish to decarbonise, but I think we have to call out some fundamental flaws in the Bill. I do so with the aim of saying, “Let’s make sure that we can be really clear about what this is doing and what some of the potential unintended consequences are.”
First, I think it is important to say—this might sound slightly controversial, but I do not wish it to be—that this is not a step that will decarbonise. It is a step that will increase the production of sustainable aviation fuel. The way you decarbonise is effectively by incentivising consumption of sustainable aviation fuel, which we already do through the SAF mandate. The SAF mandate is a reasonably well-developed tool that sets a volume threshold and a buy-out price. That is a major lever that you pull as a Government to incentivise consumption. Let us be clear that this is around incentivising production.
My question is not necessarily whether the Bill is right or wrong; I just do not think it is necessary. What you want is a market that functions and sends a signal, and then production will meet that demand signal and the sustainable aviation fuel will be supplied. My question is whether the Bill is necessary.
Let us look at some of the unintended consequences. The first is that there will potentially be an incremental cost, which will be put on the fuel supplier and then, in theory, passed over to the consumer. It is important to say that although that has been put under the principle of the polluter pays, the fuel supplier in this scenario is not the polluter; it is clearly the passenger on the aeroplane or the person who is booking freight on a cargo plane. They are the ones who are causing the flight to happen and creating the consumption. Our principle should therefore be that the cost of the levy goes directly to those entities, but the way we look at it now, it is structured in such a way that it is based on the market share of the fuel supplier.
That gives us two issues. First, it is not really on the polluter; it is on the fuel supplier. Secondly, we are very concerned about whether we will have the absolute transparency necessary to be able to pass 100% of the cost through to the ultimate consumer: either the passenger on the plane or the person who books the freight. We strongly urge you to look at that mechanism and perhaps look at something like the contracts for difference supplier obligation levy that exists in the electricity sector. That is one way of asking, “What are the actual costs? What are we going to impose as a levy?” It is published, it is transparent, the supplier knows what we are going to charge, and what we charge the supplier is 100% passed through. There are a lot of mechanics I think we really need to be clear on.
It is also worth saying clearly that if we have a mechanism that we do not believe is necessary, but which is going to incur incremental costs, we will be passing incremental costs to British consumers and to an area in the UK that is clearly a global market. Having a potentially higher jet fuel cost because of the levy will have some unintended consequences. First, it makes the UK less competitive. Secondly, planes can tanker in fuel, as we all know, so if fuel is more expensive in the UK than elsewhere, people will fill up with more fuel in France, for example, before they fly into the UK, thereby decreasing demand in the UK, decreasing revenues and ironically increasing consumption because more jet fuel is being hauled around the world. I think that those are important unintended consequences that we need to take into account.
Graeme Downie (Dunfermline and Dollar) (Lab)
Q
Rob Griggs: One of the key reasons why we support the RCM and see it as necessary is that we have a mandate that—unlike the EU mandate, for example—has an advanced subsection. We therefore require advanced SAF. At the moment, something like 85% of all the SAFs produced in the world are first-generation HEFA—hydro-processed esters and fatty acids. That is used cooking oil-type SAF; it is perfectly legitimate, but it is ultimately feedstock-constrained. The world will be drawing on more and more SAF, and at some point we will be likely to reach what people are calling a HEFA tipping point, where there just will not be enough of it.
The UK, through its policies, is focusing on second-generation advanced SAFs, which are technically more challenging and more expensive, but also more scalable. As airlines, the absolute worst-case scenario that we are trying to avoid, and that we think the RCM is really important in helping us avoid, is a situation whereby in 2030 the suppliers who are the mandated party simply cannot access through the market the advanced SAF they need to fulfil their mandate obligations. It is not being made anywhere at the moment. A lot of HEFA is being made, but not advanced SAF.
We need advanced SAF here in the UK. The US is making some advanced SAFs, but they have feedstocks that are not for our mandate—they are often crop-based. Without the RCM driving the production of advanced SAFs, we are concerned that we simply will not be able to access it. If that happens, the buy-out price kicks in for the suppliers, which is likely to be passed on to airlines.
The worst case scenario is that, in 2030, the mandate essentially fails because there is high buy-out, all the cost gets passed on to airlines, there are no SAFs, which means no decarbonisation, and then we are unable to claim our SAF against the emissions trading scheme obligations, for example. To be clear, we do not think that the RCM should cover all mandated volumes of advanced SAF; there needs to be competition. It should be there to get those first plants built, and to provide a quantity of that mandate—potentially a substantial quantity, but part, not all, of it.
If we can get a competitive scheme, where the market for advanced SAF is becoming competitive, and the RCM helps to get some of those first difficult plants built, the UK could be in an advantage position, because the global market for SAF, at some point, will need to expand into the advanced SAF area, and the UK could have got a head start on that through our approach. That is the upside of what we are doing, notwithstanding the challenges of getting it right.
Gaynor Hartnell: The question was about the impact on global supply. I think Rob is absolutely right that the UK’s policy is unique. It is very much envied. I have been at many conferences where the greenhouse gas basis, versus it being volumetric, was lauded. The existence of the RCM is envied by SAF developers in other jurisdictions. It is already having an influence globally by being visible in doing this special seeking-out of waste-based SAFs, which are incredibly challenging to develop. These projects are very complicated, which is why the RCM is totally necessary; I disagree with Paul Greenwood about that.
Paul Greenwood: Let me build on the question of necessity. To be clear, I know that everyone is trying to do the right thing here, but the reason this is being called for, for entities in the marketplace, is because it is very difficult to manufacture things in the UK, and that is because energy costs, carbon dioxide costs and labour costs are incredibly high. It is very difficult. Not very long ago, we used to have six refineries in the UK; one of them was shut down for operations and another has gone insolvent. There are four refineries left, so it is very difficult to manufacture things effectively in the UK at a profitable level.
What the Bill does is say, “Because of that problem, we’re going to incur more costs in a niche, new business, and we’re going to input that cost on to the existing fuel suppliers, which are already struggling to survive.” We need to be clear about what problem we are trying to solve. Effectively, I think this is a distraction. We need to look at the core fundamentals that are impacting our manufacturing base in the UK, because that is the primary struggle that we have.
Luke Taylor
Q
Gaynor Hartnell: There are really only two options for the levy: airlines or aviation fuel suppliers. A large part of why aviation fuel suppliers were chosen may have been because, administratively, they are the obligated party when it comes to the mandate. They are expected to pass the cost of the mandate through to airlines—their fuel customers. They would be expected to pass the cost of the levy to airlines, or indeed, if the levy actually brings in money—these are very small balances of money in comparison with the balances to do with the mandate—they would be expected to pass those costs back to the customers. The aim is to deal fairly with a fairly small amount of money. It is not the additional cost of the sustainable aviation fuel; it is just the cost of levelising and stabilising it, which is a sliver in comparison.
Rob Griggs: For us as airlines, the funding is a critical issue about fairness and accountability. As Gaynor said, the understanding is that the levy will be on the supplier. The issue for us is that we understand that the costs are likely to be passed through to airlines. We just want to make sure that that is transparent. We have seen through the early stages of the mandate that there is some concern that excessive compliance fees are perhaps being put on to the SAF. Voluntary SAF seems to be a lot cheaper than mandated SAF and there is not necessarily a clear reason for that. We want transparency in terms of how the levy is passed through.
As Gaynor said, in theory, if the market price for SAF is high—if there is relatively little of it—it is likely that the suppliers will actually pay into the counterparty. We want to make sure that if money is essentially being paid back to the counterparty from the producers, that money does not just go to the suppliers and sit there. There should be a transparent mechanism, however it works, through which that money then comes back to airlines and airline customers. It has to work both ways, essentially.
How do you do that? We have looked at ETS for a long time. You are right that in the European Union, the emissions trading scheme funds are used: for example, to help to close the price gap on SAF. We are not doing that, which has competitiveness implications for UK SAF, separate to the RCM. Of course there are ways to make sure that it is a two-way street.
Paul Greenwood: We have to recognise that if the desire is to pass the cost on to the passengers, the airlines and the people who are shipping freight around the world by plane, then we should put the charge on them. That is the most direct way of doing it. There are charges now that are put on airlines and on freight directly. There is no reason why you cannot do this as well. I do not buy the argument that it is a relatively small amount of money, therefore we should just put it on to the fuel suppliers and they should deal with it. I do not think that is right. I certainly do not agree with the idea that this is because “the polluter pays”—that is erroneous and a false statement.
We do not know how much this will be, because we do not know how many projects there will be, what the costs will be, or how the CFD mechanism will go. We do not know what the cost of this will be. I support what Rob is saying: if this is something imposed upon us, I do not wish to profit from it but I do want to pass 100% of it on to the consumer of my fuel. The only way I can do that is if I know what it is ahead of time, so that I can bill them the exact amount of money so they pay the exact amount. At the moment, this legislation talks about market share, but market share moves and changes. Therefore it is a very imprecise way of doing that.
Ours is a very fine margin business. If you get this wrong, you will make the UK a less attractive market. We have to understand that fundamentally people will do different things around their molecules. One data point worth remembering is that about 70% of the jet fuel consumed in the UK at the moment is imported. Effectively, we rely on people bringing jet to market to sell it profitably. If they are uncertain around the cost of that jet fuel, they will potentially look to sell it into different markets, which can lead to energy security and market dynamic issues. There are unintended consequences here that need to be thought through very carefully.
Chris Vince (Harlow) (Lab/Co-op)
Q
Rob Griggs: To take the second point first: on the environmental side, UK aviation is committed to net zero 2050. We have not wavered from that commitment, and SAF is a hugely important part of that. It is doing the physical and metaphorical heavy lifting for our road map to get there. We need to do a lot of things—there is no silver bullet—but the last industry road map we all agreed had SAF at around 40% of the decarbonisation to 2050. That number will obviously change, but it is hugely important. The UK has a world-leading aviation industry, which does a huge amount for the UK economy. We believe we can grow and decarbonise, but we cannot do that without SAF. It is hugely important for both its economic and social benefits.
In terms of next steps, we fully support the Bill, and we hope the process can go as quickly as possible to get that certainty for investors and help to get those first plants built. For us, it is then down to the importance of scheme design and ensuring that we look to get that balance right for the most cost-effective decarbonisation to meet all those objectives: what size of scheme, how many and what type of projects are supported, what proportion or volume of SAF it would be looking to support and, through that, how you ensure there is competitive tension between those projects that are bidding for support and those projects that do not think they need support. It is about getting that right to ensure that we are getting best value from the projects that will deliver best bang for their buck and can produce the volumes that we need quite quickly. There are a lot of different technical elements.
Then there is funding and the transparency around that—how do we ensure it works and is accountable? If we have a scheme in place that is delivering SAF as cost-effectively as possible, it is starting to produce some, we have the quantities we need by 2030 and we are avoiding buy-out—if all those things happen together, enabled by the RCM, that is the outcome we are looking for.
Gaynor Hartnell: In terms of what is next, yes, there is a lot of detail involved in thinking about how the contracts are structured. We expect to engage with officials in great depth on that.
You asked about the environmental benefits; do you mean the environmental benefits of SAF generally, or the specific environmental benefits of producing SAF in the UK, which is what the Bill is about?
Chris Vince
Q
Gaynor Hartnell: I think it is worth mentioning some of the environmental benefits specifically of producing SAF in the UK. They are focused on the second generation—that is, SAF that comes from waste. We have problematic waste to deal with in the UK, and it is better in terms of the proximity principle if we deal with our own waste domestically. There are various different feedstocks that the SAF mandate is seeking to encourage that have not traditionally been used, so it is aiming to expand the feedstocks to things such as end-of-life tyres. We currently export a lot of that waste to India, and we have heard in the news about the devastating environmental and health impacts that that has. If we deal with our own waste domestically, that is an environmental benefit; we will import somewhat less, but the aviation fuel we use at the moment is largely imported.
The main benefits of producing the SAF in this country are economic. The Government have realised that and they support it as part of their growth agenda, which it plays to.
Paul Greenwood: To round that out, if you listen to Rob’s comments, which I thought were very insightful, about the complexity of this and the need to ensure you get the right projects, with the right feedstock, at the right size and with the right basis, that to my mind is classic market distortion. Fundamentally, you are intervening in a market and saying, “I’m going to decide what is going to happen in this marketplace and I’m going to incentivise it to happen with a tariff.” The best way to do that is effectively to set a very clear demand signal, which happens through the SAF mandate, and let the market go and work that.
I do not buy into this idea that the market is incapable of supplying second-generation SAF; I had breakfast this morning—not because I was coming here today—with an Asian supplier who I deal with, who let me know that they had taken a final investment decision on a second-generation SAF plant in Asia that will be starting up in 2028. These things are happening; the market is responding. You are deliberately intervening in the marketplace with very good intentions, but it will distort that market signal. There is no doubt about it.
Mr Paul Kohler (Wimbledon) (LD)
Q
Gaynor Hartnell: These projects are first of a kind, pretty much. This waste-based stuff is not being produced at scale anywhere in the world yet. It is very challenging to build one of these projects. There are numerous risks. You have Philip New coming later to give evidence; he has written a report on that, so you could ask him what those risks are. This addresses the showstopper risk if you like, which is the revenue certainty that a SAF producer can rely on when going to a bank and asking to borrow the millions or billions of pounds that it costs to build one of these projects.
In the UK, we now have many precedents of other large-scale projects that are driven by environmental requirements, from renewable electricity generation to carbon capture and storage. Those various different projects are all supported by some sort of equivalent to the contracts that will be let under this revenue certainty mechanism, whether it is a contract for difference for electricity or whatever. It is par for the course. We are not asking for this just because everyone else gets it so we should get it too. There is a competition for capital, among other things. If there are supported projects in terms of revenue stability, it will be easier for the capital to flow to those projects. This is a new mechanism. We are seeking new types of SAF production pathways. It is incredibly complex, and it is necessary.
Underlying all of this, the SAF mandate creates a market for greenhouse gas certificates, and the price of those certificates will be variable. It is very much built on a preceding policy—the renewable transport fuel obligation for road transport. That was just a demand mechanism without any accompanying equivalent to this revenue certainty mechanism. We import 85% of our road fuels, and we are not doing a very good job, I must say, given the opportunity, at preserving those early movers of projects that were built in the early days. Getting project funding is challenging, and it is not made easier by the fact that we have some early movers that are not managing to keep their renewable fuel projects going. I am talking about the bioethanol producers.
Rob Griggs: I agree with what Gaynor says. Ultimately, UK SAF projects are competing for investment against other renewable projects across the UK economy that have similar types of support—CFDs for energy and hydrogen and other types of things. In some way it is levelling the playing field a little for SAF compared with other forms.
I am here representing airlines; I am not representing producers. We want and we need SAF, and we want it as cost effectively as possible. We have seen all the evidence, given the nature of our mandate, its design, the global market and the work of Phil New that Gaynor referenced, which specifically asked that question: you have a mandate; why do you need an RCM? Everything suggests that given all those dynamics, without some form of revenue certainty you will not get that investment in the first-of-a-kind plants that we need to prove out the technology and get that initial set of volumes on a really aggressive timeline for 2030.
As airlines, on balance, we want the system to be competitive. We expect there to be imports as well as domestic production, but we think that without that UK 2G supply kick-started by the RCM, we will struggle and then we risk the buy-out. That is why we support it. On top of that, if it goes right, you get a UK industry better for your security, and jobs domiciled in the UK. It is a win-win, notwithstanding that as airlines, that is not necessarily our primary goal, but it is a huge benefit, so why not support it?
The Chair
We have six minutes left and two other Members want to ask a question. Mr Greenwood.
Paul Greenwood: I would take a look historically at the energy industry, which is a trillion-dollar industry. We have risen to the challenge of any technology that has been set and have managed to move from leaded gasoline to unleaded gasoline, and from high-sulphur fuel oil to low-sulphur fuel oil. New technologies come in all the time. We have the capability to deliver those if the market signals are right. I see no reason at all, as I look around the world, why sustainable aviation fuel, second generation, would not be the same.
The Chair
Because of the pressures of time, unusually, I will ask Euan and David to ask their questions together.
Euan Stainbank (Falkirk) (Lab)
Q
David Reed (Exmouth and Exeter East) (Con)
To pick up on Mr Greenwood’s point about unintended consequences, at a time of increased international instability, the need to produce things domestically in the coming years has become more and more apparent. Do you think this will impact our traditional ways of producing those fuels that we will probably need in the UK?
Paul Greenwood: First, from an energy security point of view, and as Gaynor rightly pointed out, a very significant amount of the road fuels in the UK are imported. They are imported rather than refined here, as it is not economic to refine them here, because of all the cost issues we face in energy, labour and carbon dioxide. That has effectively driven refineries to not invest or expand, and in some places, to go bust. That is the major driver here.
If you are prepared to import 70% of your jet fuel now, I do not see why you need to increase local production of SAF. There is a very good reason for doing that—the creation of jobs—but there are unintended consequences in the costs and how you are going to pay for that, which need to be thought through seriously. I do not think this is an energy security issue, given the amount of product that you are importing into the country now. By layering cost on to refiners and fuel suppliers as you are doing now, you actually risk precipitating the decline and demise of the refining sector even more, which will mean importing significantly more fuel across the piece. To my mind, that is a quid pro quo.
Gaynor Hartnell: We import about 85% of our road fuels. Lamentably, that figure is going to go up, because existing biofuel and renewable fuel production facilities are falling away. There was a Greenergy announcement last week about the closure of the Immingham plant, and two bioethanol producers are at risk of closure. They are linked into the UK in so many different ways, from CO2 production to the market for grain that does not meet the required grade for milling, so it has to be used as feed wheat instead. We will suffer the consequences of not taking care of our domestic industry. We need production in the UK.
It is not just a question of saying, “We can simply buy it from overseas”. As Rob has pointed out, the SAF mandate creates a specific demand for waste-based SAF that is not specifically encouraged by any other mandate around the world, so we need this. If we are not going to make it, we cannot rely on other people making it, and the airlines and fuel suppliers ultimately rely on pulling that into the UK to avoid paying the buy-out for the mandate. Paying the buy-out for the mandate would be a really bad situation for everybody, so we need to safeguard against that happening.
You also asked about the waste hierarchy and what could be done to encourage residual municipal solid waste to find its way to the best carbon outcome, rather than being used to produce electricity, which is already going on to a largely decarbonised grid. Adjusting the waste hierarchy to recognise the carbon benefits of this route for residual solid waste would be really helpful. At the moment, local authorities are in a situation where they have a reliable route through just sending it off to an energy from waste project, against prospects of hopefully SAF projects coming down the line in future, if all else goes well, then RCM comes along and they win contracts. There is a lot more risk involved in choosing the SAF route. That has to be specifically encouraged, and the waste hierarchy would be a way of doing that.
The Chair
Mr Griggs, I am sorry—you have 35 seconds.
Rob Griggs: We fully support the changes to the waste hierarchy. On municipal solid waste, our key point is that our analysis suggests that there are plenty of UK feedstocks across the different technology pathways, of which municipal solid waste is a huge potential advanced pathway. The way the waste hierarchy and local authority contracts are set up, it is just not working as we think it could be to maximise your decarbonisation bang for your buck. When there are cheaper and better ways of making electricity, decarbonising is tough, and we think that we should be prioritising that.
That links to the question about domestic production. Again, we think that the UK is advantaged in that we have a lot of potential to be producing advanced SAFs through the wastes that we have available, and through the technology infrastructure that we already have in the UK.
The Chair
Order. That brings us to the end of the allotted time. On behalf of the Committee, I thank all the witnesses for their evidence.
Examination of Witnesses
Jonathon Counsell, Luke Ervine and Lahiru Ranasinghe gave evidence.
The Chair
Q
Jonathon Counsell: Good morning. I am Jonathon Counsell, group sustainability director at IAG. For those who do not know it, IAG is the owner of five airlines—British Airways, Aer Lingus, Iberia, Vueling and Level. We also have a loyalty and a cargo business.
Luke Ervine: I am Luke Ervine, head of sustainability at Virgin Atlantic. We operate a fleet of wide-bodied transatlantic aircraft. We also have a cargo business and a holidays business. For us, having invested in decarbonising our fleet over the past 10 years, SAF is vital. It is now the only opportunity we really have to decarbonise further in the foreseeable future.
Lahiru Ranasinghe: Good morning. I am Lahiru Ranasinghe, the director of sustainability at easyJet. We operate an entirely short-haul network, with about 350 aircraft around Europe, more than 150 of which are based in the UK.
Greg Smith
Q
Jonathon Counsell: We are huge supporters of the Bill. As Luke has said, SAF is critical to decarbonising aviation. There is no silver bullet, but this gets pretty close. We think that by 2050, 70% of our fuel will be SAF.
There are three types of SAF: first, second and third generation. Quite clearly, the first generation is all that you can buy today, and 95% of it is from hydroprocessed esters and fatty acids—used cooking oil. However, that will hit feedstock constraints in the early 2030s, so we are going to start to cap out on the amount of 1G SAF we can produce. That is why 2G and 3G are critical if we are to meet long-term decarbonisation targets. We expect that by 2050, 90% of SAF will be 2G and 3G, so it is critical that we have a policy mechanism that incentivises 2G SAF.
That is why I disagree with some of the comments from the oil company representative in the previous witness panel, who said that we do not need this policy intervention. We absolutely do, because without it we will not get 2G SAF on the mandate alone. That was shown in the work done by Philip New, the chief executive officer of BP renewables. He knows a lot about this market, and he wrote an extensive paper for the Government, which said that we will not get these SAFs without the revenue certainty mechanism. For that reason, we support it.
I will come on to the impacts shortly. We have no amendments to suggest at this stage, but we think that there are two points that could make it better in the next phase. One is that it has to be targeted. Not all 2G projects will need the revenue certainty mechanism; some of them will get funding without it, so it has to be targeted at the early-stage, first-of-a-kind projects that need it. That is how we can contain the total cost of the scheme.
Then, as mentioned during the previous panel, there is the funding question. We in the industry support polluter pays; we are part of the emissions trading scheme, and we have a global carbon offset scheme. Of course, the airlines will be paying for SAF from the 2030s onwards, and that is by far the biggest element of the cost. We talk about a figure of £1.50; to us, that seems a conservative number, but anyway, that is only for the RCM mechanism. By far the biggest cost is actually paying for the SAF.
Let me give some top line numbers: 10% by 2030 is 1.2 million tonnes; a conservative premium for the SAF is about £2,000 per tonne, so you are looking at over £2 billion of SAF premium that the airlines will be paying. We are paying for the SAF and also for our carbon emissions. The issue is that we know the levy on the fuel suppliers will come straight back to the airlines. I used to work for the oil industry—for Exxon, in fact—and I know how this works. That will come back quicker than you can imagine. Our view is that will result in double payment by the airlines. We are paying for the SAF and for emissions trading. We should not be paying for RCM as well. Our view is that if that money is passed back through to the airlines we should be compensated through the money that aviation puts in the UK emissions trading scheme, to avoid double payment.
Greg Smith
Q
Jonathon Counsell: No. We have not at this stage managed to fully analyse that number. We think there are potentially some elements that have not been included in that calculation, but £1.50 per passenger feels quite low when you think the costs of the SAF itself will be nearer to £10. We can take a close look at that, but I think the key principle is we should not be paying for that plus the SAF, hence we need to net that off against the UK emissions trading scheme costs.
Luke Ervine: I fully support Jonathon’s comments. We are fully supportive of the RCM, as we have been for the mandate. The mandate drives demand and the RCM drives the supply, and we do see a massive shortage in the 2G that we need. It is interesting from an oil producer’s perspective to state that the polluter must pay. Well, the oil companies are also part of that problem and must pay. We believe that our consumers will pay the price of SAF but we do not believe we should pay to underwrite the logistics and the production facilities. That is why there should be differentiation between paying for SAF and paying for the RCM.
We as a company have fully supported some of the potential producers in the UK and they are the ones saying to us, “We need an RCM; we need a level playing field to attract investment into producing 2G SAF in the UK.” When we say, “Let the market do what it wants to do,” we are hearing from the market and from producers, some of which do not want an RCM but some of which definitely do. In creating this Bill, you are allowing that opportunity for those that do need it. I do not think we need 100% of SAF covered by RCM for 2G production. We do need imports and to make sure that SAF in the UK remains competitive. That means balancing that need for investing in first of a kind 2G plants that require the investment certainty with the ability to create a competitive market and allow imports into the UK as well.
Lahiru Ranasinghe: From a strategic perspective, there are three things we are trying to do as an airline. We want to grow, to do so sustainably while decarbonising at the same time, and to keep fares affordable for consumers. For us to be able to do that, we need a functioning SAF market to develop over time, so that supply and demand are balanced and the market is working under its own steam. Right now, the 2G and 3G SAF technology has been developed but there is a key transition period it needs to go through, to get from technology demonstrations to commercial scale. That is where the market failure is which is being addressed by the RCM. Like my colleagues, we are supportive of the RCM. It is clear to us that the eyes of the world are on the UK to see how we make this work.
To answer directly the question about the cost impact on consumers, let me split that into two things. First, there is the cost of SAF, full stop, and secondly, the potential cost of the levy. Fuel costs are about a third of our cost base. The cost of jet fuel today is about $750 a tonne. You are looking at upwards of $2,500 dollars a tonne for first generation SAF. When you go all the way to 3G or power to liquid SAF, estimates right now range from $7,000 to $8,000 in Europe. That is a massive increase in cost, which goes into the cost base. To keep flying affordable in the long run, we have to manage that carefully, because it risks the industry adding significantly to what goes through.
The cost of the levy is additional to what we would be paying for SAF, which is something that we do by fulfilling the mandate. A scenario that we are absolutely trying to avoid at any cost is one in which we cannot meet the mandate and therefore are paying buy-out prices with no SAF. In that case, those costs will be going through without any environmental benefit.
A step down from that, there is a not quite as bad, but still bad, scenario in which the market is short on supply, so there is little incentive for suppliers to charge significantly below the buy-out price. You would end up in a situation where the cost that being passed through to airlines, and therefore to consumers, is disproportionate to the decarbonisation that happens.
Finally, putting our ability to absorb those costs into context, easyJet’s profit margin is £6 per passenger—roughly 1.5 coffees in the vicinity of this building—and that is once we have paid several billion for new, more efficient aircraft, invested in the operation and paid for 18,500 employees. We have very little margin to work with without having to pass the cost on to the consumer. If an excessive cost gets passed on, the risk is that that disadvantages the consumer, but economically it would also mean that aviation cannot play the role that we intend to play in the UK’s growth.
Alice Macdonald (Norwich North) (Lab/Co-op)
Q
Jonathon Counsell: This is very important. Generally, with 2G SAF there is an opportunity to have much lower carbon emissions than with 1G SAF, and that is one of the reasons that it is very attractive. We have a project up in Teesside, Project Speedbird, with LanzaJet and Nova Pangaea, that takes waste biomass, creates bioethanol and converts that into jet fuel; it also creates a co-product that goes into the ground, which is used by farmers to enhance the soil properties. The emissions from that whole life cycle are negative, because you are getting the benefits of the sequestration. That is a good example of the environmental advantages of 2G SAF.
When you start linking that with carbon capture technology as well, it can be even better. That is why we are funding it. There will not be enough 1G SAF to meet all our decarb requirements, and 2G is much lower emission. Then you get to 3G SAF, or power to liquid—the ultimate SAF, where you capture CO2 from the atmosphere and mix it with green hydrogen. That is where we ultimately want to get to, but we accept that that is a bit further away. Generally, 2G SAF is a lot better for the environment than 1G SAF, and that is why it is critical for us.
Another thing worth mentioning is that there is also a non-CO2 environmental impact, typically from contrails—the white lines that you see in the sky. They are believed to have a significant warming disbenefit. Early evidence has shown that using high ratios of SAF reduces the incidence of contrails, so there is a secondary benefit from using SAF. Many more trials need to be done, but that is another environmental plus from SAF.
Luke Ervine: In 2023, Virgin Atlantic ran the first ever 100% SAF transatlantic flight, and we did a lot of studies in addition to those on the carbon benefits. We worked with Imperial College and the University of Sheffield, and—to back up Jonathon’s point—the particulate emissions from that SAF were 40% lower than from traditional jet fuel. That has a direct correlation with the number of contrails that it can form. More studies need to be done, as Jonathon says, but there is a very direct correlation between particulate and contrail formation—and SAF provides that benefit. On Jonathon’s point, 2G SAF is better environmentally and sustainably than 1G. The UK Government have done a great job in creating a GHG-based mandate, which will reward lower carbon intensity SAF—and that can be monetised, as well. In producing those 2G SAFs, we can kick-start a very unique pot of SAF that has better environmental attributes and can drive better value for money for us and therefore consumers.
Alice Macdonald
Q
Jonathon Counsell: Definitely. All SAF has to be independently assessed for its life cycle emission savings. Before we purchased it, we have to prove that, and as I said, get an independent authority to test the life cycle emissions. We will be able to declare publicly, of any SAF that we use, the independent assessment of its life cycle savings.
Lahiru Ranasinghe: If you look at the mechanics of how it works for meeting the mandate, there is a minimum threshold that we set when buying compliant fuel. In this case, compliant fuel is kerosene: fossil-based kerosene blended with SAF. When we pay for the supply, we get the product transfer documents, which have the sustainability criteria associated with that specific batch of SAF. At that point we can very accurately calculate the emissions saving. In terms of planning, we have to set a range, because there is some variation depending on the pathway and the SAF provided. Building on what my colleagues here have said, there is an opportunity for the UK both in home-grown production and up and down the value chain in the development and export of the technology and the financing and trading of SAF in the longer term. We have what is seen as a gold standard for sustainability criteria, especially going to 2G SAF and the conversion of waste into usable fuels, which addresses multiple issues at the same time and is something that we can export to the rest of the world.
Mr Kohler
Q
Jonathon Counsell: We support the RCM: it is a critical mechanism and you will not get 2G plants funded in this country without it. We spent the last five years talking to investors who said that the mandate is not enough. The mandate creates demand; it does not create investment. If you have a mandate on its own, all your SAF will be imported. The RCM unlocks the investment to get the plants built—so it is absolutely an investment, but the issue for airlines is that we are paying for the SAF and also paying for our carbon emissions. If we then pay for the derisking of the infrastructure, we are double-paying.
The EU ETS first established that the key principle is that money is recycled to help decarbonisation of those sectors that fund it. It is not taxpayers’ money. Aviation puts £500 million into the UK emissions trading scheme. That money is supposed to come back to support the decarbonisation of aviation. None of it does. All we are saying is, is that not a perfect opportunity to use some of that aviation money to support the costs that are coming back to us through the levy? Then we would not be paying twice. Instead, we would be paying for the levy, but through the UK emissions trading scheme.
Mr Kohler
Q
Jonathon Counsell: Absolutely—we hope that eventually, as you scale up SAF supply, the cost will come down. Will it ever come down to jet fuel levels? I do not think it will, because of the factor cost element. I agree with Paul Greenwood, who said earlier that one of the disadvantages we have in this country is high energy costs. We are doing SAF contracts with SAF suppliers in the US, where their energy costs are one third of those in this country, so we are at a disadvantage.
On 2G SAF, however, I think we have some real advantages: we have some sites, we have expertise and we have feedstock, both waste biomass and municipal solid waste. We put 20 million tonnes of municipal solid waste into landfill; we even ship 5 million tonnes of it to Europe. That is energy. We should be using it to make SAF. Those advantages can overcome the energy disadvantage in the short term. Hopefully we will sort out that energy disadvantage, but as we scale up those plants that SAF price should come down. It is an investment, but we do not want to double-pay for it.
Luke Ervine: Just to add and clarify, I think Luke Taylor asked a question earlier about ways to pay for the SAF mandate. We have always been very clear about paying twice through things such as the ETS scheme. We would love to see those revenues used to reinvest in the decarbonisation of the aviation industry. Given the economic value it returns and the Government’s growth agenda, we believe that creating a SAF industry also creates jobs and a lot of economic prosperity. The Sustainable Aviation report in 2023 estimated that the UK SAF industry would create about 60,000 new jobs by 2050 and about £10 billion gross value added by the same time. There is a benefit here for the UK economy as a whole purely in terms of the SAF industry, and using some of the taxes we currently pay to fund the RCM would be very helpful.
Lahiru Ranasinghe: I do not have much to add to what has already been said, but the cost of SAF means that the cost of fuel will go up in the long run, even with the RCM. In our minds, the RCM is something that unlocks production, as opposed to something that brings the cost down. The primary role we see for it is in getting production up so that supply can meet demand in the short run. Ultimately, though, we will have higher costs because of SAF, especially as eSAF and power-to-liquid comes in, and those costs will have to be passed through.
We are doing a huge amount to try to be as efficient as we possibly can; that is where the investments in aircraft and how we operate come in. As they say, the best energy is the energy you do not use, and in that way we are trying to manage our costs in the same way we have for the past 30 years, but I completely agree that we have to be wary of adding on to the costs we are already paying in the name of sustainability, both right now and in terms of meeting the mandates.
Lewis Atkinson (Sunderland Central) (Lab)
Q
Jonathon Counsell: From our modelling and analysis, we still want to have the flexibility to import SAF, because there is a global market there and we do not want to put ourselves at a competitive disadvantage by saying that all mandated SAF has to be produced in the UK. We still want access to imported SAF, particularly 1G SAF; we do not think the UK has much competitive advantage in producing 1G SAF. We think roughly 50% feels about right, and you have to compare it around that. Our view is that, of the mandated SAF, approximately 50% should be produced here in the UK—but, as I said earlier, not all of that will need the revenue certainty mechanism.
One of the key points that I want to make is that the revenue certainty mechanism is for those plants that cannot get funding: they are early stage, first-of-their-kind technology, and cannot get tracker funding because it is perceived to be too high risk by the investment market, and they cannot get that revenue certainty through any other mechanism, so therefore they rely on this mechanism. We think that roughly half of that 50% will need the revenue certainty mechanism.
A good example is LanzaJet in Teesside, the speedboat project that I mentioned earlier. That does not need the revenue certainty mechanism because we at IAG are providing the company with a long-term committed take-or-pay offer. We are giving the revenue certainty to LanzaJet, so that project does not need it; but other projects do, typically including the municipal solid waste projects that take black bag waste. They are at a very early stage, using less mature technology, and they are massively capital intense projects. They definitely need the revenue certainty mechanism, so we must ensure that it is targeted.
As Luke said, we think that by 2030 there could potentially be 10,000 extra jobs in the UK from that UK production. We can share a piece of analysis that we did through Sustainable Aviation that showed what that looks like for each region of the UK. We think there is certainly potential to build plants in Wearside, Teesside, Humberside and south Wales; if we get the policy right, we think there could be up to 14 plants within the next 10 years, which will deliver £1.8 billion in GVA by 2030.
However, the big prize will come in 2050: 60,000 jobs and £10 billion in GVA. We are creating a new energy industry for the UK. I have to congratulate the Government: we have potentially the most powerful package of SAF policy in the world, with the mandate, the revenue certainty mechanism and the advanced fuels fund. Taken together, they mean that we are the envy of the world and we have a huge chance to be a world leader on SAF production.
Lahiru Ranasinghe: To add to that, it would also enable UK aviation to grow. Our estimates are that each aircraft based in the UK supports around 400 jobs and £27 million of GVA. We have over 150 aircraft in the UK as it is, we have three aircraft going to a new base in Newcastle shortly and we absolutely intend to continue with the growth in the UK. By having the RCM unlock SAF production and SAF supply, that opens the doors to us to continue growing, while also decarbonising. That is a massive part of the economic benefit that the RCM helps to unlock, beyond the obvious effects of supporting jobs and production on the ground in the SAF industry.
Luke Ervine: Just to add a note on benefits, it is important to recognise the cost of not having the RCM. We have spoken a lot today about the buy-out. The UK is unique in its ambition to have a 2G SAF mandate, so the cost of not having the RCM is important. If we do not have it, we pay buy-out, and then we are going to lose out regionally to other areas, such as Europe and the US, that do not have those 2G SAF mandates, so it is important that we recognise that there is a cost of not having the RCM.
Luke Taylor
Q
Jonathon Counsell: That is a really strong point. There is a key question about the waste hierarchy, which Gaynor spoke to. Currently, waste going to SAF is treated the same way as incineration or energy from waste, but the analysis is clear that we can get twice as much energy capture from producing SAF than from producing energy from waste. We feel that you are getting a lot more bang for your buck from using waste to produce SAF than from other things, which we think should be reflected in aviation being prioritised in the waste hierarchy.
On renewable energy, last year the Sustainable Aviation road map made it quite clear that 3G SAF—where you basically electrolyse water to get hydrogen and you capture CO2 from the atmosphere—is going to take a lot of renewable electricity. We are going to need a lot more of that within the UK if we are going to support a domestic power-to-liquid market.
Luke Ervine: In addition to that, we need to think about other areas of SAF, when we talk about SAF having a nominal value associated with its ability to reduce greenhouse gases. We are working alongside the Department for Energy Security and Net Zero and the Department for Business and Trade to understand how carbon can form part of the solution, and decarbonising the SAF that we are producing is also key. We are also working side by side with the Treasury to understand what the revenues from the ETS look like.
That has been quite successful in the last few years, especially since the advent of the jet zero taskforce, which was a really key turning point. I think we are going to continue in that vein to work cross-departmentally and across industry to work through some of these finer details. I think it has been very useful to be part of the Jet Zero Council; we are actually a co-chair, alongside Mike Kane, of the jet zero taskforce. Carrying on in that vein is very important and useful.
Lahiru Ranasinghe: This also enables us to reduce our dependence on used cooking oil imported from elsewhere in the world as a feedstock for first generation SAF. A strategic move towards 2G and 3G also gives more flexibility and capability for the market to scale up in the long-term, and allows it to use waste products from the UK, as opposed to having to ship it in from China or south-east Asia.
Graeme Downie
Q
Jonathon Counsell: On the customer perspective, we did a lot of surveying of our customers, and it is no surprise that there was a bit of scepticism about offsets and all the history with those. When it comes to SAF, I think there is general recognition and support: people think, “You burn a lot of fuel, so it just makes sense that you are trying to find a lower carbon fuel.” There is a lot more acceptance of that. We have always offered voluntary schemes for our customers to offset their emissions. We provide offsets, carbon removals and SAF. The uptake is very low, but SAF is proving quite popular, so I think there is greater acceptance of SAF as a solution for aviation than some of the others.
What I will say is that corporates have gone gangbusters—if I can use that technical term—on SAF, and we do something called SAF Scope 3. A lot of the big corporates set very ambitious net zero targets by 2030, particularly professional services firms such as consulting firms, banks and law firms. When they do their carbon footprinting, a huge proportion is from their flying activity, so they come to us and say, “I want to address my carbon emissions”, and we can offer them SAF. We can sell the carbon attributes as what they call a Scope 3, and that has literally taken off. Most of the SAF that we bought last year came with a SAF Scope 3 deal from a corporate. That is fantastic, because we can use that revenue to reinvest and buy more SAF. From a corporate market, there is definitely very good acceptance of the power of SAF to reduce our emissions.
The Chair
May I say that we want full answers, but we have three other Members who want to ask questions? We have 11 minutes left.
Luke Ervine: I agree with Jonathon; the corporate world is where we see most support for SAF, particularly in cargo companies. They are very mature in the way that they think about SAF, largely because they have clients—as freight forwarders, they have clients—that demand CO2 reductions. That is corporates and cargo.
We recently undertook a survey. I cannot remember, off the top of my head, what the split was, but a large proportion of our passengers really valued the ability to buy SAF—less so carbon credits; they relished the ability to buy SAF. In terms of competitive advantage, we are all working with the same levers, and there are not many of them in the aviation industry. We have invested in those fleet transitions to cleaner, more efficient aircraft. We are 82% transitioned into new NEO—new engine option—fleets at the moment, and we will be 100% by 2028. There are competitive advantages in this space, but we are all dealing with the same basic levers in order to drive our customer base and attract customers in.
Lahiru Ranasinghe: We probably have a slightly different customer base from the two airlines here. A large proportion of our travellers are people who travel once a year, or once every couple of years, on their holidays.
Generally speaking, we have asked customers, and they care about sustainability, and about easyJet and the airline becoming sustainable, but it is not something that those who travel infrequently engage with frequently enough for it to be a consideration. Also the question about SAF, for example, is a complicated one. I completely agree on the corporate side, but on the average customer side, it does not feel like a competitive advantage right now.
The Chair
I will call Chris Vince, then Euan Stainbank and Luke Taylor—will you go one after the other, please?
Chris Vince
Q
Euan Stainbank
We have talked about targeting. Would you support any further specific policy interventions to help to stimulate advanced 2G SAF technologies that might otherwise struggle to scale up?
Luke Taylor
I just have a pushback or challenge on the comments about SAF being popular. An earlier pushback, too, was on the £1.50 per passenger on top of tickets. Does that suggest that this might be easier to sell—easier to promote—to passengers than you might have suggested in the first place? I think the suggestion was that certain demographics and certain airline customer groups will be more or less in favour and able to pay it.
Lahiru Ranasinghe: To add to that, for us, the average leisure traveller would say—to put it in colloquial terms—“It’s your problem to solve. We want you to do it, but we’re not going to pay for it.” With corporates, they have their own corporate targets, so from a B2B—business to business—perspective, they want to hit those.
Jonathon Counsell: I will answer the risk question. Yes, without the policy, we have no 2G SAF, so we would be dependent on the 1G market, which will cap out in the early 2030s. We are not going to achieve our decarbonisation targets without 2G SAF. That is the biggest risk without the Bill.
The biggest risk with the Bill is buy-out. If the incentive does not produce enough SAF—we understand the buy-out is there to manage short-term supply shortages, but if we have long-term buy-out, which we have seen in the ground transport fuels market—that is policy failure. Essentially, that huge cost is £6,000 per tonne of SAF, and if that cost comes straight back to the airline, it will go on air fares, but you do not get any decarbonisation—you get huge cost and no decarbonisation. That is our biggest risk.
Luke Ervine: Some of the risks of the RCM that we need to be cognisant of include covering too much of the mandate with the RCM. We do not want to lock ourselves into high prices forever and a day. Obviously we want that to stimulate the part of the market that needs that support, so we want to leave enough room for competition.
The other thing we need to think about is how suppliers might bear some of the risk that is presented in the RCM—how some of the cost of capitalising the fund, or any cost of compliance failures that they may face, might be passed through to airlines and consumers. That key area of transparency is therefore important. This needs to be well thought through, but we also need to do it quickly because we are reaching a pivotal point in terms of buy-out where we will have to just pay for no decarb.
Lahiru Ranasinghe: Ultimately, the RCM is a derisking measure. It is a stepping stone towards what we want, which is a functioning SAF market. It is a complicated challenge. There is a lot of work to be done over the coming stages and throughout the process to make sure that we end up with a competitive UK SAF market so that producers can compete on a global scale, and, crucially, we as airlines can compete on a global and European scale by keeping flying affordable and continuing to grow in the UK. On an environmental level, if there is x amount of growth coming through the UK, which is supporting an environmentally robust SAF mandate, and production in the UK, as opposed to that going elsewhere in the world, that is driving sustainable growth on a global scale.
Jonathon Counsell: On the amendment question, I do not think we need to look at any amendments at this stage. On the targeting of the scheme, we should make it an opt-in scheme for the projects that need it. We do not want a blanket scheme to cover all 2G SAF because that is not needed, but we could have projects opt in with some qualifying criteria—for example, projects that are early stage, first of a kind or high risk, and that cannot get funding without the scheme.
I would not say SAF is popular—that is probably going a step too far. It is fair to say there is greater acceptance of SAF as a solution, but let us be clear: nobody wants to pay for it. However, we accept that there is a cost to the net zero transition, and our job is to minimise that cost as far as possible.
The Chair
We have two minutes left. Do the other witnesses have any final comments or do Members have any further questions? No. I thank the witnesses for their evidence. We will move on to the next panel.
Examination of Witnesses
Sophia Haywood and Noaman Al Adhami gave evidence.
The Chair
We will now hear oral evidence from Sophia Haywood from LanzaJet and Noaman Al Adhami from Alfanar Projects. We have until 11.25 am for this panel. Good morning to you. Could you introduce yourselves for the record?
Sophia Haywood: Good morning, everyone. My name is Sophia Haywood. I am the director of EU and UK Government affairs, policy and sustainability for LanzaJet. We are a US-headquartered alcohol-to-jet SAF producer, and we are developing our flagship project—Project Speedbird—here in the UK. Thank you for having me.
Noaman Al Adhami: My name is Noaman Al Adhami. I am country head at Alfanar, which is a global renewables and engineering and construction company. We are developing our Lighthouse Green Fuels project in Teesside. It is a second generation SAF from biogenic waste and residues. We are currently considered the most advanced globally in terms of development, and one of the largest globally in terms of capacity.
Greg Smith
Q
Noaman Al Adhami: Maybe I can answer this question. This comes with scale. The technologies that we are implementing currently have been implemented in other sectors, so they are not necessarily new, but with the scale, in terms of logistics and feedstock availability, it will take time. We think that when we potentially scale up production, we can recycle engineering and we can utilise other services to push the price down further.
However, in our case, because we are using the FT-SPK route, biogenic CO2 is produced in the process. If I capture that CO2 and connect to Net Zero Teesside, I will be able to generate more carbon certificates—actually, it is triple. For example, if I produced 100 carbon certificates without carbon capture, with carbon capture I can produce 300. By this process, we can reduce the cost of SAF to the offtaker or to the consumer, because then I will divide the capex with the overall cost; instead of dividing it by 100, I will divide it by 300. In our case and for our route, it is key to be connected to the carbon cluster in Teesside, because then I will be able to provide a lower cost for these carbon certificates, if we get the RCM potential.
Sophia Haywood: Just to build on that, scalability is absolutely key. We are looking at a global suite of different projects all across the world. With that, each time we are learning and improving, and becoming more efficient. For example, we built a demonstrator project in the US of our ethanol-to-jet process. From that, we have been able to learn and to become more efficient in spaces, so that when we then develop in Teesside with Project Speedbird, we are able to improve consistently on that basis.
The other thing I would add is that scalability takes you to one level, but I do not think that scalability alone will become completely identical with a market that has had years and years of operation and cheap access to crude oil, for example, to convert into jet. As for the idea that we will immediately be able to become competitive, that is where there can be another role for policy. The RCM is one of those tools.
Another example that we have seen in Europe is that they have been looking at things such as ETS allowances. These allowances basically help airlines to minimise that uplift in terms of the price of SAF. At the moment, that is time limited until 2030, but for biofuels you are able to take 75% of the cost difference between fossil jet and biofuel. For e-fuels, you are able to take 95% of the price difference. This could potentially be explored in the UK long term, again to help airlines to minimise the impact of SAF price increases. I think there is a role for scalability and time, but equally, in the short to medium term, there is still a role for policy in being able to support that.
Greg Smith
Q
Sophia Haywood: At the moment, we are not allowed to use the bioethanol produced in the UK, because the majority of it is technically first generation, whereby it is produced from crops. The bioethanol here is particularly produced from crops such as wheat. I am not sure about the exact proportion that is grown here and then converted into bioethanol here.
I think that SAF is a great opportunity for the challenge that the bioethanol sector is currently facing. If we were allowed to use in SAF the bioethanol that is currently allowed to be used in the road transportation sector, we would be able to take that and convert that into jet fuel at our facility Speedbird. I did some quick statistics—quick maths—looking at the total capacity that we have for bioethanol production in the UK today. If we took that additional capacity—not counting our current project, which is 2G or second generation—we would be able to build three and a half more Project Speedbirds in the UK, just taking that potential capacity, if that was all theoretically to come to us.
We see SAF as a great opportunity to fix the current issue that the bioethanol sector is facing. Certainly, we see it as complementary also to the scale-up of 2G, because for us it means that we can reduce the overall cost of project development and we could still transition to 2G over time, or indeed have blends of first generation and 2G together to increase roll-out. For our technology, as long as it is sustainable ethanol that is coming in, we are producing sustainable jet on the other side.
Luke Taylor
Q
As a follow-up question, similar to one that I asked the previous panel, what do you see as some of the challenges across Government that will hold back your ability to produce more SAF? You referred to the ability to use some of the feedstuff to produce second generation SAF mixing, but I think planning and energy will be among the responses as well.
Sophia Haywood: On sustainability and fraud, I have been working on sustainability certification over a number of different fuel types. We have ISCC, which is like an auditing process that we generally have to go through—there are other providers out there—to be able to prove the sustainability of our fuel. This is a very complicated and rigorous process, and I have gone through it many times on different types of fuels.
On the sustainability piece, the guidance that has been put out already in the SAF mandate is very high, and we have to go through a lot of that auditing process. To your point about the risk of fraud and other challenges around greenwashing that potentially could have happened in the past, I think the UK has done a good thing there with how it has approached this, so I support the approach that we are taking. That is not necessarily in this Bill; I would say that that has more already been laid out in the mandate rules.
On what else we would like to see, potentially, through this, as I said before, there is a piece around the SAF allowances—this is a scheme currently in Europe that is funded through ETS revenues. Obviously, you are always taking from somewhere with funding, but you are trying to take at least from a funding source that is coming directly from industry, and using that to then fund the industry back with SAF. I think that has good bones and good structure, and I would love to see that being fleshed out.
On a more practical level, for sure, there is planning. We have just had a recent example that some of my engineers have told me about: waiting two months for an answer on a very small question. It is not because of the quality of the planning teams; they are fantastic. It is the fact that they are quite constrained and there are not enough of them. I suppose there is a potential short-to-medium-term fix there, but also a longer-term fix in terms of thinking of the skills that we need moving forward. We automatically think of more engineering and STEM roles, but we also need the rest of the value chain to be adequate in terms of workforce and other things.
I alluded earlier to the details of the mandate being really good on the sustainability piece, but there are some very complex rules that we are still consistently trying to navigate six months on. There are different interpretations to different questions—for example, in the nitty gritty of how hydrogen is treated or the rules around electricity and displacement. They are more in the detail, but we end up spending quite a lot of time on them as a company trying to break through into this market.
Equally, it is a learning experience for my colleagues doing these projects all across the world. We have other projects going on in India and Australia. As a Brit, I want the UK to be our flagship and our first, and I am working hard to make sure that it is, but as I always say to people, I am competing with my colleagues in Australia and all over because lots of people want SAF. It is about how we can make it as efficient and easy as possible, keeping in mind all the good sustainability criteria, to get steel in the ground here in the UK.
Noaman Al Adhami: From our perspective, the route we are using—the Fischer-Tropsch synthetic paraffinic kerosene route—is an American Society for Testing and Materials route that is approved already. On sustainability, the feedstock criteria are well defined in the SAF mandate. All the types of feedstock that are eligible to produce SAF are well defined. We are complying with that. The greenhouse gas and carbon intensity are other factors for measuring sustainability. For our project, without carbon capture, we are at minus 80% or minus 85% from the fossil equivalent. With carbon capture, we will go negative—we will go to even more than minus 200%. That is key for us.
On what could be done better, planning is always an area where we need improvement in terms of time. There is also connection to the grid, for example—grid connections take a very long time. We decided to produce our own power on site using a biomass boiler rather than waiting for a grid connection because the answer we got was that we will get it by the end of the 2030s—2039—and we cannot wait until then.
Another requirement, which is very specific to us, is to get connected as early as possible to the carbon network once we start producing SAF by the end of 2029, especially when there is a unique benefit for the UK. By the way, that is very unique to the UK. No other country has a SAF mandate that is about carbon scaling and at the same time has the capability to capture CO2. That is also unique in Europe because the UK and Norway together have 75% of the carbon capture capacity in Europe. It is really very unique to the UK. Our ask is to get connected to reduce carbon intensity, provide a better price per certificate, and also pay, because we do not need subsidy for carbon capture. We are ready to pay the transport and storage costs to the Government for carbon capture. Those are the three main points.
Euan Stainbank
Q
Noaman Al Adhami: Our project is a £2 billion investment. We need the RCM to be able to reach FID. We already have lenders on board, and that is the requirement they have asked us to secure before reaching FID. Our project was part of the windows of the advanced fuels fund. The original plan was to start construction by 2025—this year. We were planning all our development activities to be ready to start construction this year. Unfortunately, that is now not possible, because the RCM is now pushed to the end of 2026.
Yes, immediately after I sign the contract—the day after—I will start constructing the site and reach FID. I will technically be ready by the end of this year. I am finishing FEED. We have invested more than £70 million in this project so far and we will finish FEED by the end of this year, so technically I am ready to start construction after the end of this year.
If there are delays, we are worried. We are broadly very supportive of the Bill; our issue is timing. If I do not get the RCM by the end of 2026, then the project will be delayed, and then I will not be able to produce SAF as planned starting from the end of 2029, and then provide the market with the SAF quantities by 2030, when it is required, as per the mandate. The second-generation SAF is required in 2030. I will not be able to do that if there are delays.
Sophia Haywood: We are currently in the FEED phase, which is front-end engineering and design—we are really good at acronyms in this space. Basically, what that means is that we are looking at the facility specific to the site and designing everything up with the site. It is a really important stage, before we then go to a final investment decision. We are expected to go to a final investment decision next year. That is what we came out publicly and said. Any policy uncertainty in this space, even if it is for a good thing, creates questions, but at the moment we are still working towards that timeframe.
One of the things we are hearing at the moment on access to finance is a lot of positivity towards when you get to that final investment decision space. But again, who knows the full impact that this will have on the broader markets in the financial space as well? All eyes are on the UK; they have been, first with the SAF mandate, and now with the RCM. Also in Europe, there is a lot of looking to what the UK is doing.
This is undoubtedly going to have an impact, but in all honesty it is very difficult to say right now what that impact could be until more details are available. From our perspective, the development of the scheme as swiftly as possible and, as Jonathon Counsell said, the competitivity within that, is important. It is about as much swiftness as possible. We are very supportive at the moment of what is happening.
David Reed
Q
Sophia Haywood: That is a great question. In terms of the international value chains, as I said before, all eyes are on the UK. For a lot of projects that are developing globally, even if they are being developed in countries significantly further away from here and Europe, we are going to see a lot of opportunity for product to be moved over to the UK, at least until other mandates in other countries are put in place, and then we will start seeing shifts in where this goes.
Instead of a blocker, perhaps, I would phrase it more as an opportunity about things that we could maybe do slightly differently. One example that we have just had is a project in Japan that we have done. We had a large amount of funding. It is quite similar to the advanced fuels fund principle, but a lot larger in terms of the quantity of funding that is available, albeit with a smaller number of participants. That has enabled a much larger-scale project in partnership with one of Japan’s largest oil companies to develop a SAF project. This is a transition, and they are going to move at the same pace as one another.
As much as we can support investments on existing sites with existing infrastructure, such as both of our projects in Teesside in terms of the regeneration, I think more activities like that could be a great opportunity for the UK. The steps that have been taken so far with Project Willow are a good example of how that could be taken to the next level. The project is looking at opportunities on the site of the former refinery at Grangemouth; maybe this could be a similar example, where you could take it to the next level. However, we will see increasing competition globally.
Coming back to the points around planning and electricity connections, anything that could help us to bring investments to the UK, where we have some of the highest energy costs, would be welcome. We saw a commitment in the industrial strategy to reducing electricity costs, which is fantastic. We would welcome greater clarity as to whether SAF can definitely be included in that. I saw that it is an extension to an existing scheme, which is why I am asking that question. These are some of the things that help us to compete better globally.
David Reed
Q
Sophia Haywood: It is not something that we have had great levels of conversation about, particularly when it comes to energy security. It is a really important part of energy security. Coming back to the point about access to locally produced bioethanol, I see it as another great example of something that would be sustainable, affordable and secure, if we are able to take wheat that is produced locally by British farmers, and convert it in local facilities and then at a SAF facility. With all the additional benefits on things such as CO2, that is a great opportunity on energy security, but speaking more broadly it has not been a huge part of the interest in SAF.
Noaman Al Adhami: I will focus more on scalability. When it comes to scalability, allowing all the routes to SAF and not focusing on one route will potentially enable SAF production to be scaled up. Green hydrogen will also potentially be there in large quantities with an affordable price, and that will contribute. For example, we could utilise green hydrogen to triple production if it were available, but currently it is not.
We are also designing our plant to utilise multiple types of feedstocks. It is mainly solid waste to SAF. I would start with a less challenging feedstock to prove the line-up and then explore much more difficult feedstocks, such as MSW. Even sewage sludge, chicken manure and grease, for example, could be used to co-fire the gasifier, so we think the supply chain will potentially build once it sees a home for their waste.
We will start with a safe option for the feedstock, but our objective is to explore all other potential feedstock and increase capacity. We have plans for at least phase 2. Our site in Teesside can accommodate phase 2 and we are already planning for that. Hopefully, once we reach FID, we will announce phase 2 of the project.
Tom Collins (Worcester) (Lab)
Q
Noaman Al Adhami: In terms of standards, as I mentioned before, our route is approved as per the ASTM route. The rest of the standards—mainly on feedstock—are already there in the SAF mandate with all the details, and we are complying with that. I think one of the big advantages of SAF, compared with other means of decarbonising aviation, is that it is a drop-in fuel. It is a liquid fuel, very similar to the jet fuel kerosene, so it is easy to store and transport; you can use existing pipelines.
Obligated parties, whom we may potentially supply with SAF, have the capability to blend it. Currently, it can be blended up to 50% drop-in, and they can do so using the infrastructure that is already available. If you compare hydrogen with SAF, SAF is much easier, because you can use the existing infrastructure in airports, storage and logistics. To be frank, we do not see any challenge there in Teesside, which is an industrial area with storage facilities. We do not see any issues. With hydrogen, as I explained, we can use hydrogen not necessarily to power the plane directly, but we can certainly use it to boost production of SAF. That is possible. I have the CO that I mentioned earlier, which I am currently capturing to reduce carbon intensity. I can convert this to CO, mix it with hydrogen, and produce more SAF.
The issue in the UK is the cost of producing green hydrogen. We, as a global developer of renewables, know the cost of producing green hydrogen in the UK is very high. If you have this valuable green electron, is it better from an efficiency perspective to use it to electrify cars and heat homes, where you can get up to 80% efficiency, or to produce fuel at 30% or 40% efficiency? But things are happening; once hydrogen storage and production costs advance—we think perhaps between 2035 to 2040—hydrogen will potentially be available in quantities. We will need large quantities, of course: for our project alone, we will need 1 gigawatt of hydrogen to fully utilise the biogenic carbon we produce.
The Chair
I am afraid you have just two minutes left.
Sophia Haywood: Just quickly on planning, it is more about boots on the ground than a lack of skills or particular challenges within planning. That is something I have heard from many other SAF producers all over the UK, so that would be my point there.
Similarly, in terms of standards, we also have ethanol-to-jet, ASTM approved, at 50%. That is fine for the current mandates, but as we move towards potentially greater blends of SAF in the mix, more work will be needed to increase the blend limit from an ASTM perspective. I am not aware of any issues on the diesel side—we produce 90% SAF and 10% diesel—but of course I can go away and check, and report back. The same applies to the storage of intermediates; ethanol is a well-transported product in many ways, shapes and forms. Again, I am not aware of any particular challenges there, but I can double-check and—[Interruption.]
The Chair
Order. Photographs must not be taken of the Committee—I am absolutely clear about that. I am sorry to interrupt.
Sophia Haywood: No, thank you. Just on hydrogen, we need a small quantity of hydrogen for our project. The challenge we actually have at the moment is that we are not allowed to use hydrogen supported by the hydrogen business model, which is obviously supporting a lot of the hydrogen production out there. We also have to use green hydrogen in SAF, otherwise it would essentially be counted as fossil-based, and we do not want to produce any fossil jet—that is not what we are trying to do.
There could perhaps be some leeway in the short to medium term to allow us to access projects supported by the hydrogen business model. I think they are being treated slightly in isolation at the moment, but we are all very connected with one another. Whether it is CCS, hydrogen, or everything else, we are all interconnected in one shape or another. I get why we are trying not to double-incentivise, but in a way we are all reliant on each other’s—
The Chair
Order. I am afraid that brings us to the end of the time allocated for questions from the Committee. I thank our witnesses for their evidence this morning. As it is now 11.25 am, the Committee is adjourned. I look forward to seeing you all this afternoon at 2 pm.
Sustainable Aviation Fuel Bill (Second sitting)
Tuesday 15th July 2025
(2 weeks, 2 days ago)
Public Bill CommitteesSustainable Aviation Fuel Bill 2024-26 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 15 July 2025 - (15 Jul 2025)
Greg Smith (Mid Buckinghamshire) (Con)
Q
Doug McKiernan: On the first part of the question, given my knowledge of the sector as an engineer, I do not believe that there is a long-term solution other than power to liquid. At the moment, in the ASTM fuel standards, there are a lot of bio-based, sugar-based and food-waste solutions. In my view, those are not truly scalable, and their cost will only ever go up, because of the shortage of land and so on. The power-to-liquid side is truly scalable. The feedstock is air, water and renewable energy. It is extremely clean, and it gives the industry the opportunity—in, say, 10 or 15 years’ time—to move to fuels that are even more performant than current fossil-based fuels.
We are very supportive of the Bill, and we think it will be useful for us if it goes through. It will give confidence to the sector and bring investment, which then helps to bring capability to the UK. It is a great way to kickstart the e-fuels industry, which is the medium to long-term solution, not a short-term solution. We have been working in this sector for only five years. Because of our education system, we probably have some of the best talent in this sector globally, and we are able to recruit that.
We have already made significant inroads into the quality of the fuel, which is over and above anything else that is now available—and when I say that, I mean globally available. This little company that we have—and it is little—has been able to outperform some of the bigger competitors in the field. Towards the end of this year, we will submit our product to the ASTM governing body to get it certified. The intellectual property that we are generating is key to the UK. We need to make sure that the IP is generated here in the UK and kept here because I believe that in five years from now all the big decisions around e-fuels—all the important ones—and the freedom to operate will have been worked out, and we do not want that to be worked out anywhere other than in the UK. It will enable us to kickstart the energy generation within the UK so that we have a sovereign capability for energy generation. I hope that answers your question.
Greg Smith
Q
Doug McKiernan: That is a very good question. I think we are in a race. At the moment we need the Bill to give confidence to investors. That will help us to scale. That is the main benefit in the short term. With regard to the IP, there needs to be a mandate somewhere in Government to support core e-fuels development. A lot of small companies at the moment are not getting that, so we are at risk of going abroad with the technology. The Aerospace Technology Institute heavily sponsors hydrogen and electric, but does not really support the core technology of e-fuels. Although we have this mandate, which we think is great, there is a bit of a gap there that could do with addressing.
Graeme Downie (Dunfermline and Dollar) (Lab)
Q
Doug McKiernan: Without this Bill and the mandate and quotas that have been set, I think the investment industry will step back from that, which would hurt us as a company. We would not be able to scale up. It would make things extremely difficult and would push the pace at which we could get to net zero to the right.
Luke Taylor (Sutton and Cheam) (LD)
Q
Doug McKiernan: Coming back to the IP, there needs to be some sort of support for e-fuels core technology development. That is very important. If you want e-fuels to be part of the future, we need to make sure that that research is supported in the UK and that when it is supported in the UK there is proper IP regulation of that. That needs to be mandated as part of the support from the Government.
What is happening in the aviation area is clearer cut, because you cannot get the energy density into an aircraft with hydrogen or electric, so it is kind of obvious, but I think it is a solution for a lot of the fossil-based fuels, including gasoline and diesel. I think what we will end up doing is that, if we can develop that core technology, it is then transferable to other sectors, and with that we will be able to deal with the real problem, which is the end-to-end solution of getting renewable energy to the consumer. That is the real challenge.
At the moment, we are talking about sustainable aviation fuel, but actually there is a lot of energy in the North sea that is not getting used because of the challenge of the cost of getting it from there to the consumer. This is where e-fuels come in. The Bill would help to move us in the right direction to start to tackle that problem, because you would have these companies with the new tech working out how to make that viable. There is a very good, well researched paper by the National Renewable Energy Laboratory in the US and the Department of Energy. It was done back in 2021.
I had a conversation with our CEO and the board one day and realised, “We’re not actually a fuels company, although we’re called Zero Petroleum and we’re making jet fuel and gasoline. We’re actually an energy transmission company, because all the problems we have with renewable energy are solved by liquid hydrocarbons”. If you look at the paper I referred to, done back in 2021, the cost of getting energy from the North sea in a cable to the consumer is probably forty to fiftyfold what it is if you wanted to do it with a liquid hydrocarbon. That is the fundamental problem that we are going to struggle with going forward. We are slowly going to morph as technology and engineering rather than policy dictate what the solution is.
Luke Taylor
Q
Doug McKiernan: Correct. Within that report, there were also comparisons to hydrogen—that was a sixfold increase over a two-foot oil pipeline—and to ethanol, methanol and ammonia. It looked at how you get energy from A to B in the cheapest operational expenditure and capital expenditure form. That is a fundamental. The cost of getting the renewable energy is what all the engineering will come back to. I believe the renewable energy will be in remote locations, a bit like oil today. Ultimately, we are going to put renewable energy in those places. Hopefully we do not cover all the fertile soil with solar panels and we can generate it elsewhere, and then use the power-to-liquids to get it from A to B.
Mr Paul Kohler (Wimbledon) (LD)
Q
Doug McKiernan: To be perfectly transparent with everybody, with carbon dioxide at the moment I think the direct air capture, compared with where we are, is a bit of an Achilles heel. It is probably around two to four years behind in its scale-up, in terms of being able to keep pace with our scale-up, but actually there is plenty of biogenic carbon dioxide around for large-scale commercial plants here in the UK, which could be a stepping stone to the direct air capture. A lot of the work with direct air capture at the moment talks about the cost of it; you can sequestrate the carbon dioxide in the ground. That is not what we want to do as a petroleum company; we want to put that carbon dioxide into a liquid fuel, and then it is net zero. You have carbon dioxide and water coming out of the exhaust—whether that is a turbine or internal combustion engine. If you capture the carbon dioxide again with the direct air capture, you are then net zero.
When you integrate that direct air capture with our process, the cost of direct air capture is probably reduced by 80%, because we have an exothermic reaction going on, and the majority of the cost in direct air capture is in the de-absorption of carbon dioxide. Once you have absorbed it from the air, you have to heat up the catalyst again—or the material that has absorbed it—to get the carbon dioxide out again, and we have an exothermic reaction. We would not have those costs associated with our process. Integration of our direct air capture with our power-to-liquid solution in three to four years’ time would be quite a mature technology, and definitely scalable within the UK.
Ms Julie Minns (Carlisle) (Lab)
Q
Doug McKiernan: That is a good question. I am not a particularly good judge of financial investment—I am a technical person—but I looked at the quotas for the e-fuels, and if they went further, I believe they would drive the development of the technology harder, because it would bring more investment into that particular area. To me, 3.5% by 2040 seems quite low—I think that we could probably scale up and do blends where that would be significantly higher.
Chris Vince (Harlow) (Lab/Co-op)
Q
Doug McKiernan: There is no question about it. The people who we have recruited have been researching, and have done not only doctorates but post-docs in this area. They have been working in it for nine or 10 years, hoping that there was a company out there that would recruit them and turn their R&D into a reality. These people are very passionate about their career and what they want to do. They are not going to work for the money; they come to make a difference. We have recruited a lot of those people. They will go wherever the company is that will make what they want to do happen.
Mr Kohler
Q
Doug McKiernan: Our technology at the moment has to be scalable. When I go to the Jet A-1 ASTM committee at the end of the year, it has to be scalable. That is part of getting of getting the certification. We have to have a scalable process as well as a quality of fuel—so yes, we are there.
The Chair
We have a minute left, but there are no further questions from Members. I thank the witness for his evidence.
Examination of Witness
Ruben van Grinsven gave evidence.
The Chair
We will now hear from Ruben van Grinsven from Shell International. This session will have until 2.40 pm. Can you introduce yourself for the record, Ruben?
Ruben van Grinsven: Good afternoon. My name is Ruben van Grinsven. I work for Shell and I am based out of the Netherlands, at The Hague—the former headquarters of our company, which has now moved across the street. Shell is active in quite a large part of the value chain of aviation refuelling. We provide both SAF and fossil aviation fuel to airline customers today. We do the blending, we do the transportation and we do sourcing, which means that we buy both aviation fuel and SAF from across the world to meet our customers’ needs. We are also actively looking at the production of generations 1, 2, and 3 of SAF.
Greg Smith
Q
Ruben van Grinsven: That is a really good question. We are looking globally at various opportunities to build SAF production plants. The second and third generations especially are more challenging than the first generation. To make the investment case robust, we need to solve a whole number of challenges—some are around ensuring that we can make the technology work, and some are around financing. But a lot of it has to do with the value of the product that we make, and the certainty around the value of the product.
The revenue certainty mechanism being discussed in the Bill is very compelling. There is always a combination of different factors. It is partially fundamentals about whether we can get the right feedstocks, but part of it is also about the certainty we have about the price we are going to get for our products. The revenue certainty mechanism is absolutely very helpful.
Greg Smith
Q
Ruben van Grinsven: There are two elements. One is whether we can invest in a UK plant. That is hard to tell at this point in time for two reasons. We do not fully understand all the details associated with the Bill. I think the principles are very promising, but there are many things that need to be detailed out, which, at the end of the day, will decide how appealing the investment is going to be. There is a lot of that.
Can UK-produced SAF be competitive in a global market? I think that depends a little bit on the type of technology, but it is also very timebound. At this point in time, this is not the cheapest place to make e-SAF, just because power is more expensive than other places in the world. But if we continue to build out the renewables, as I have seen in plans before, I think there are going to be more affordable electrons around that can then be converted into e-SAF. In the longer term, e-SAF can be competitive.
For other technologies, I think things are less location dependent. Ethanol to jet, for instance, is very feedstock dependent, and I think that the UK can be as competitive as other places. Again, the fundamental competitiveness is one element. The other element is whether the whole investment case makes sense, and part of that is financing —and part of the financing is driven by revenue certainty. It is not just the fundamentals but the whole package that determines the attractiveness of the investment.
Greg Smith
Q
Ruben van Grinsven: I do not know. I do not know exactly what the price projections are for renewable power in the UK. It is hard to guesstimate that, so I do not know.
Graeme Downie
Q
Ruben van Grinsven: Ideally, you want the market to take care of it. As evidenced by a lack of investment to date and by a lot of feedback from industry, it is difficult for investors now, without the revenue certainty mechanism, to invest. Is it essential? That is a very black-and-white question. I think it is going to be extremely helpful to convince people to invest.
We absolutely support the Bill because additional SAF production in the UK is going to be helpful for decarbonising the aviation sector, and we very much support that. Additional supply projects in the UK are going to be very helpful to meet the targets and help decarbonise the aviation industry. Yes, we very much support the Bill.
David Reed (Exmouth and Exeter East) (Con)
Q
Ruben van Grinsven: I am afraid I cannot fully answer that question because it is not the part of the business that I am in. I am not importing SAF to the UK, so I do not know how trade limitations are currently impacting SAF supply. I would have to ask a colleague and come back to that question. It is also hard to predict what the future is going to bring for global trade and how protectionism will impact the global free trade of all types of fuels.
If you produce domestic fuels, that is, of course, going to be helpful if you want energy security. I must say, though, that if you look at the volumes that we are talking about today, the energy security element in the early days is going to be limited because of the volume of the fuels involved.
Amanda Hack (North West Leicestershire) (Lab)
Q
You are a global company in a global marketplace. The airlines I have spoken to want to source SAF from UK markets. How attractive is that to your organisation as a global business—responding to your customers’ wanting you to deliver locally? How much does that play a part in that investment?
Ruben van Grinsven: I am going to answer in a slightly similar way. My role is very much investigating and developing supply assets. I am really looking at building SAF plans. I am not very familiar with how customers demand locally produced fuel. In general, customers look for affordability and, therefore, at price and eligibility legislation. At this point, those are the more driving factors for people to buy certain fuels.
Luke Taylor
Q
Ruben van Grinsven: That is a good question. First and foremost, the UK is ahead of pretty much everybody else when it comes to developing those mechanisms. I know the EU is basically inspired by the RCM and trying to come up with a similar framework, which it will be announcing in September in the sustainable transport investment plan. I think the initial thoughts are indeed to fund that through ETS.
I do not have a strong preference between ETS-funded or levy-funded. The most important thing is that it is clear, transparent, consistent and predictable. Once we know the details and find out how the whole mechanism will work, we can perfectly live with the levy mechanism—as long as it works practically. So we do not have a strong preference between ETS or levy funding.
Tom Collins (Worcester) (Lab)
Q
Ruben van Grinsven: There are two elements. One is the fundamentals: affordable renewable energy, other feedstocks, then the cost of building plants, labour, and everything else. At the moment, in terms of the fundamentals of renewable electricity, the UK does not have a clear advantage because power prices are slightly more expensive, and most of the renewable power in the UK is intermittent. That is an important thing that needs to be overcome.
You have a slight disadvantage compared with, for instance, the Nordics, such as Sweden and Finland; they have a lot of hydro and stable baseload renewable power. On the fundamental side, especially for power, I think there are other places that are currently a bit more competitive. However, many of the other elements, such as feedstock supply, labour and knowledge, are quite similar.
The biggest differentiator is probably the legislative and regulatory landscape. You are creating a market through mandates, which I think is extremely powerful. If you also increase investment certainty through an RCM, that element is unique and, at this point in time, very helpful.
Chris Vince
Q
Ruben van Grinsven: Especially for the second and third generation, SAF needs to develop. I think the consensus is that HEFA-based SAF is, at this moment, the most mature and affordable, so it is a great option. However, we also all believe that we are going to run out of feedstock at a certain time.
If you want to continue decarbonising aviation, you need additional forms of SAF—and that is where the second and third generations come in. We need to start developing those now, to learn how it is done and establish the technology and the fundamentals behind it. Starting that now is essential, and doing it in the UK could potentially give you a head start. If you do this before everybody else, you would have a technological and commercial head start, which could be an advantage.
Greg Smith
Q
Ruben van Grinsven: The principle makes sense: at the end of the day, additional cost will find its way to the end user. We do not have enough information at this point in time to calculate what the cost is going to be because a lot of the details of the Bill are unknown. We would like to better understand how this is going to work, what the volumes are, what the timing is going to be, and how we will organise the contracts between the supplier and the off-taker. There are a lot of things that we do not know at this point, and therefore it is difficult to model what the final cost of the levy is going to be for the end consumer. I do not know; it is difficult to answer.
On top of that, I think it is going to change over time. Over time, if the market is short and the prices are high, money might flow towards the levy, so it would be like a negative levy but then it might turn into a positive levy. It is very difficult to assess that and put a number on it.
Mr Kohler
Q
Ruben van Grinsven: Again, that is hard to judge because we do not have the full details of how this is going to be done. I agree that it is a very thin-margin business, so we have to make sure that the levy is distributed properly, and that we do not give certain people a disadvantage or advantage just based on calculation methods. We need to design it very carefully so we do not disturb the market too much. We will be able to assess that much better when we have more details about the Bill.
The Chair
I thank the witness for his evidence.
Examination of Witness
Matt Gorman evidence.
The Chair
We will now hear oral evidence from Matt Gorman from Heathrow airport. For this session, we have until 3 pm. Welcome, Mr Gorman. For the record, can you please introduce yourself?
Matt Gorman: Sure. I am Matthew Gorman, the carbon strategy director for Heathrow airport.
Greg Smith
Q
Matt Gorman: Let me start by saying that we take this issue very seriously, for the reasons you have outlined. It is central to our business. SAF is key to delivering the industry’s net zero transition plan: it is about 40% of the solution. I do not think that anyone can forecast the future costs and prices with exact certainty, but I will say that we test all our demand forecasts for Heathrow against a range of different carbon price scenarios, from low to high—“high” being the Department for Energy Security and Net Zero’s high scenarios. We do that because it is important for us to understand and our investors to understand, and because climate disclosure legislation now requires us to share that information in our annual report. We have concluded that demand for flying from Heathrow remains robust even in high carbon price scenarios in future. We are confident about that.
The Government have shared their analysis on the revenue certainty mechanism and the reasons behind it. That is one of the carbon costs that consumers will bear—there are clearly others—but I come back to the point that all our forecasts have shown that demand is robust.
Greg Smith
Q
Matt Gorman: It is a good question. We welcome the Bill. As SAF is so important, the sector and Heathrow have advocated over a number of years both the mandate, which was passed as legislation at the beginning of the year, and the revenue certainty mechanism. It has benefits for energy security, green jobs, growth and decarbonisation. That has been one of the drivers for the sector to support it. The decarbonisation benefits are clear. On jobs and growth, earlier witnesses talked about the industry studies showing up to £10 billion of GVA and 60,000 jobs by 2050.
Energy security is one of those reasons. As SAF is a key part of the industry transition plan around the world, there will be global trading of SAF. Kerosene is a global commodity today; SAF will be in future. We think we will import some. However, the sector is supportive of domestic production, which is why we are so supportive of the Bill. I should say that Heathrow is not directly in the fuel value chain—we do not buy, make or sell fuel—but we are very involved in the debate, because it is so significant. All the fuel producers and investors we talk to say that the revenue certainty mechanism will help to unlock investment decisions in the UK. I am not sure whether the Bill could be improved to do that even more. I do not have a view on that.
Julia Buckley (Shrewsbury) (Lab)
Q
Matt Gorman: That is a good question. We have not studied it in those terms. We have published a plan to get to net zero, and there are four key tools in the toolkit. SAF is one; zero-emission and hydrogen-powered aircraft are others. More efficient aircraft and more efficient operations deliver a huge amount, and there are greenhouse gas removals for anything that we cannot cut within the sector.
SAF is important. We have always said that a combination of a mandate requiring production and incentives to stimulate investment in the UK is important. We are delighted to see the Government progressing with the Bill: we would like it to be passed as soon as possible, and we would like the consultation on the implementation to move forward. I would simply say that SAF is very important and that the Bill is very important to driving UK production.
Julia Buckley
Q
Matt Gorman: It would be much more difficult to produce in the UK; all the investors and fuel suppliers we talk to say so. There are huge advantages in doing that—for jobs, growth and energy security, as well as for decarbonisation .
Julia Buckley
Q
Matt Gorman: Very confident, from everything we hear from fuel suppliers in this space. Looking at the different bits of infrastructure, starting briefly with aircraft and engines, the main aircraft and engine manufacturers are in the process of certifying all their aircraft to run on 100% SAF. In a sense, we do not have to worry about that problem immediately, because—apart from dedicated flights—we do not have 100% SAF flowing through pipes, but that is clearly their goal. I forget the exact dates, but I think that by the end of this decade they will all be doing it, if not before.
On pipelines and aircraft infrastructure, one of the main reasons that we have focused on SAF is that it requires upstream investment in production facilities, but it does not require changes in airport infrastructure or planes. That means that as soon as you can start producing SAF, you can start cutting carbon. As an illustration, at Heathrow, partly in anticipation while waiting for some of the Government market signals to develop and kick in, we introduced a landing charge incentive—a financial incentive. It started at 0.5% a couple of years ago, and now 3% of all the fuel being used at Heathrow is SAF, which has dropped into our systems without any issues. I should also say that 17% of the total global production of SAF is now uplifted through Heathrow.
Luke Taylor
Q
Matt Gorman: This Bill is part of a package of measures from the Government, and I think it is absolutely vital. I see the Bill and the SAF mandate as equally important, with the SAF mandate driving a requirement for 10% SAF and with the Bill encouraging investment in domestic production. Those are vital tools, and the Government are taking a range of other steps. I am not here as a spokesperson for the Government, but the jet zero strategy outlines a range of measures to support the ongoing development of more efficient aircraft, which is a key tool in our toolkit, along with modernising airspace with the new UK airspace design service, which is vital for more efficient airspace, and support for new hydrogen technology and greenhouse gas removal. This is a vital part of that package.
Luke Taylor
Q
Matt Gorman: I think this is a very strong start from the UK. I was smiling when the Shell representative said that the EU had been inspired by the measures that the UK is taking. Joking aside, I have talked to fuel suppliers and investors to get a sense of how they are seeing the market. They say that this package, with the mandate and the revenue certainty mechanism, is a really strong policy package from the UK.
To answer your question, Heathrow has been invited by the Government to submit updated proposals for our expansion plans by the end of this month. Within them, we will be setting out our views on our future trajectory to net zero. We think that the mandate and the revenue certainty mechanism are vital. The Government have already said that they want to keep the mandate levels under review; you are right that although we are more ambitious to begin with and the EU is less ambitious, the EU takes over. Our view is that heading more in the direction of the EU’s ambition over time will be important for Heathrow and for aviation generally, but we will keep that under review.
It is really important to get started and make a strong start in this decade, to show that as well as producing SAF globally for use in the UK, as we are already doing, we can produce it in the UK.
Tom Collins
Q
Matt Gorman: I think it would look broadly like what the UK is doing. We think about it in three buckets: the plane, the airport infrastructure and the regulatory environment. It is worth remembering that UK aerospace is one of the jewels in the crown of our manufacturing sector. We have a very long history in aerospace, and the Aerospace Technology Institute funds some of that technology development alongside the private sector. That is important.
With airport infrastructure, we have always said, certainly for Heathrow, that we do not want to be a blocker. We do not want a hydrogen plane to be designed but not able to fill up at our airport. We keep an active watching brief on technology developments. We have taken a stand at Heathrow to trial hydrogen technology so that we can understand and build understanding. That is partly to influence the regulatory environment so that we are supporting the roll-out of hydrogen.
The latest views from manufacturers are that we will probably start small with hydrogen—small plane sizes and small ranges—and build confidence there before getting bigger. However, that could play a real role in domestic connectivity. I think we are doing the right things, but it is a both/and with SAF and hydrogen, not an either/or. I would also say that SAF is the solution that we know exists today and that we can deploy today, so we need to get it moving.
Mr Kohler
Q
Matt Gorman: On the first question, I touched earlier on the fact that the EU and the UK have taken different trajectories, certainly into the longer term. I will be a little bit careful in what I say, because we are just finalising our thinking on what we submit to the Government, but increasing ambition with SAF will be important in the UK as we build confidence in production and scale-up of the technology. We can see a case in future to be more ambitious with the UK mandate. I think the Government said that they want to keep that actively under review, which we support.
On the question of tankering, it happens to a limited extent today. We do not fly the aircraft, but our understanding, from when we last looked at it several years ago, is that on short-haul aircraft in particular, where there is a very rapid turnaround and you do not necessarily want to take time to fill up the aircraft at the other end of the route, the CO2 penalty was not huge in terms of the industry overall. I am not close enough to comment on whether the levy poses a particular challenge there, but when the Government get to the stage of consultation on the detailed design of the mechanism and are working with the industry, it will be important to design it in a way that avoids that wherever possible.
Amanda Hack
Q
Matt Gorman: It is a great question. All the evidence from our polling of customers, as well as what we read in regular polls and consumer surveys, shows that people are broadly concerned about climate change and environmental issues generally. In terms of aviation, they see that there is a role for customers, but they are clear that the industry needs to set out a plan and take action. They understand that airports do not necessarily fly planes, but that we clearly have a responsibility. They expect us to set out the plan, communicate it and take action at the airport where we can. In that sense, all the evidence shows that consumers support us taking action.
As the answer to an earlier question alluded to, the net zero transition will have some costs to consumers. The challenge is how we keep those costs as low as possible while reaching the goal of net zero. I think the balance of the mandate and the revenue certainty mechanism is well designed to achieve that. We think that domestic production in the long term so we are not reliant on imports—we have discussed the energy security angle—is a good way of helping to manage price certainty in future. Consumers are supportive, engaged and willing to pay a bit more to support the transition to net zero, but the industry and Government need to take action to manage it cost-effectively.
Mr Kohler
Q
Matt Gorman: If we start with the mandates out to 2030, we at Heathrow do not see a particular challenge in the UK’s adoption of a more ambitious mandate. We very actively supported the 10% mandate for the UK. As I say, it is really important that we start to get SAF flowing and to produce it in the UK, with the support of the Bill.
In the longer term, through the work we are doing and our submissions to Government, I expect us to say a bit more about the long-term ambition for the mandate in the UK, but we have not quite finalised that. I will be happy to update the Committee in writing later in the summer.
The Chair
There are no further questions from Members. Thank you for your evidence, Mr Gorman.
Examination of Witness
Josh Garton gave evidence.
The Chair
We will now hear oral evidence from Josh Garton of the Green Finance Institute. For this session, we have until 3.20 pm. Good afternoon and welcome, Mr Garton. For the record, will you please introduce yourself?
Josh Garton: I am Josh Garton, technical director at the Green Finance Institute.
Greg Smith
Q
Josh Garton: I think that the revenue certainty mechanism that is being proposed is a really good start to getting finance into the sector. Undoubtedly it will not be the only thing that is required: there are other risks that need to be addressed. The revenue certainty mechanism addresses price risk, as it is designed to, but other challenges remain for the second and third-generation fuels, and they may need to be addressed as well. I think that it is the best solution for addressing price risk. As other witnesses have described, when we speak to our colleagues in Europe and elsewhere, they see the package of regulation that the UK is proposing as some of the most promising in the world. The UK will become a very promising place to invest in SAF.
On your question about the price for the end consumer, it is very hard to forecast what that will be. There are a lot of forecasts out there. It obviously depends on the cost of production, the blending of the fuel and many other factors, but the most important thing is that the mechanism for transferring the cost to the consumer be done in a very equitable way, so that you remove any competitive advantages or disadvantages resulting from airlines and other players in the industry potentially gaming the system. I would say that that is a more critical element to consider.
Greg Smith
Q
Josh Garton: I think that imports will definitely play a role, particularly for the first-generation fuels. The structure of the mandate provides space for second-generation fuels, which are quite novel with the sustainability requirements attached to them, so the UK will be a good place for producing them. The technical design of the mechanism, which is not set out in the Bill, will be what is most critical to ensuring that the mechanism is adequate for facilitating investment.
David Reed
Q
Josh Garton: We are most active here in the UK and Europe with sustainable aviation fuel and the investors that are interested. We deal with commercial banks, private equity and other investors, and they are all very enthusiastic about the prospect. Unquestionably, they want to deploy capital into this space, but they will not be throwing out their investment rulebook when it comes to their risk-return profiles and the way that they assess risk. For that reason, we need things like this revenue certainty mechanism in place to provide confidence that investors, when they deploy capital in this space, will get the returns they need to justify their investments, or that lenders providing debt capital into this will get the returns they need within the regulatory frameworks in which they operate.
Amanda Hack
Q
Josh Garton: Yes, I think there are. As I said, the revenue certainty mechanism seeks to address price risk primarily. The mandate deals with volume, and it provides that volume certainty in the market. When we think of the second and third-generation fuels that we need to develop to meet the aviation decarbonisation targets, these are somewhat novel technologies—in fact, they are novel technologies—and there is no market for the fuel at the moment. That means the technologies themselves are not commercially mature yet, so even with a revenue certainty mechanism in place, there is still a level of technology risk that some investors are not willing to tolerate at this point in time.
We need further support to help the first-of-a-kind projects get through FID, even with the revenue certainty mechanism in place. That can include deploying things like first-loss guarantees, or other forms of Government involvement, such as being the first lender through something like the NWF taking a slightly more risk-on approach to the financing of these first-of-a-kind projects. That way we can prove that the technologies are commercially viable, and then help scale the sector.
Ms Minns
Any international comparator.
Josh Garton: In green finance, we will all have observed that the geopolitical narrative is changing. In the UK and the EU there is a more favourable environment for green finance than over the other side of the Atlantic. There is still a great appetite here, albeit within those risk tolerances that the different types of investors require.
Greg Smith
Q
Josh Garton: To go there? Are you talking about the first-generation fuels?
Greg Smith
Well, first and second, until we get to third.
Josh Garton: It is certainly a consideration, but I think most investors are very cognisant of the fact that the third-generation fuel, while absolutely necessary in the long term, has some way to go to evolve to that point. There is a lot of space still for the first and second-generation fuels to develop, but there will be some consideration about not building overcapacity in those sectors.
Greg Smith
Q
Josh Garton: Certainly, the technologies are at that point. There are still commercial challenges; they have been proven at demonstration scale but not at the commercial scale. In the UK, we have a mandate that provides space for second-generation fuels. While that mandate remains intact, there will be a lot of space for that fuel over the long term. In the EU they have a different structure, where they do not have that same space for second-generation fuels.
Luke Taylor
Q
Josh Garton: Yes, absolutely there is. It feeds into the overall narrative in the UK on the direction of SAF. It is more than just at the regional level; there are murmurings around the strength of the mandate itself and its being upheld. All those murmurings impact the narrative and the appetite for investors. The more we can do to support those first-generation plants to get through to a final investment decision and through to production, the better we prove out the sector as a viable one in the second and third-generation fuels. That narrative then falls away, because we have proof that it is a commercially viable product.
Luke Taylor
I admire your faith that that narrative might fall away, but I agree with the rest of the answer.
The Chair
If there are no further questions, thank you very much indeed, Mr Garton, for your evidence today.
Examination of Witnesses
Philip New gave evidence.
The Chair
We will now hear oral evidence from Philip New. For this session we have until 3.40 pm. Welcome, Mr New. Just for the record, could you introduce yourself?
Philip New: My name is Philip New. A couple of years ago I was commissioned to prepare a report for the Government on the development of a UK SAF industry. Before that, I used to be responsible for BP’s global renewable energy activities.
Greg Smith
Q
Philip New: The main conclusions from the report that I did were, first, that the SAF mandate as laid out—it was at a slightly more formative stage then than it is now—was a really smart way of trying to define the market mechanisms, the targets and the obligations framing a new market. The question then was what other mechanisms would need to be in place, having got the demand side largely mapped by the mandate, to enable supply to occur.
My first thought when I saw the RCM was that there was very little that was needed: if you believe that the market will be short of SAF, as many people do, with a buy-out price and a target, you would expect the product to price close to the buy-out price—that which is available. That sends a very strong price signal to investors. I was unfortunately thinking of that from my historical perspective as a strategic investor and had underestimated the conservatism of the banking community. It was clear to me that they were pushing very hard—perhaps because they had grown very comfortable with the idea of a CFD in other parts of the green transition—and they were really enthused and insistent on the idea of a revenue certainty mechanism. The way that the RCM has emerged so far is very highly aligned with the proposals that emerged in that original report. From that point of view I would say, “So far, so good.” The mandate is evolving well and the RCM feels pretty much where it needs to be.
The questions that are still out there, as I think Josh Garton was referring to, are specific to very first-of-a-kind technologies. Part of the issue with the second-generation products is that, while the feedstocks are already wastes, they are often already being used in other sectors. There needs to be, I think, some greater degree of comfort to enable some of those wastes to be bid away without wrecking the project economics of the SAF developer. A good example is black bin waste. The prospect is that by having more competition for black bin waste, we reduce costs for local authorities. It is really nice if we can get there, but for now, while these technologies are so uncertain and regarded as such a risk, it is difficult for local authorities to commit to them with enthusiasm, because they are afraid that they will end up paying landfill fees if they do not manage to do it.
That is one example suggesting that there should be some more comfort around feedstocks. The rest of the answer are the mechanisms that could be put in place to smooth some of the risk around the very first projects. The risks there are around integrating new technologies for the first time and then getting through some of the operating teething problems, because everyone involved will be coming across those issues for the first time. It took me about four years to get a much simpler plant up and running to a point of satisfactory operation. We should not underestimate the challenges of getting those initial assets over that first set of hurdles, but the RCM is an absolutely necessary part of the mix that needs to be put in place.
Greg Smith
Q
Philip New: When I first engaged with this, I had exactly the same thought. However, a few things are starting to emerge that sit on the more optimistic side of the balance of risk here.
First of all, over time there will be more and more pressure for the energy from waste manufacturers to access carbon capture and storage. It is not at all the cleanest way of generating an electron in this day and age. It would be reasonable to expect that over the next 15 years, we will see a number of those assets get to a point where the contracts are expiring. They will then need to contemplate refinancing, and if they do, whether or not they have access to carbon capture and storage will become important. Not all of them will be able to either afford or justify it, because they are too distant from where the carbon sinks are. There is a probability that enough capacity will start to come off stream for it to be picked up.
On top of that, the imposition of the emissions trading tax will start to free up some of the very difficult to recycle plastics, which could be used to make SAF. There is also an interesting stream of waste wood that will become available, particularly as some of the rocks start to fall away, which will start to happen in a couple of years’ time—and assets that at the moment are making renewable electricity out of waste wood will lose their rocks. We also need to remember that it is the local authority that is paying the energy from waste company to move it away.
I have recently been involved with some economic analysis. We assumed that for the first wave of sites there would be a 100% discount. In other words, rather than the local authority paying, it would get rid of the waste for free. The developer would not pay for it themselves, but the local authority would still save the money. We thought that would be necessary to give local authorities the comfort to take on the exposure. Later on, there might be scope for it to become a little more competitive, because people will get more comfortable and there will be more confidence in the technology.
I do not think that we simply have to bail them out. I think there might be something around a guarantee of some description that simply says to a local authority, “Look, if you give a contract to one of these companies and it fails—if it can’t live up to that contract—and you have to put it into landfill and pay the landfill tax, there could be some kind of keep-whole mechanism,” just to encourage them over the line.
The other thing that you could consider is looking at the waste hierarchy. Simply moving this from being recovery to recovery-plus would send a very strong signal to local authorities that putting it into SAF is a better use of their waste than simply incinerating it and turning it into electrons.
Ms Minns
Q
Philip New: This is quite a challenging conundrum. Right now, the safe place to put your waste is into an incinerator to make electrons. Is that the best place for the journey to net zero or for the local authority’s long-term economics? That is less obvious. It is difficult to put all the obligation on the local authorities to make the right, wise, long-term choice, when they are dealing with some very short-term pressures. This is where I think some extra signals—whether through some kind of mechanism that gives them comfort that they will be kept whole if things do not work out as planned, or some adjustment to the waste hierarchy—could play a helpful role.
David Reed
Q
Philip New: I think the key change has been in the United States. When I wrote that report, it was in the context of Biden’s Inflation Reduction Act. The concern was that we might be out-competed by investment in America, and we would end up being a net importer of stuff from America, not just in first-generation SAFs but in second-generation SAFs. They have lower energy costs, which are very important in these sorts of industries, and their build costs are about 20% less than ours. That was a real worry then.
Especially coming out of the big, beautiful Bill, America is out of the game. That is kind of a good thing at one level, because it means that, particularly with the way the mandate is designed around second-generation SAFs, we now have a globally unique position. We could therefore become an incubator for a series of technologies that will have to play a significant role in aviation decarbonisation over the next couple of decades. The bad news is that if we fail to get this new industry kick-started, I do not think we can hope to rely on imports from somewhere else to get us out of trouble. It will mean that we will not meet our mandate targets.
David Reed
Q
Philip New: No. For most global markets that have started to look at SAF, the preferred mechanism has been to impose some form of mandate—even China has put in place the beginnings of a mandate mechanism. None of them are as ambitious as those in Europe and the UK, but that is the normal mechanism. The reason for that is simply that SAF costs more than aviation fuel. Left to its own devices, an airline in a very competitive industry is unlikely to voluntarily buy more SAF than it needs to buy. If it has big corporate clients that want to offset some of their scope 3 emissions and are willing to pay a premium to have their flights decarbonised, that is fine, but there is a real limit to how big, dependable and investable that market will be.
That is where America is right now, and it is because of the structure of the other incentives in the American mechanism. A critical part of that was a change in the big, beautiful Bill, in which the premium given to SAF producers was removed completely. They now get no more money than those making diesel for ground transport use, but it costs more money to make SAF. The airlines do not have an incentive to buy SAF because there is no mandate, and the producers do not have an incentive to make SAF because it costs more to make and they get less credit from the American mechanisms in place to support renewable fuels.
Luke Taylor
Q
I have questions about the big picture. It has the potential to disincentivise recycling. Does the increasing value of SAF feedstock undermine the efforts to recycle? Another, more technical question is: could plastics recycling be better diverted into this process to solve a lot of the problems we have with exporting plastics for recycling and the energy used to do that?
Many of our energy from waste facilities are now linked to heat networks. Is that bigger picture being considered—not just producing electrons, as you say, but using waste heat for district heating networks? There is a bit of additional complexity.
That leads into the bigger question of the holistic view across different Departments and the incentives that the Bill creates, which I am sure are all positive. It promotes better, more sustainable options in different Departments. Is enough work being done elsewhere for this to work within the bigger system? You have 15 minutes.
Philip New: My roots are as a fuels and energy guy, so I will not be able to respond with much expertise to the more specific questions about the waste sector. However, I will do my best by starting with the general statement that I think you are quite right that the second that waste becomes more valuable than an alternative use of that waste, you have to start questioning whether it is really waste. Funnily enough, that is more of an issue in some of the first-generation products that we are using, where the waste is becoming more valuable than virgin vegetable oils. That is a different issue, but it is very important.
In this case, as long as people either do not get anything for waste or have to pay to get rid of it, the risk of it distorting other parts of the hierarchy is manageable, particularly with a sensible degree of oversight and monitoring. I would not lose too much sleep about that. You will have to help me with the other part of the question.
Luke Taylor
Q
Philip New: First, I challenge the suggestion that this is an incentive. I think of it more as an insurance policy. If you are a recipient of the insurance policy, if it turns out that the market price is higher than you contracted for—your strike price—you will end up paying. The counterparty will be in receipt of money from the participants in the scheme. It is not a one-way incentive.
One of the charms of the RCM is that it is nicely balanced. If you are worried that the market will go long and there will be lots and lots of lower-priced product that undermines your economics, the RCM is a great way of giving you insurance that your investors will stay whole and happy.
On the other hand, by taking it on, you are sacrificing your exposure to the upside. That is the premium you are paying. I think the balance that has been designed into the RCM is a really attractive way of keeping everyone honest while still enabling investment to flow into the sector. I do not think it should distort the underlying drivers or mechanisms.
That having been said, I worry about the range of sectors that a successful SAF industry will touch. It has the potential to touch them in a very positive way, but it is also exposed to some inadvertent—I would not call it negligent—inattention in somewhere that does not feel a very strong ownership of the space, which could really mess things up. A degree of conscious, whole-system understanding of what it takes to enable a brand-new sector to emerge, and providing some co-ordination of that, would be welcome. Whether that looks a little like mission control in the electricity transition or something else, I do not know, but something to provide more comfort would be important. It touches many parts of the economy and many Departments.
Lewis Atkinson (Sunderland Central) (Lab)
Q
Since your report, of course, we have had a change in Government, and who knows if there might be another one over the investment cycles we are talking about here? Could you say a little about your assessment of how a Bill—putting something in primary legislation, as this does—helps to provide the political confidence that you believe investors are looking for, and also, frankly, helps to mitigate the actions of the varying parties in Parliament as we approach this issue?
Philip New: There were two big pushes from the investment community when I was writing the original report connected with the RCM. The first was that it would just be nice to have that revenue certainty in the first place, and that is what we see in other parts of the green transition.
The other speaks directly to this point. They were very nervous that there might be a change to the mandate design, the mandate targets or something at some stage in the future, and that that would so change the market dynamics and the pricing dynamics that all their assumptions would go out of the window. They were not going to be satisfied with any number of assurances from the Government, because Governments change their minds, so they wanted a bilateral contractual arrangement, which is another feature of the RCM. A big driver of its original definition was precisely to respond to that very concern.
The Chair
Thank you for your evidence, Mr New. We will now move on to the next panel. Before I call our next witness, Mr Geoff Maynard, I say to colleagues that there may well be a Division around 4 pm, or perhaps 4.05 pm, so we may or may not get through the whole of this session before then. If there is a Division, we will go and vote. Return within fifteen minutes maximum, please. If there is another vote, which I do not think there will be, it will be a further 10 minutes.
Examination of Witness
Geoff Maynard gave evidence.
The Chair
Q
Geoff Maynard: Good afternoon. I am Geoff Maynard, a fellow of the Chartered Institute of Logistics and Transport and a member of its aviation policy group. We meet regularly, maintaining links with universities, industry, airlines and environmentalists to assess developments in the sector, and to advise and inform Governments and the aviation sector on the best way forward, balancing the needs of the environment and the airline sector.
Greg Smith
Q
Geoff Maynard: I think the short answer is yes. It meets that requirement because, unless there are some incentives for SAF—which will cost more than the kerosene that would otherwise be used—there is no incentive for the aviation industry to use it. That presents a problem because there is then no environmental benefit, which we desperately and quickly need. The Bill is a good way forward, as we see it.
Greg Smith
Q
Geoff Maynard: But production is important. You could have a situation in which there is a mandate but nobody can acquire the fuel, except at a totally extortionate price. There would then be pressure on the Government to revise the mandate. That is how we see it.
Greg Smith
Q
Geoff Maynard: It depends on where you are within the mandate. If you are looking at low mandates, up to about 10%, then the £1.50 figure is probably correct, but as we move further on, it seems unlikely that it will be quite as low as that.
Greg Smith
Q
Geoff Maynard: On the face of it, you would expect the cost to fall, but the problem is that there is only a limited amount of raw materials for the generation 1 and 2 fuels to proceed. You will have to move forward to meet the requirements; you will have to move to power-to-liquid fuels, and they are going to be more expensive to produce. Therefore, at some point, as they kick in, to meet the overall figures, the cost base will rise. That is why we believe that, in the longer term, it will be slightly more expensive because there are not the cheaper feedstocks that are currently available.
Tom Collins
Q
Geoff Maynard: The short answer is yes, I do. I think it will be very effective. As many previous witnesses have said, it provides a guarantee to investors that they will get a return on their money. A point that perhaps has not been made is that it gives quite a lot of authority to the Secretary of State. If he sees that the process of moving to SAF is slowing, he can instruct the counterparty to let additional contracts and thus speed up the process and the amount that we have. There is a considerable degree of confidence that, properly used, it will produce the desired results.
David Reed
Q
Geoff Maynard: We have had some discussions around the edges with the RAF, if I can put it like that. They recognise the need that, at some point, they perhaps ought to be using SAF. It is certainly possible for them to do so, albeit not necessarily to the same percentage that you can use it in commercial jets, as I understand it, because the engines have not been designed for it. There are some issues to resolve before they can use it in the way that the commercial sector does. Does that answer your question?
David Reed
Q
Geoff Maynard: Yes, because the use is much greater. There is a lot more SAF to be used in the commercial sector than there is in the military sector.
The Chair
Any other questions? No. Mr Maynard, thank you very much indeed for your evidence this afternoon. We are grateful to you for taking the time to meet with us.
Examination of Witness
Professor Mark Maslin gave evidence.
The Chair
We will now hear oral evidence from Professor Mark Maslin from the UCL Centre for Sustainable Aviation. We have till 4.20 pm for this session. Welcome, Professor Maslin. Would you state your name and so on for the record?
Professor Maslin: I am Professor Mark Maslin. I am a professor of Earth system science at University College London and the founding director of the Centre for Sustainable Aviation.
Greg Smith
Q
Professor Maslin: We take the very large view that the only way to make the international aviation industry net zero is by SAFs. Electric short haul—possible in the next 20 to 30 years. Hydrogen—forget it; it is never going to work and any pilot will tell you, “Not a chance.” That is just so we have that laid out there.
We need SAFs both UK-wide and globally, and we are talking, as an academic institution, with very large airlines that want to produce SAFs in their own country. As academics, my colleagues and I would not pick one technology. What you need to do is what you are doing, which is having a levy that says, “If you produce SAFs, you will then have this benefit.” Then, you will work out which technology comes to the fore, whether that happens to be alcohol production or waste. You should stay agnostic to the successful SAFs output.
Greg Smith
Q
Professor Maslin: Our analysis is slightly different because it is looking at the industry as a whole. On the airline side, there is a worry that these costs will literally be shoved on to the airlines. Many of us do not realise that the difference between this industry and others is that it is a very narrow margin industry. If there is any change in geopolitics, companies can go bust—for example, Finnair. Airlines are worried about this levy system, not necessarily because of the extra cost, but because they are not reassured that when there is a surplus, which goes back to the actual producers, it will be then be passed back to the airline. Again, they are happy with the up and down mechanism, but there seems to be no way of shunting that back to airlines to say, “Okay, you have done well, so you can get some money back.” That is more the concern.
Adding £1 or £2 to the price of a flight does not concern the airlines from the passenger point of view—it will not put passengers off. What will put them off is when the airlines suddenly realise that if you multiply that by 550, which is the number of people in an A380, you suddenly start to bankroll quite a lot of extra money that has to be found. I am hedging my bets, so I will not tell you that it will be higher or lower than £1.50. That is a very small amount per individual, but for the companies that are trying to make aviation work and are positive about trying to move to net zero, this is the perfect time to push, as they have suddenly woken up to the fact that they are laggards.
Tom Collins
Q
Professor Maslin: Other levy systems that have been used in the energy sector have been very successful, so I am personally very positive about this because it gives a guarantee. We have seen what I call the solar rollercoaster: suddenly everyone has solar panels, and then suddenly all the companies go bust. What you are doing, very sensibly, is trying to level those bumps in the road. That worked for offshore wind and it should work for this, but there also needs to be support through other mechanisms, such as R&D and mechanisms designed to support small and medium-sized enterprises, so they can get the research they need, to go from “Wow! That’s a brilliant idea!” to being world leading. This is a great mechanism, but the Government need to use the other mechanisms to fund those companies to develop as well.
Tom Collins
Q
Professor Maslin: I have been very lucky, because in the past I have been able to get funding from Innovate UK and even from the TSB before that—that is how old I am. Innovate UK needs direction, with top-down prioritisation of this sector for the UK. Sometimes Innovate UK has stuff coming in, then selects what it thinks is good, but I think you need to mandate, in concert with the Bill, that it focuses on SAFs and makes that one of its priorities.
Joe Robertson (Isle of Wight East) (Con)
I have realised that Professor Maslin was an undergraduate tutor of mine quite a few years ago.
Professor Maslin: Oh, this is becoming a real embarrassment; it just makes me feel really old. But it is great to see you in a position of power.
Joe Robertson
Q
Professor Maslin: I think that is deflection. The Bill is absolutely required. You need to support this fledgling industry; as with any of our green industries, we need to support it so that we can be world leading.
SAFs are going to be the future. There are 14,000 planes in the air at any moment, and in 30 years’ time they will hopefully all be flying on SAFs. If we can get our industrial might to actually produce the technology, patent it and push it forward, we will be ahead of the curve, because everybody else is starting to throw money at it.
Amanda Hack
Q
Professor Maslin: That is a huge, huge question.
Amanda Hack
Sorry.
Professor Maslin: No, no, I think it’s great. Forgetting schools, I think we need reinvigorate engineering in universities—and I say that not coming from an engineering background. The reason is that, at UCL, we have a huge faculty of engineering and some real areas of expertise, but we need to build those up. We need the chemical engineers who can train the next generation to go into SAFs. We need to energise that.
At the moment, the problem is that the university sector is creaking and underfunded, and top universities are doing things on a shoestring. It seems slightly ridiculous that I am going out to the middle east to get funding to support research into SAFs, but we are having to be entrepreneurial and sell our talent around the world.
David Reed
Q
Professor Maslin: The first thing is that we have to work out a way of being self-sufficient in SAFs. If you want the mandate and the Bill to work, we have to have that self-reliance. The problem that is the quality, quantity and supply of SAFs around the world are highly variable. They are not as good as you think they are. We therefore need to be able to protect our own regulations by having a homegrown community.
On weaponisation, no, I have not seen any evidence that hostile states are going after SAFs at the moment, because they are a very small percentage of the aviation mix. At the international level, it would be helpful if the Chicago accords could be renegotiated so that you could tax aviation fuel internationally, even if the tax was small—$1 per tonne, or something like that—to shift the balance away from aviation fuel and towards SAFs being more accountable. I doubt that will be possible in these interesting political times, but that is the problem we have. We are able to tax aviation fuel internally but not internationally. Therefore, at the moment, there is no aviation fuel tax on international flights, which would be a really nice mechanism. Of course, you can see that as weaponising against the fossil fuel industry.
Luke Taylor
Q
From my discussions with industry on the Bill up until now, I am not quite sure that I am convinced about being agnostic to SAF production, source and mechanism. My worry is that it does not give enough ability to shape the environmental benefit of that SAF stream and to incentivise the most beneficial SAF production, such as PTL compared with the earlier gen SAFs, even 2g SAFs. Does the Bill as presented give enough of the right mechanisms to incentivise the right sort of SAFs that will be most beneficial and provide us with the greatest environmental benefit?
Professor Maslin: The Bill provides financial security for industries producing SAFs, which I think is essential. I do not think it has real tweaks to favour particular SAFs—whether you want to do that or not is another matter. The problem is that some SAFs have a better environmental signature, and they are better, but we are going to run out of those.
Ultimately, the real SAFs that we are going to be looking at globally are massive algal productions and artificial kerosene, whereby you produce huge amounts of energy, and you use water and CO2 from the atmosphere to actually create kerosene. That is extortionately expensive at this moment in time. However, as I said, if there are 14,000 planes, going up 4% per year, by 2050 you will have a very large number of planes in the air at any one moment in time. There will not be enough waste, cropland or algal stuff to produce the SAFs we need. Generations 4 or 5 will be the ones that ultimately look after the aviation industry. I would still say to be agnostic; I cannot believe I am saying this, but let the economics work its way through at the moment to see who comes out on top in the UK, and then take through the next generation.
The Chair
Professor, thank you for your evidence and for illuminating us with the alumni in our midst.
Professor Maslin: It is amazing where my students end up.
The Chair
Thank you, Professor, for a very interesting contribution. We very much appreciate your time today.
Examination of Witness
Mike Kane MP gave evidence.
The Chair
We now move on to the Minister, and we have until 4.40 pm for this session. I suspect that we will be interrupted shortly by a Division, but I think we should proceed. Minister, while you have been active in our proceedings today, taking notes and so on, could you please introduce yourself for the record?
The Parliamentary Under-Secretary of State for Transport (Mike Kane): Thank you, Mr Pritchard. I am Mike Kane, and I am the Minister for aviation, maritime and security.
Greg Smith
Q
Mike Kane: As the Minister, may I start by thanking all Committee members and witnesses for their time today? I think it is a great question. We have a world-class aviation sector and, if we want to stay world class, it is absolutely essential that we pass this Bill. It is part of our manifesto commitment. We introduced the mandate on 1 January for 2% on the demand side, and this now begins to give investment to the supply side.
You are absolutely right; we have to remain competitive in the aviation market if we are going to remain the third largest on the planet, and one of the most advanced. The figure we have from the departmental analysis teams is that it is plus or minus £1.50 of the price of a ticket over a year. That is less than my Bee Network bus fare, where Andy Burnham keeps the cost below £2. That is what we are looking at.
You ask how we are going to look at this. To answer in all seriousness, we are going to continue to monitor and control by managing the scale of the number of contracts we let. This gives the Secretary of State—whoever it is, from whichever party it is in the future—the power to look at what is happening and scale up or down if the market is badly distorted. We feel that there is no big impact on consumers taking their annual holiday to the south of Spain once a year. They will continue to do that unaffected.
Greg Smith
Q
Mike Kane: As we said, we are agnostic to the technology. As we let the contracts, that is where the innovation will come.
There is a wider question across Government and UK security about intellectual property, and of course we will keep in contact with our colleagues at the Department for Business and Trade who look at that. The world is looking to us at the moment, as Lahiru from EasyJet said this morning, because we are the first doing this. We want to maintain the intellectual property by being first in the world to do this and then, as the companies come forward with the innovative technology, we want to properly IP that and maintain the competitive advantage in the UK.
Greg Smith
Q
Mike Kane: As the Minister leading on the Bill, I would say, “My kingdom for a chemistry degree.” Actually, Mark said something that I thought was very pertinent towards the end: we just have to allow the technology to emerge. That way, as we get to the power-to-liquids and the harder piece to do, in five, 10 or 15 years, there will be a market for it. The beauty of the Bill is that we can let contracts over five or 10 years.
Personally, even though Exxon has reservations about this measure, the only emotion I would convey to Exxon is thanks for producing this fuel now, in this country. Exxon is happy about the SAF mandate; its issue is with the revenue certainty mechanism. That is an area where, once the market is established, the Government have an exit strategy; once the market begins to work, the then Secretary of State will have ways out of it, because Government will not need to be in it once we have established it.
Chris Vince
Q
Mike Kane: First, I thank you, Chris—you have been a great advocate for aviation since you came to Westminster in 2024, with Stansted airport near your constituency. The No. 1 risk is not doing this—that is the risk. I think Matt from Heathrow and Rob from Airlines UK said that in our approach to getting to net zero by 2050, we have a number of Government policies—airspace modernisation, leadership at CORSIA, the emissions trading scheme, the £2.3 billion investment in the Aerospace Technology Institute and hydrogen regulatory development—but that 40% of that pathway is the Bill. If we do not pass it, we are in serious trouble about decarbonising the industry. That is the key risk.
Tom Collins
Q
Mike Kane: When we came into Government in July, we had two key aviation policies. The first was airspace modernisation, and we set up the UK Airspace Design Service and passed it into legislation just the other week. In addition to improving resilience in our skies, we hope that that measure will stop planes circling and allow those that currently do not fly in a straight line to fly in a straight line, which reduces the cost of fuel—to go back to the shadow Minister’s point. Lahiru from easyJet said in his evidence that the best energy is the energy we do not use, and airspace modernisation helps us with that piece.
The second part of our manifesto commitment was SAF. After we were elected, we laid the mandate for 2% of all aviation fuel in the UK to be SAF. That came into force on 1 January. Airlines are sourcing SAF and getting supplies of it, but too much of it comes from abroad. While we have a good industry in the UK, companies need the confidence to scale it up.
I will make no party political points, but four or five years ago we were promised that by 2025 five plants would be up and running. If I were going there, I would not be starting from here, but we are getting on with doing this now. I think everyone on this Committee can be extraordinarily proud that this will be the moment that we stepped up and began to decarbonise the aviation industry.
Luke Taylor
Q
Mike Kane: To get any Bill this far, as any Member will know, it has to have consent right around Government. The Government know exactly what we are doing in a joined-up way. To answer your mission question, we have said that we want to be a clean energy superpower, and this Bill helps us to do exactly that. It gives us sovereign capability here on UK shores to do that; not only is that the right thing to do, but, in the increasingly uncertain geopolitical situation we face, it is becoming almost essential.
The other mission that we have is growth. Today, I heard some very big figures on what that could mean. Our Department figures show at least £5 billion GVA added if we do this, and about 15,000 jobs—[Interruption.]
The Chair
Order. I am suspending the Committee for a Division in the House. We will try to get back as quickly as possible.
The Chair
We now continue with our proceedings. I call Luke Pollard to continue—[Interruption.] Sorry, you are not a Minister of State yet, but you will be soon, I am sure. I call Luke Taylor.
Luke Taylor
Q
Mike Kane: As the departmental Minister, I want to avoid the pitfall of commenting on Treasury policy, but I did hear some earlier evidence that £500 million came in from the ETS. What did they get back for it? Well, £2.3 billion of investment in the ATI, which is looking at engine capacity, hydrogen and reduced noise technologies. We are investing more than we ever have in that area. We are also now aligning, or are in negotiations to align, our ETS with the European Union. That would give us a bigger market, and therefore help aviation in this space.
In addition to the £2.3 billion, the Chancellor recently announced £63 million for the advanced fuels fund. The Government are putting their money where their mouth is. As part of the work that I have done this year to restart our confidence in aviation, I set up the jet zero taskforce, which is jointly chaired by me and the Minister for Industry, my hon. Friend the Member for Croydon West (Sarah Jones), at DBT. There is an awful lot of joined-up thinking in this area.
Amanda Hack
Q
Mike Kane: Indeed, and Amanda, you are a great champion of East Midlands airport in your constituency—I have Manchester airport in mine, and I see from day to day the benefits that growth brings in terms of jobs, skills and inward investment. You make exactly the right point. Good strategy is turning what you have into what you need to get what you want.
We have industrial heartlands dotted right across our nation, including in our coastal communities. They are almost oven-ready to host the technology, inward development and jobs. Our analysis, which was a minimum compared with those of everybody else in the room, is that this would create 15,000 jobs in the next few years and £5 billion in GVA. Those jobs are in many of our run-down coastal communities and industrial heartlands, so this is a win-win on many levels—in terms of decarbonisation, carbon capture, production and the regeneration of parts of our nation that have been left behind for far too long.
Mr Kohler
Q
Mike Kane: I think clause 6 gives us flexibility. That is what is key in letting the contract. We have made some principle statements here. This is industry-funded; we do not think the taxpayer should pay for the decarbonisation of aviation. We know that at the moment it is a small amount of what transport emits nationally, but because it is one of the harder-to-decarbonise areas, we know that the graph will go up over time. That is why we are funding the fuel suppliers, at the top of the chain here, so that the costs are spread as this goes lower down the chain and eventually to the passenger.
Mr Kohler
Q
Mike Kane: The first thing I would say in response to your question, Paul, is that this is a very technical, short Bill, but there are huge challenges ahead. I want to compliment my officials, who have worked extraordinarily hard to get to this point, and also industry who have worked with us to get to this point. As we go to the strike price and the levy, we will continue to work with industry to make sure we get that right.
Somebody described it earlier—I think it was Mark again—as being like a seesaw. It will go up, it will go down; but by letting the contracts or drawing them in, we can keep that balance in equilibrium, as far as humanly possible. That is the quality of this. While that is not the answer you might want to hear about the end piece, there will be scrutiny of the Secretary of State and of this, and of the legislation, and that will be covered by the Competition and Markets Authority. There will be many levels of scrutiny of how well Government are delivering this.
The Chair
I am sure Hansard will pick it up, but just for the record, Minister, you have mentioned Mark twice. I believe it is Professor Mark Maslin you are referencing, rather than the Chair, who of course remains neutral—and is not in a seesaw chair.
Mike Kane: You are always Mr Pritchard to me.
Graeme Downie
Q
Mike Kane: First, you are a great champion for Edinburgh airport in your constituency. You know the value of aviation to local communities in particular and you have championed that since you have been here.
Does the Bill give you innovation? I am not sure it does. I think it gives you a platform for what you want to do, in terms of the contracts that we will let going forward, which are about going from HEFA and first generation, to second and third generation. This gives you the substructure to build that capacity for intellectual property, inviting bids for various ways of doing things, and then protecting and supporting that, and bringing new entrants into the market. I think that is what the Bill does.
Euan Stainbank
Q
Mike Kane: This will depend, again, on the contracts. I know that you are a neighbour to the Grangemouth refinery, where there could be potential in the future. We know that SAF can be made from a wide range of feedstock, including household waste. The SAF pathways are developing rapidly, and will do even in the weeks and months while the Bill goes through. We just need to make sure that this legislation adapts to the technology and pathways that are coming forward, which will involve further discussions with DBT, other parts of Government and possibly local authorities.
Euan Stainbank
Q
Mike Kane: The requirements to support specific technologies’ feedstock today may be out of date. Again, if we were to pass this legislation and get to Third Reading, that gives us flexibility, as the Secretary of State has ability to change it. If we feel that the HEFA cap needs to change, we will be able to change it. If we want to move up the gradients of the types of SAF that we use, it gives us the ability to do that through the letting of the contracts.
Lewis Atkinson
Q
Mike Kane: First, you have been a big supporter of sustainable aviation fuel in your constituency, because you have the Wastefront tyre-to-fuel plant, so your constituency is already benefitting from jobs that have been created by that company. The Bill also allows us to scale up the technologies that we want to use, which could be of particular benefit to the north-east. I am also the maritime Minister, and we have announced £1 billion investment at the Port of Tyne for LS Cables, and Teesport is about to announce big investments in sustainability as part of our clean energy mission. The mayor, Kim McGuinness, is absolutely tied into this agenda, and using the whole north-east coast to support our green energy mission is vital.
You are absolutely right that the pressure on ticket prices could be downward. Very recently, there was an article in The Sunday Times by the International Airlines Group, which hedged its SAF supplies a long time ago in advance of this. It says that it will now, as an airline, have a competitive advantage in the price of ticketing over the next few years, because it got SAF at the right price at the right time.
The Chair
If there are no further questions, thank you, Minister, for your evidence this afternoon. That brings us to the end of today’s session. The Committee will meet again at 11.30 am on Thursday 17 July to begin line-by-line consideration of the Bill.
Ordered, That further consideration be now adjourned. —(Kate Dearden)
Sustainable Aviation Fuel Bill (Third sitting)
Thursday 17th July 2025
(2 weeks ago)
Public Bill CommitteesSustainable Aviation Fuel Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 17 July 2025 - (17 Jul 2025)
The Committee divided: - Ayes: 3 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 3 / Noes: 9 - Question accordingly negatived.
The Chair
Will everyone kindly ensure that all electronic devices are switched to silent or, ideally, off? We now begin line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room and on the parliamentary website. It shows how the clauses, schedules and selected amendments have been grouped together for debate. A Member who has put their name to the lead amendment in a group is called first; in the case of a stand part debate, the Minister will be called to speak first. Other Members are then free to indicate that they wish to speak in that debate simply by bobbing.
At the end of a debate on a group of amendments, new clauses and schedules, I will call the Member who moved the lead amendment or new clause again. Before they sit down, they will need to indicate whether they wish to withdraw it or to seek a decision. If any Member wishes to press to a vote any other amendment, including grouped new clauses and schedules, they need to let me know. Decisions are taken in the order in which amendments and new clauses fall in the amendment paper. I hope that that explanation is helpful.
Clause 1
Direction to offer revenue certainty contract
Greg Smith (Mid Buckinghamshire) (Con)
I beg to move amendment 3, in clause 1, page 2, line 4, at end insert—
“(4A) The terms under subsection (1)(c) must include a requirement for the producer to consider the longevity of supply and relative environmental impact when prioritising between organic and synthetic derived sustainable aviation fuel solutions.”
Greg Smith
It is a pleasure to serve under your chairmanship, Mr Western. As I have throughout the passage of the Bill, I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests—I am taking a safety-first approach here—and the donation from Nemesis of synthetic road fuel for a constituency surgery tour last year. That is not relevant to sustainable aviation fuel, but I want to be entirely transparent about it, as I have been throughout the passage of the Bill.
Before I speak to amendment 3, a broad comment about all the amendments I will speak to today is that, fundamentally the Opposition are not a million miles from the Government on the Bill. However, as I am sure you expect us to do, Mr Western, it is our job as His Majesty’s loyal Opposition to kick the tyres and ensure that the Bill is as strong and workable as it can be. We share the ambition to decarbonise aviation and ensure that everybody still can fly for pleasure or business, and that businesses can move goods around the world using air freight.
It is in that spirit that I tabled amendment 3, which aims to ensure that the producers that come forward for the various contracts consider the full breadth of the sustainable aviation fuel technologies available. On Tuesday, we heard oral evidence from manufacturers of wholly synthetic, waste-derived and feedstock-derived sustainable aviation fuels. It is important to look at the panoply of fuels in relation to the long-term environmental impact and the practicalities of producing them today.
As I said on Second Reading, my big fear, which led to my tabling the amendment, is that industries might be stood up only to be turned off again in 10 or 20 years, as the technology becomes redundant. For example, in the oral evidence session on Tuesday we almost had a debate about the possible pitfall of there not being a waste supply to create waste-derived sustainable aviation fuel. Many local authorities up and down the land, my own in Buckinghamshire included, are tied up in 10, 20 or even 30-year financial obligations to, for example, the financing of energy for waste incinerators, which in some parts of the country are connected to heat networks. It may therefore not be possible for councils to say simply, “No, we want to move our waste to a equally productive but different form.” Those contracts exist.
The point of the amendment is to ensure that we look through that very clear lens to see which of the technologies available for producing sustainable aviation fuel will have the longevity of supply and relative environmental impact in the long term. From the evidence we heard the other day, it is clear that some technologies are at a different point of development from others, but none is actually that far away.
For example, the evidence we heard from Zero Petroleum was that it is ready to scale a wholly synthetic production facility right now. Of course, that does not happen overnight—it takes some considerable time to build any facility—but the scalability is able to happen right now. The Government should reflect on that point and should not look just at the technologies that are available right here, right now. I would argue that, too often in this country, we look for alignment with the technology that is available today, when that which is only hours, days, weeks or months away may well be better and worth waiting for.
That is the point of the amendment: ensuring that we get this right for the long term, so that we have a supply of sustainable and, I hope, synthetic—entirely man-made from air and water—fuels available for this country, so that we have the liquid hydrocarbons there, available for purchase, using the price mechanism which sits at the heart of the Bill to get production going, so that our aviation sector can continue to flourish and be available for all that wish to use it.
The Parliamentary Under-Secretary of State for Transport (Mike Kane)
It is a pleasure to serve under your chairmanship, Mr Western. We often discuss our bicycles and their technology, but today we have to talk about the revenue certainty mechanism, which I am glad we are doing.
The RCM is part of the Government’s agenda to decarbonise aviation in the United Kingdom. I will address the amendment moved by the hon. Member for Mid Buckinghamshire, but first I put on the record my thanks to him and other Opposition parties for their general support for what we are trying to do in the Bill.
This Government back synthetic power-to-liquid SAF, which is why we have introduced a separate power-to-liquid sub-obligation, the SAF mandate. We have a separate power-to-liquid pot in the advanced fuel fund, which we are funding up to £63 million. Any RCM contracts awarded will be on the basis of the design phase of the project, including technological pathway and feedstock designation. I hope that answers the hon. Member’s worries about redundancy, because the process will evolve.
Making changes to feedstock requirements or fuel type after contracts are awarded would be extremely challenging for producers. Instead, during our contract allocation process, it is for the Government to decide on the right mix of SAF that will be supported under the revenue certainty mechanism. Given that, I ask the hon. Member to withdraw the amendment.
The clause allows the Secretary of State to direct the counterparty to enter into a revenue certainty contract with a SAF producer. The Secretary of State will decide who gets revenue certainty contracts through an allocation process. Making the leap from lab to commercial scale is difficult for SAF producers—we heard that in the evidence sessions on Tuesday. Commercial plants typically cost £600 million to £2 billion, so they need to attract a lot of investment, yet first-of-a-kind plants often struggle to get investment because there is no clear, predictable market price for SAF. The revenue certainty mechanism will address that.
Under the revenue certainty mechanism a SAF producer will enter into a private law contract with a Government-backed counterparty that sets a strike price for SAF. If the producer sells SAF for less than the strike price, the counterparty will pay the difference. If the producer sells it for more than the strike price, it will pay the counterparty. This follows the example of similar schemes in the renewables sector, which showed that a private law contract with a Government-backed counterparty is a rock-solid commitment that will drive investment into projects.
As we heard in our evidence sessions on Tuesday, British SAF producers are ready. They have the tech and the innovation; they just need the final piece of support from the Government to take off. That is why SAF producers, airlines, environmental groups and investors back these measures.
A Government-backed counterparty will enter into the contracts rather than the Secretary of State, because investors value the day-to-day independence of a Government-owned private company and its insulation from political change. The counterparty will also have expertise in contract administration. This follows the model of contracts for difference schemes in other renewables sectors, where the Low Carbon Contracts Company, a Government-owned body, enters into the contracts, rather than the Secretary of State for Energy Security and Net Zero.
When we consulted on how the revenue certainty mechanism should be administered, stakeholders strongly supported having a counterparty. The clause ensures that the Secretary of State can exercise control over how and on what terms the counterparty enters into the revenue certainty contracts. This is consistent with the approach for similar schemes. The Government will set eligibility and assessment criteria for the competition to allocate contracts, which will focus on ensuring value for money, maximising the benefits of UK SAF production, and supporting viable projects. Any restrictions on our ability to decide which projects to allocate contracts to would affect those objectives and jeopardise the whole scheme.
The allocation process and the terms of the contract will need to be consistent with the requirements of the Subsidy Control Act 2022, which makes sure there is oversight of the mechanism by the Competition and Markets Authority through the mandatory referral process. The oversight will ensure that the objectives of the revenue certainty mechanism address the subsidy control principles set out in that Act. This includes ensuring that the scheme addresses an identified market failure, that any funding provided is proportionate to achieve that objective, and that any distortions of competition, investment or trade are minimised effectively.
Clause 2 provides that producers must be notified of a direction made under clause 1 that affects them. This provides transparency and ensures that producers are aware of any directions towards them. It also gives the Secretary of State powers to revoke a direction and its effect, which protects the Government from entering into a contract where a producer has not met the criteria defined during the allocation process due to unexpected circumstances. We need to ensure that the taxpayer and the sector are protected, and this clause ensures that we can remove ourselves from the contract negotiation process if any issues arise.
Clause 3 enables the Secretary of State to make regulations requiring the counterparty to maintain a register and publish the revenue certainty contracts, subject to any necessary redactions. This will ensure transparency by keeping a register of successful applicants and information on specific agreements, and make it clear which SAF producers have received contracts and on what terms. We will also continue to publish information on the volume of SAF supplied under the SAF mandate. These publication requirements will balance transparency and the commercial and confidential nature of contracts and negotiations. We believe that any stronger requirements to publish information may make producers reluctant to enter into negotiations or affect our ability to ensure value for money.
Greg Smith
I accept many of the arguments that the Minister has put forward. I note he acknowledged that, off the back of the evidence sessions on Tuesday, all the current technologies are ready. That is a really important point for the Committee and the whole House to reflect upon as the Bill progresses. There has been something of a narrative from the usual vested interests in the country suggesting that one technology or another is not in the right state to be able to move forward, or to produce sustainable aviation fuel at the scale we need as a country. It is very welcome that the Minister acknowledged in his remarks that the technologies are already to scale, whether the fuel is HEFA-derived, waste-derived or entirely synthetic following the Fischer-Tropsch process at large.
Mike Kane
Clause 4 enables the Secretary of State to designate a counterparty for the revenue certainty mechanism. It also sets out that the counterparty must be a company wholly owned by the Government. There are several reasons for doing that. First, a Government-owned counterparty will be highly creditworthy, meaning that producers will find it easier to get cheaper financing, so their costs will be lower and the SAF they produce cheaper.
Secondly, the counterparty will have day-to-day operational independence, giving investors confidence that the scheme will not be changed or dismantled. This approach follows similar schemes for renewable electricity generation and for hydrogen production and carbon capture. For those reasons, the Low Carbon Contracts Company, a Government-owned private company, acts as the counterparty. The LCCC has significant expertise in delivering similar contracts, and we have worked closely with it when developing the Bill.
The clause also states that the Government-owned counterparty must consent to being designated. In practice, it is very unlikely that the designated counterparty would fail to provide or withdraw its consent, but it is important that there is a theoretical exit option, as the Government cannot force a private entity to undertake actions that may be to its detriment.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Transfer schemes
Question proposed, That the clause stand part of the Bill.
Mike Kane
Clause 5 enables the Secretary of State to make the scheme transferring the property rights or liability of a company whose designation has been revoked to the new designated counterparty. The power might be needed if it is no longer appropriate for the designated counterparty to continue its current role. The clause will give the Secretary of State the power to act quickly to avoid any disruption to the revenue certainty mechanism, including to existing revenue certainty contracts or negotiations.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
Levy on suppliers
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 7 to 9 stand part.
New clause 2—Review of Sustainable Aviation Fuel Levy Impact—
“(1) The Secretary of State must, within twelve months starting on the day on which Regulations are made under section 6 of this Act, publish and lay before Parliament a report which reviews the impact of those Regulations on the sustainable aviation fuel industry in the UK.
(2) The report under subsection (1) must include, but is not limited to—
(a) an assessment of the impact of the levy on—
(i) demand for sustainable aviation fuel (‘SAF’) in the United Kingdom, with particular regard to whether the levy has increased production of and demand for SAF in such a way as meets SAF Mandate obligations; and
(ii) demand and production of UK produced SAF compared to non-domestic production;
(b) an analysis of any beneficial impact of Regulations made under section 6 of this Act as opposed to projections of benefits of using alternative revenue streams to fund the revenue certainty mechanism, including but not limited to, aviation industry contributions to the UK Emissions Trading Scheme; and
(c) recommendations for any further actions or policy adjustments that may be required based on the findings of the review.
(3) When carrying out a review under this section the Secretary of State must consult relevant stakeholders, including but not limited to—
(a) aviation fuel suppliers,
(b) sustainable aviation fuel producers,
(c) airlines,
(d) consumer representatives, and
(e) environmental groups.
(4) In this section, ‘SAF Mandate’ means an obligation imposed on a provider of SAF under the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024.”
This new clause would require the Secretary of State to carry out a review of the effect of the introduction of the levy; sets out things the review must consider; and stakeholders the Secretary of State must consult during the review.
New clause 6—Review of International Alignment of Sustainable Aviation Fuel Support under this Act with schemes in the ECAA—
“(1) Within twelve months of the day on which this Act is passed, the Secretary of State must publish and lay before Parliament a report detailing the degree to which the levy imposed under section 6 and the revenue certainty mechanism established under this Act aligns with relevant policies and support schemes for sustainable aviation fuel in the European Common Aviation Area (ECAA).
(2) The report required under subsection (1) must include, but is not limited to—
(a) an assessment of the current level of alignment of the levy and the revenue certainty mechanism with ECAA policies and support schemes concerning sustainable aviation fuel; and
(b) recommendations for specific steps or policy adjustments that may be required to increase alignment between aviation in the United Kingdom and the ECAA, where such alignment would be beneficial for the United Kingdom's sustainable aviation fuel industry.”
This new clause requires the Secretary of State to publish a report within twelve months, assessing the alignment of the Sustainable Aviation Fuel levy and revenue certainty mechanism with the European Common Aviation Area.
Mike Kane
Clause 6 enables the Secretary of State to introduce, through regulations, a levy on aviation fuel suppliers to meet the costs of payments made by the counterparty to SAF producers and to cover the counterparty’s administrative costs. We plan to fund the revenue certainty mechanism through a levy on industry because it is right that the costs of decarbonising air travel are borne by the aviation sector rather than the taxpayer. We are levying aviation fuel suppliers because placing the levy higher up the supply chain spreads costs across the sector and reduces administrative burdens, and because aviation fuel suppliers will benefit from the greater volumes and lower prices for SAF that the revenue certainty mechanism will create.
Broadly, if the counterparty has incurred costs in a set period, we will cover those costs by levying aviation fuel suppliers based on their share of the fossil fuel market during that period. We are continuing to work closely with industry on the details of how the levy will operate. This approach is in line with the approach of other contracts-for-difference-style schemes, such as in the renewable electricity sector where there is a levy on electricity suppliers. The clause will also ensure that the counterparty’s obligations and activities in respect to the levy are appropriately regulated. I assure Members that the regulations under this clause will be subject to consultation and the affirmative parliamentary procedure, so there will be further opportunities for scrutiny in this area.
Clause 7 enables the levy regulations to require a person who is liable to pay the levy to provide financial collateral to the counterparty. This acts as a failsafe if there is cause for concern about non-payment. It ensures that if a levied party does not make a payment, the counterparty can take any owed money through the collateral. Without this power, there is a risk that non-payments to the counterparty lead to the Government needing to provide financial assistance to ensure that the counterparty can make payments under the revenue certainty mechanism contracts.
Clause 8 enables the levy regulations to include provisions to ensure that the levy is administered efficiently. It allows the Secretary of State to confer statutory functions on the counterparty, such as collecting levy payments and enforcing regulations. It is vital that the counterparty has the powers and functions it needs to operate efficiently and effectively.
Clause 9 will allow us to make regulations on who will calculate matters relating to the levy, and how—for example, how levy payments should be calculated and who is responsible for doing so. It ensures that calculations are made in an appropriate way by people who are qualified to do so. The regulations made under this clause will be subject to consultation and the affirmative procedure.
Mr Paul Kohler (Wimbledon) (LD)
I rise to speak on clause 6 and new clause 6. As we have heard, clause 6 would create a levy on fuel producers. While I do not necessarily believe that to be the wrong approach, as with much of the Bill, the devil will be in the detail that is not available for us to scrutinise here, for obvious reasons. As my hon. Friend the Member for Sutton and Cheam will make clear, there may be unintended consequences if the regulations are not designed correctly.
In my opinion, leaving much of the mechanism to a later date is not necessarily a bad thing—I agree with the flexibility that is being put in place. With a new, emerging technology and industry, ensuring that the Government’s hands are not tied at this early stage is a strength, not a weakness. That notwithstanding, some assurances should be given about how the mechanism will be designed, and how the potential flaws raised in the written evidence received by the Committee will be sidestepped. I point in particular to the written evidence from Valero.
Clause 6(3) implies that the levy will be based on criteria relating to the historical market share of fuel suppliers. That has been raised by those in the industry as potentially having unintended consequences. As I raised yesterday with the Minister, who I am not convinced gave me the clearest of answers, there have been worries that it may allow new market entrants not to pay any levy, as they will not have had a previous market share. Will he commit to ensuring that the levy regulations will account for such obvious loopholes?
It is clear that the challenge of decarbonisation, both in aviation and beyond, is great and will not be solved without collaboration with our closest international partners. I therefore tabled new clause 6, which would require the Government to review the differences between our approach to sustainable aviation fuel and that of our European partners in the European common aviation area. With 71% of international air passengers at UK airports travelling to or from Europe, it seems sensible that we should strive to be in broad alignment with Europe with regard to SAF.
I appreciate that there may be differences: in the case of the early part of our SAF mandate, we are going further and faster than the ECAA, but our European partners may accelerate beyond our thresholds later on. However, we believe it is important to remain mindful of what our partners across Europe are doing in an industry that has international competition at its very heart. The new clause would ensure that the Government are fully aware of differences in policy, and alive to any unintended consequences or differences that the Bill could result in for those in the aviation industry. We think that would be helpful.
I would welcome the Minister’s observations on both the mechanism that we have suggested and the broader issue of alignment with our European partners. This is, of course, a probing clause. Can the Minister assure the Committee that the Government will keep a watching brief on what the ECAA are doing with regard to SAF from here on?
Greg Smith
I will make one or two brief comments on the new clauses that have been tabled by the Liberal Democrat members of the Committee. The official Opposition have some sympathy with new clause 2. It is always sensible with any new legislation to ensure, within a reasonable timeframe, that it is doing what it was meant to do. We can all debate things when they are a new idea in Committee and in the House, and on paper they might seem as though they are going to be all fine and rosy, but of course we can never predict that with 100% certainty. The review that new clause 2 would bake into the Bill—we can all do the parliamentary arithmetic; it will become an Act at some point in the near future—seems fundamentally sensible.
I understand where the Liberal Democrat spokesman, the hon. Member for Wimbledon, is coming from with new clause 6, because of course by definition aviation is a global industry. By practicality, the vast majority of flights leaving these shores are going to other countries. I therefore understand why the hon. Gentleman would seek a degree of co-operation on the fuel that airlines leaving UK airports and landing in other countries will have to refuel with. Those airlines will have to use the fuel that is available in France, the United States of America, Australia, India or anywhere else. That level of co-operation is important.
I would merely push back a little in arguing that we need to keep a careful eye on not just the European area; it needs to go much further than that. An enormous number of UK aircraft will be refuelling in countries all over the world. It is about trying to get that certainty of supply of a level of fuel that aligns with what we are setting down as our values—the blends that we, as the United Kingdom of Great Britain and Northern Ireland, have baked into the SAF mandate.
The other side of the coin to the Bill is that we should seek to use our influence abroad to achieve things in other countries. We will probably be unable to do so in many of them, but it does not hurt to have that overview and ambition to be the world leaders on sustainable aviation fuel, and to see whether we can encourage others to follow our lead.
Luke Taylor (Sutton and Cheam) (LD)
I rise very briefly to speak in favour of new clause 2, which I have tabled. Generally, the intent was to provide a check-in and reporting mechanism for the success of the Bill. We are all in favour of its objectives; I think that it is the care, and the attention to understanding how it is progressing, that is needed. I therefore ask the Minister what measures will be taken by the Government to achieve the aims of the new clause. Will that be through the jet zero taskforce, or will there be another mechanism for us to understand and monitor the progress and success of these measures? I would be interested to hear his response on how that might be done.
Mike Kane
I thank hon. Members for their contributions. Let me start by addressing the point made by the Opposition spokesperson, the hon. Member for Mid Buckinghamshire, about the overview and ambition of this legislation. We are the first legislature in the world to attempt to create this revenue certainty mechanism. The SAF mandate was a key commitment in our election manifesto last July, and the eyes of the world, as some of our witnesses said the other day, are on us doing this work, because people are following our lead. I therefore want to bake in the competitive advantage of being ahead of the game in this area, and being a world leader in this area too.
Chris Vince (Harlow) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Western. The Minister talks about all eyes from across the world being on the Bill. I must declare an interest, because I have an international airport on the very edge of my constituency, which obviously serves Harlow and where people from Harlow are employed. It is the industry itself that is really looking at this debate, and it was very clear from Tuesday’s evidence that the industry, particularly airports such as Stansted and Heathrow, are in favour of the Bill and moving it forward as quickly as we can.
Mike Kane
My hon. Friend is a doughty campaigner for Stansted airport, which is near his constituency. Stansted is part of Manchester Airports Group Ltd, or MAG, which I know is extraordinarily keen—along with other airports, AirportsUK, airlines and nearly all the other people who gave evidence—that we pass this legislation.
Coming back to the Bill, new clause 2, which was tabled by the hon. Member for Sutton and Cheam, would make it a requirement to carry out a review of the impact of levy regulations on sustainable fuels and the industry in the UK 12 months after they are introduced. The levy regulations will not have a significant impact in the 12 months after they are made. Contract payments will form the majority of levied costs. However, contracts need to be negotiated and signed, plants built, and SAF produced and sold before costs are incurred, which is very unlikely to happen in the first 12 months. Also, review clauses are commonly included in secondary legislation and we do not need separate powers in the Bill to include them in the levy regulations. The levy regulations will be subject to the affirmative procedure, which will allow Members of both Houses to scrutinise them. Given that, I ask the hon. Member for Sutton and Cheam not to press the new clause when we come to it later.
I turn to new clause 6, which was tabled by the hon. Member for Wimbledon. I understand his concerns about the effectiveness of the SAF revenue certainty mechanism and how our policy aligns with the ECAA. I assure him that the UK’s overall SAF framework and requirements have many similarities to those of the EU, generally allowing the same certification schemes to be used, reducing administrative burden and minimising market access barriers. We actively monitor the SAF market including policies elsewhere in the world, just as the world is monitoring this Bill, to ensure that we provide the right level of support to the sector.
As I have said, I am proud that we will be the first country in the world to introduce a dedicated SAF revenue certainty mechanism. Alongside the implementation of the SAF mandate from 1 January 2025, we are leading the way in having clear and effective policies, grounded in legislation, that address the demand and supply of SAF. International Governments and stakeholders frequently point to the UK as an example to emulate, based on our forward-leaning and comprehensive SAF policy framework.
The UK plays a key role in international discourse on SAF and has cultivated strong bilateral relationships on SAF with countries worldwide. The UK promotes co-ordinated international action on aviation emissions through the International Civil Aviation Organisation. Given the active measures that we have in place, I ask the hon. Gentlemen not to press the new clause to a vote.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clauses 7 to 9 ordered to stand part of the Bill.
The Chair
I remind Members that the order of decisions follows the order in which amendments and new clauses appear on the amendment paper. Therefore, although we have also just debated new clauses 2 and 6, decisions on new clauses are taken after decisions on existing clauses, amendments to those clauses and schedules. There will be an opportunity for a decision on them later.
Clause 10
Payment of surpluses to levy payers
Question proposed, That the clause stand part of the Bill.
Mike Kane
Clause 10 enables the Secretary of State to make regulations to ensure that a designated counterparty pays any surplus it collects to the people who have paid the levy. There would be a surplus when a SAF producer sells SAF for above the strike price, and therefore makes payments to the counterparty. In that situation, it is right that the surplus is paid to those who pay the levy. It provides some potential upside to levied parties and will help to balance the flows of payments as the price of SAF fluctuates over time.
The clause also allows the Secretary of State to make regulations requiring someone who receives a surplus payment to pass it on to their customers. This is because we expect levied parties to pass on the costs of the levy to their customers, such as airlines and air freight operators, and it is therefore right that any surplus is also passed on.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clause 11
Financial penalties
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendment 2.
The schedule.
Mike Kane
Clause 11 creates new civil penalties that are necessary to secure the payment of the levy and compliance with regulations. Any penalty will be limited to a maximum of the lesser of £100,000 or 10% of the turnover being penalised. This penalty can be imposed for failing to pay the levy and failing to pass on the benefits of surplus payments to customers in accordance with the regulations under clause 10(1)(b). This penalty is consistent with similar penalties under the SAF mandate. The clause also allows these penalties to be adjusted in line with inflation.
The schedule sets out the procedure for notices, appeals and recovery of penalties. It ensures that anyone who has to pay the penalty will be told why, how much they have to pay, their right to appeal and the deadline for making any payment.
I will also speak to Government amendment 2, which inserts “or Northern Ireland” after “Wales” in the schedule. The amendment will ensure that an unpaid penalty is recoverable in Northern Ireland as if it were payable under an order of the county court, as is the case in England and Wales. The amendment corrects a drafting error and does not reflect a change in policy intention.
Greg Smith
I do not have a great deal to say on the provisions, other than that it is always regrettable when Northern Ireland is forgotten and has to be inserted via an amendment.
On the clause, I have no problem with financial penalties for failure to comply with the law, so I am not attacking the clause per se, but what will the appeal mechanism be? When it comes to law that involves financial penalties, a company will often have a legitimate case—force majeure, or whatever it might be—as to why it has been unable to comply with the letter of the law, and it is always important, as a matter of natural justice, for an appeal mechanism to be in place. Does the Minister intend to enable appeals where such financial penalties are given?
Mike Kane
I am grateful to the hon. Member. Because this will be a matter between the counterparty and the companies invited to bid, it will be subject to normal contract law, but I am happy to write to him on the matter of appeals more specifically.
Question put and agreed to.
Clause 11 accordingly ordered to stand part of the Bill.
Schedule
Financial penalties for failure to comply with levy regulations
Amendment made: 2, in the schedule, page 10, line 28, after “Wales” insert “or Northern Ireland”.—(Mike Kane.)
This amendment ensures that an unpaid penalty is recoverable in Northern Ireland as if it were payable under an order of the county court, as is the case in England and Wales.
Schedule, as amended, agreed to.
Clause 12
Power to direct designated counterparty
Greg Smith
I beg to move amendment 4, in clause 12, page 7, line 12, at end insert—
“(3) A direction given under subsection (1) must include a requirement for the designated counterparty to report on—
(a) the impact of any revenue certainty contract on the fluctuation of the average price to consumers of an airfare over the proceeding 12 month period;
(b) a projection of the expected impact of any revenue certainty contract on the fluctuation of the average price to consumers of an airfare over the following five year period.
(4) A report under paragraph (a) must be made within one year of the date of Royal Assent to this Act and annually thereafter.
(5) The Secretary of State must lay a report made under paragraph (a) before Parliament.”
Amendment 4 focuses on UK IP, which I alluded to earlier. Given that we have been told throughout the passage of the Bill, and the Opposition agree, that we need to underpin domestic sovereign fuel security, there should be a provision in the Bill that gives preference to UK IP and UK producers—not just those that might happen to make the fuel here, but those that are using UK-derived innovation and technology to do so. Of course, we exist in a global marketplace and are often reliant on imports, but it would be regrettable if the Bill enabled the standing-up of industries that are based entirely on foreign-owned technology. That is what the amendment seeks to correct.
The Chair
Order. Minister, given that the Opposition spokesperson spoke to another amendment, perhaps we could allow him the opportunity to say a few words on amendment 4.
Greg Smith
I apologise, Mr Western, for getting ahead of myself. I went slightly cross-eyed as I looked down at my notes, and have two amendments back to back. I stand by what I said, and maybe we can save some time later as I have already made my comments on amendment 5. We all make mistakes; we are all human.
Turning to amendment 4, then, much has been made of the cost to the end user. We had a good debate on Second Reading in which all agreed, across the House and all political parties, that the challenge, as we decarbonise and move to net zero, is that everyone must still be able to do the things that they want to do—to fly and move goods around—but in a cleaner, decarbonised, and net zero way. We have been the first in the western world to legislate for that by 2050.
When I heard the Minister say—in both the private briefings that he gave before the Bill was introduced to the House, for which I am grateful, and then on the Floor of the House on Second Reading—that the net impact would be only plus or minus £1.50 on an ultimate airfare, I was delighted. I took him at his word. I thought, “Fantastic. That is something that consumers will surely be happy with”—particularly if it is on the minus £1.50 side of the equation. Yet, in the evidence sessions on Tuesday, I am not sure that a single witness was willing to put their own name to that plus or minus £1.50 fluctuation. Some witnesses went even further by saying they thought that was—I hesitate to use this word—a conservative estimate.
The point of amendment 4 is to try to ensure that we get something baked into the Bill that acknowledges the ultimate potential cost to the end user: the consumer, the person, any of our constituents who wish to book a flight to go on holiday or on a business trip.
Graeme Downie (Dunfermline and Dollar) (Lab)
The hon. Member reflects the concern that we all have to make sure that our constituents can continue to go on holiday, and that trade can continue to happen, but does he agree that, in addition to some of the information that we heard, there was also a concern about the cost of doing nothing? That could actually cause costs to go much higher than any estimate given by anyone in the evidence sessions, therefore we should proceed as quickly as we can.
Greg Smith
I am grateful to the hon. Gentleman for that point; I do not think that we are misaligned on that argument. Yes, we need to move to sustainable aviation fuel, preferably at the better end of that technology. It is this very Bill that will ensure that we can, as a country, move faster towards that aim with—I have used the phrase before—the other side of the coin of the Bill, which is the SAF mandate. When the Conservatives were in government, we were heading towards that, but I fully acknowledge that it is the new Government who have introduced it to the House. I totally agree with the hon. Gentleman that there is a cost to doing nothing, but it is incumbent on all of us on behalf of our constituents, and the businesses that operate within our constituencies and require the use of air freight, to ensure that we are not legislating for something that will put an undue additional financial burden on them.
The point of the amendment is to embrace the Minister’s commitments at the Dispatch Box on Second Reading, and in the briefings beforehand—which, I repeat, I was grateful to him for putting on—and to ensure that as the Committee potentially allows the Bill to go on to Report, and further through the parliamentary process, we are confident in those numbers, and about the impact that we, collectively, as a Committee and ultimately as Members of Parliament, are putting on the statute book. It is in that spirit that the amendment has been put forward. I ask the Minister to ensure that the projections he has reported from the Dispatch Box come to fruition, so we do not end up looking back in probably a few years’ time, as opposed to a few months’ time, and discovering that the plus or minus £1.50 was much worse than that, as some of the witnesses we heard from on Tuesday suggested.
The Chair
As the Opposition spokesperson has spoken to both amendments, I invite Members to speak to amendment 4, and to amendment 5, in clause 12, page 7, line 12, at end insert—
“(3) A direction given under subsection (1) must include a requirement for the designated counterparty, where a venue certainty contract would result in a new production facility, to prioritise entering into any such contracts with producers that will use UK owned technologies in that facility.”
Mr Kohler
I have a brief question. When the Minister talked about the effect of £1.50 either way on airfares, was he talking about the effect of just the levy or the effect of the mandate as well? As we heard on Tuesday, the mandate will have far more of an effect on prices than the levy, given the premium that is likely to be repayable on SAF.
Mike Kane
Well done to the hon. Member for Mid Buckinghamshire; he pulled it out of the fire there with the amendments. He is right that we are putting SAF on the statute book. We should have put it on the statute book years ago, which is why it was in our manifesto and we are doing the right thing now. I will address the questions about £1.50 in a moment.
Amendment 4 tabled by the hon. Member would put a requirement on the counterparty to report on the effect of the introduction of the revenue certainty mechanism on air travel prices. Once operating, the revenue certainty mechanism is expected to make minimal changes to fares with an average ticket price, as we have said, decreasing or increasing by up to £1.50 on average per year. I remind him that that is less than a bus fare on Andy Burnham’s Bee Network in Greater Manchester where I live. I would offer to pay it, but it is quite cumulative over time and I do not have that type of resource—I am happy to fund the hon. Member for one year at £1.50 if he so wishes. That figure comes from a DFT analysis.
The costs of the scheme and the impact on ticket prices will be kept under continual review. The Government will also set the approach to the allocation of contracts, the number of contracts awarded and the scale of support they provide. Those controls will help to minimise any potential impacts on airfares. The costs of the scheme will also be reported in the DFT annual report and accounts in the usual way. I therefore ask the hon. Member to withdraw his amendment.
The hon. Member for Wimbledon asked whether the figure refers to the mandate or the revenue certainty mechanism. I assure him that it is just the revenue certainty mechanism.
Greg Smith
I am grateful to you for rescuing me, Mr Western, by grouping both amendments in the same debate. I made a mistake, so I put my hands up to that.
I am grateful for the Minister’s response. I will not press the matter to a vote but, as with the earlier amendment, when projections are made I think it is incumbent on the Government to find a way of giving comfort to all the travelling public and all those businesses that use air freight that the provisions of the Bill—I fully accept the comments of the hon. Member for Wimbledon on the wider effects of the mandate—will not produce a much higher cost to them when they go on their holidays or business trips or move goods around the world.
Ahead of Report, will the Minister and his team in the Department look at ways to kick the tyres on those presumptions—in particular given the evidence we heard on Tuesday—and check that they are robust as possible and have the confidence of industry? I would be grateful for that, and we may well return to it on Report. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Mike Kane
The clause gives the Secretary of State the ability to control some of the activities of the designated counterparty through directions. The counterparty will maintain day-to-day independence and the power is limited to the functions conferred on the counterparty under or by virtue of the Bill. However, it is important that the Secretary of State can direct the counterparty on the exercise of its functions to ensure that the revenue certainty mechanism operates effectively and as intended. Any direction by the Secretary of State must also be published to ensure transparency.
Clause 13 requires the counterparty to provide information or advice to the Secretary of State about the revenue certainty mechanism. That ensures that the Secretary of State can get the information and advice needed to understand how the scheme is working in practice, and to ensure that the revenue certainty contracts and levy are working effectively.
Question put and agreed to.
Clause 12 accordingly ordered to stand part of the Bill.
Clause 13 ordered to stand part of the Bill.
Clause 14
Financial assistance for designated counterparty
Question proposed, That the clause stand part of the Bill.
Mike Kane
The clause will enable the Secretary of State to provide financial assistance to the counterparty to ensure that it can always meet its liabilities under the revenue certainty contracts. The intention is that the counterparty will be funded through the levy payments from suppliers of aviation fuel in the UK. The power is a back-up to assure SAF producers and investors that the counterparty will always be able to meet its obligations.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
New Clause 1
Black bin waste
“(1) The Secretary of State must, within two months of the passing of this Act, publish and lay before Parliament, guidance on the opportunities available for local authorities in England to support the production of Sustainable Aviation Fuel through the use of black bin waste.
(2) Within six months of the publication of guidance under subsection (1) the Secretary of State may, by regulation, require local authorities in England to prioritise the creation of sustainable fuel in the disposal of their black bin waste unless the local authority deems it to be significantly financially disadvantageous to do so.
(3) Regulations under subsection (2) must define the meaning of ‘significantly financially disadvantageous’ for the purposes of this section.
(4) Regulations made under subsection (2) are subject to the affirmative resolution procedure.”—(Luke Taylor.)
Brought up, and read the First time.
Luke Taylor
I beg to move, That the clause be read a Second time.
I move the new clause simply to discuss some of the interesting issues that it raises. In the evidence session on Tuesday, we heard about the opportunities for the diversion of residual municipal waste into the production of second-generation SAF. We have heard from many in Committee this morning about the challenges to do with the incineration of waste and the impact of that on our communities, but a lot of us maintain, or agree, that that is the least worst option. The opportunity here is that there is a slightly less worse option for the disposal of that remaining municipal waste.
New clause 1 aims to give the Minister a bit of a nudge towards examining the opportunities and how the waste hierarchy could reflect how that waste is potentially reused. There are also broader questions not only about the residual waste but about plastics recycling, such as whether there is an opportunity to incorporate changes in the way that plastics recycling is prioritised, and whether it is a suitable feedstuff for SAF. New clause 1 is an opportunity to raise some of those questions, and for the Minister to give some assurances and responses on them.
Mike Kane
I think the hon. Member for Sutton and Cheam has a point, in that the public will be interested in how this is made. Advanced-waste SAF, including SAF made from non-recyclable municipal solid waste, is a key part of the SAF industry. We have backed and invested in this kind of SAF in our grant funding programme, the advanced fuels fund, as I mentioned earlier, and we are backing it again in this Bill, providing the revenue certainty that advanced waste-based SAF producers need to attract investment and scale up fast.
The hon. Member’s new clause, however, is not what the SAF producers need, and would place more burdens on our local authorities. There is nothing preventing local authorities from using their municipal solid waste for SAF production if they believe that it provides the best value for money and environmental outcomes. We heard in evidence the other day, when waste actually has a value to it, is it waste any more?
However, municipal waste often needs to be pre-treated and processed before it is used in SAF production. This often means that SAF producers look to buy their waste from processors, rather than from local authorities. We do not believe that access to municipal solid waste is currently a significant barrier for UK SAF production, and it is likely that discussions on the availability of municipal solid waste would happen once a project is close to taking a financial investment decision. I ask the hon. Member to withdraw his new clause.
Luke Taylor
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 3
Review of the supply of bioethanol for use in sustainable aviation fuel production
“(1) The Secretary of State must, within six months of the passing of this Act, publish and lay before Parliament a report reviewing measures to encourage the supply of materials for Sustainable Aviation Fuel.
(2) The report under subsection (1) must include—
(a) an assessment of the impact of the closure of bioethanol plants on the ability to encourage overall increases in sustainable aviation fuel production;
(b) options for mitigating any adverse impacts on the availability of supply of sustainable aviation fuel by the closure of bioethanol plants;
(c) recommendations for any necessary Government action to promote a stable supply of bioethanol for Sustainable Aviation Fuel.”—(Mr Kohler.)
This new clause would require the Secretary of State to lay before Parliament a report outlining measures to encourage the supply of materials for SAFs, including considering the impact of bioethanol plant closures on encouragement to increase supply.
Brought up, and read the First time.
Mr Kohler
I beg to move, That the clause be read a Second time.
New clause 3 would require the Secretary of State to publish a report within six months of the Act’s passing, reviewing how we can better secure the supply of bioethanol for use in sustainable aviation fuel production.
The success of the UK’s sustainable aviation fuel ambitions will rely not only on bold targets and optimistic projections, but on the reliable availability of the resources needed for manufacturing. Bioethanol will be a resource that can be part of the manufacturing process for SAF, and help support a low-carbon industry in the UK, yet while the Government continue to laud their commitment to green aviation, they have stood by while domestic bioethanol production is at risk from Donald Trump’s bully boy tactics.
Since the signing of the UK-US trade deal, the owners of two UK bioethanol plants based in Hull and Teesside have threatened to close the sites as the trade agreement fundamentally undermines their business position. This Government have given US ethanol producers a 1.4 billion litre tariff-free quota—equivalent to the UK’s entire annual demand for the product—and completely undercut the industry, making the UK vulnerable to the whims of, to put it at its mildest, the mercurial Trump Administration.
The new clause would require the Government to assess the impact of plant closures on SAF production potential, set out options to mitigate supply risks and, crucially, recommend the policy steps needed to promote a stable domestic supply of bioethanol. We cannot afford to leave this to chance, or to the good will of a US President who, as we all know, simply cannot be trusted. If the Government are serious about scaling up SAF production, they must ensure that the raw materials are available. That means a proper strategy to support and stabilise the UK’s bioethanol sector.
Greg Smith
I absolutely understand and appreciate where the hon. Gentleman is coming from with this new clause. This topic came up in the oral evidence sessions and on Second Reading.
It is of great concern that the slightly lower tariffs deal done with the United States of America has clearly and materially threatened UK production of bioethanol, which of course has many uses. Many of us on the petrol station forecourt will have seen the curious E5 and E10 labels on the petrol pumps, which is about the ethanol blended with the regular fossil fuel. Our consumption of it as a country is particularly high.
As we are debating the potential future of bioethanol in sustainable aviation fuel production, it is incumbent upon the Government to reflect, within the scope of the Bill, on how much domestic supply there can be. So much of the Bill is underpinned by sovereign capability and fuel security—a point on which the Opposition and I think the Liberal Democrats are equally aligned on; it is so important—and so surely this new clause must also be important to the Government. I ask the Minister to reflect on that when he responds.
Mike Kane
I am extraordinarily proud that we have a Prime Minister and a Government who are rebuilding the UK’s reputation across the world once again, building trade deals with our closest partners across the planet, whether that be India, America or the recent agreement with the European Union. That is where Britain should be—leading and involved, not on the fringes as we have been for many years.
We are debating sustainable aviation fuel, but this is also about decarbonising the planes that will fly in our skies for generations to come. That US trade deal is zero tariff on aviation technology, which is a huge deal for this country, making it a world leader again in the future.
However, I am worried for the workers and families who have been affected by the trade deal. Ministers and officials, including the Business and Transport Secretaries, have met the companies consistently during this challenging time—those companies were struggling regardless of the time—to understand their concerns, discuss what action could be taken and to support them, because that is what good Governments do. The Department for Business and Trade is in discussions on requests for support from the UK bioethanol sector. As a responsible Government, there is a series of strict criteria and well-established due diligence processes that we must follow to consider such requests.
While I would like to see a thriving UK bioethanol sector, we would not expect a significant impact on the SAF mandate if there were to be a reduction in that sector’s production. That is because the UK bioethanol plants use crops that are not eligible for the SAF mandate. The SAF mandate, which is the framework for the supply of SAF in the UK, sets targets based on the availability of waste feedstocks rather than crop feedstocks. The SAF mandate is a global scheme and can use fuels from all around the world, providing an opportunity to draw upon a diverse pool of feedstocks.
However, we also want to encourage a UK industry. In January, the Chancellor announced £63 million of funding this year to help grow UK supply of SAF through the advanced fuels fund, which has been further extended in the recent Budget through to 2029-30. The SAF revenue certainty mechanism—the subject of the Bill—will also boost investment in UK SAF production.
Finally, under the SAF mandate, a formal review of the whole scheme has been built into the legislation, with the first review taking place in 2030. That will provide an opportunity to make an assessment on the availability of SAF supply. The above steps demonstrate how many of the recommendations set out in the hon. Member for Wimbledon’s new clause are already being undertaken by the Government. Given that, I ask him to withdraw it.
The Chair
With this it will be convenient to discuss new clause 5—Increasing greenhouse gas saving potential of sustainable aviation fuel—
“(1) The Secretary of State must, within six months of the day on which this Act is passed, publish and lay before Parliament a report which sets out a strategy for increasing the greenhouse gas emission saving resulting from the promotion of sustainable aviation fuel production in the United Kingdom.
(2) The report required under subsection (1) must include, but not be limited to—
(a) proposals for incentivising the research and development of Sustainable Aviation Fuels that maximise greenhouse gas emission savings;
(b) an assessment of, and recommendations for increases to, the minimum required greenhouse gas emission reduction in order for a Sustainable Aviation Fuel to be issued a SAF certificate;
(c) an assessment of, and recommendations for increases to, minimum ratios for renewable content in blended sustainable aviation fuels, for the purpose of more quickly reducing greenhouse gas emissions.
(3) Twelve months after the publication of the report required under subsection (1) and within every twelve months thereafter, the Secretary of State must publish a further report which—
(a) sets out progress against the strategy, and
(b) makes any necessary adjustments to the strategy as a result of developments in the sustainable aviation fuel industry.
(4) In this section, ‘SAF certificate’ has the meaning given in article 2 of the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024.”
Mr Kohler
As we are all aware, aviation is one of the most challenging sectors to decarbonise and one of the fastest growing sources of emissions worldwide. While other sectors benefit from mature, low-carbon technologies, aviation remains heavily dependent on fossil jet fuel, and is one of the few industries where there is not an alternative available already. The Bill will attempt to grow the alternative industry, but it is clear that its provisions are only the first steps on a long journey to reach net zero by 2050 in aviation. If we are serious about hitting net zero by 2050, we must be equally serious about tracking our progress and course-correcting where necessary.
New clause 4 would require the Secretary of State to conduct an annual review of what contribution the revenue certainty mechanism is making in helping the UK achieve its target of net zero aviation emissions by 2050. It is a simple step that would help us to understand further the impact our SAF policy is having on our net zero targets, and whether other changes or alterations will be needed in the jet zero plan. It would allow us to ensure we understand, year by year, whether we are making the progress the science demands. Are SAF volumes increasing fast enough? Are emissions falling across domestic and international routes fast enough? Are the technologies we are backing delivering real, verifiable carbon savings? To reach net zero, those are the questions we should ask, and we must ensure that we have the evidence base to do so. The new clause would help provide us with that information as a guard against complacency.
New clause 5 would also contribute to our net zero responsibilities. It would require the Secretary of State to, within six months of the day on which the Bill is passed, publish and lay before a Parliament a report that sets out a strategy for increasing greenhouse gas emission savings from SAF production in the UK. It would allow us to understand and ensure that we are implementing new technologies within SAF production. The point of SAF is to reduce the carbon cycle of jet fuel. We should be vigilant in ensuring that anything marked as SAF delivers just that.
New clause 5 consequently sets a minimum standard of the lifetime carbon emissions that can be classed as SAF, and ensures that that is monitored effectively. If we do not embed a culture of accountability, we risk drifting and passing legislation that sounds ambitious but fails to deliver at the pace required. With only 25 years left to decarbonise a sector that today remains overwhelming fossil fuelled, we cannot afford complacency. This Government have rightly set the bold target of net zero aviation by 2050, which the Liberal Democrats support, but targets must be matched with transparent measurement and a willingness to adapt. These new clauses would simply give us the tools to do just that, and I urge Members to support them.
Greg Smith
I understand the argument that the hon. Gentleman is making with new clause 4, but I would argue that it is unnecessary; the whole point of the Bill is to decarbonise aviation. As the Minister said himself, and as I hope the Committee will accept, the Bill was conceived and finds its origins under the last Government, and it was then carried through by this Government, so it is something that we can rightly be proud of on both sides of the House. As we are leading the world on this issue, I am not sure that new clause 4 is necessary.
However, new clause 5 is more interesting, because it goes to the very crux of the debate we had earlier on the various technologies that can produce sustainable aviation fuel in the United Kingdom. It goes without saying that, while all forms of sustainable aviation fuel—as we know it at the moment—are greener than their fossil fuel equivalent, there is significant variation in the greenhouse gas and carbon emissions between using blends or 100% sustainable aviation fuel in an aircraft. The merits of new clause 5 go to the absolute centre of the debate on which of those technologies, or which of those great innovations, can deliver the closest to net zero over the coming years and decades, if not net zero itself.
If new clause 5 were baked into the Bill, and ultimately the Act, it would be interesting to see how it would enable us judge among those different technologies. I have talked in the House many times about the importance of whole-system analysis, which is an analysis not just of the effect while the jet engines are turning and the planes are in the sky, but of the whole impact on greenhouse gas and carbon emissions of manufacturing the fuel and what is done with the waste product afterwards, particularly carbon. New clause 5 would go to the heart of discovering that.
One of the things that we have seen in evidence, and that we have talked before about in the Chamber, is the effect when certain fuels are derived, in part, from atmospheric carbon capture—the carbon emitted post combustion, which comes out of the tailpipe of the aircraft, is the same amount of carbon that is recaptured from the atmosphere to make the next lot of fuel. New clause 5 has the merit of enabling us to command the Government to review that, which is why His Majesty’s Official Opposition have sympathy with it.
Luke Taylor
I rise briefly to press this question to the Minister: if the Government oppose the new clauses, how are they are going to incorporate their intent? I think they probably agree with the intent but are probably just resistant to their being outlined as they are. I ask the Minister to go into as much detail as he can on whether that will happen through the jet zero taskforce or something else.
Mike Kane
A latter day Hilaire Belloc, in my humble opinion. However, on this occasion, the hon. Member for Wimbledon will no doubt know that I disagree with him.
Committee members will be aware that SAF is considered to be essential in achieving net zero for aviation medium and long-haul flights, which account for about 80% of CO2 emissions from aviation. The Government update Parliament and the public regularly on the progress towards net zero targets across the economy, including by laying in Parliament an annual statement of emissions and annual publications of official greenhouse gas emissions statistics. They include granular detail on emissions from all economic sectors, including domestic and international aviation. Furthermore, the Climate Change Committee reports to Parliament each year on progress in reducing emissions, including for transport, and there is a statutory duty on the Government to respond to the points that it raises.
To address the points raised by the hon. Member for Sutton and Cheam, we continue to publish statistics on the volume of SAF supplied each year in the UK and under the SAF mandate. Together, these measures provide a clear picture of progress towards decarbonising aviation, so I would ask the hon. Member for Wimbledon to withdraw his new clause.
Luke Taylor
The Minister has spoken about the tonnage from SAF, but the real question is whether statistics and information will be available on the sources of each of those SAF types, so that we can examine how each of the various streams of SAF production are contributing and also understand the net carbon benefit. He has talked about the carbon production from the burning, but we need to see the detail of the SAF streams to understand the benefits and the progress towards decarbonisation in more detail. Is that something the Government might consider?
Mike Kane
I do not have the answer in front of me, but I commit to providing the hon. Gentleman with an answer in due course. I thought the point he was making was about whether we are being open and transparent across all sectors in the UK in showing how we are decarbonising the aviation sector. [Interruption.] I do now have the answer. Who knew? The miracle of mobile telephony—it will save writing my signature to him with the electronic pen. The SAF mandate and statistics include details of feedstocks and the origin of the SAF. I hope that answers his question, but if he wants more information—we are all keen on this—I would ask him to please keep in touch.
New clause 5, entitled “Increasing greenhouse gas saving potential of sustainable aviation fuel”, was tabled by the hon. Member for Wimbledon. The SAF mandate is the UK’s key policy to decarbonise jet fuel. It does that by securing demand for SAF, by obligating the supply of an increasing amount of SAF in the overall UK aviation fuel mix. The SAF mandate rewards SAF in proportion to the greenhouse gas savings its achieves. That will encourage SAF developers to improve continuously on their greenhouse gas savings. To ensure that the SAF mandate reflects the latest technological and commercial developments, there will be continuous monitoring of trends and the impacts of the mandate. Formal reviews will be conducted and published at least every five years, with a formal review in 2030. The formal reviews will already include certain elements of the new clause, namely the minimum greenhouse gas savings threshold and the minimum targets for supply of SAF. Following the review, there will be an opportunity to update the legislation as needed.
Greg Smith
The central question is whether that review, when it comes, looks at the greenhouse gas savings while the aircraft is in use, or gives a whole-system analysis, from the production and use of the fuel to the benefits of using the by-products, post combustion, to make more fuel. That is an important clarification that we need.
Mike Kane
My kingdom for a chemistry degree! I will let the hon. Gentleman know the answer to his question in due course.
To go back to the point, new clause 5 would duplicate the process already embedded in the SAF mandate legislation. I therefore ask the hon. Member for Wimbledon not to press the new clause.
Mr Kohler
New clause 4 was of course a probing amendment, and the Minister has satisfied most of us that enough will be done to report on our progress towards net zero. I was less convinced by the Minister’s answer to new clause 5. With or without a chemistry degree, the point is a simple one: SAF is green, but some SAF is greener than other SAF. I am not convinced that the Government are yet embracing that or doing enough to work out which SAF should be pushed because it is the most beneficial to the environment. We will press new clause 5 to a Division, but not new clause 4. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 5
Increasing greenhouse gas saving potential of sustainable aviation fuel
“(1) The Secretary of State must, within six months of the day on which this Act is passed, publish and lay before Parliament a report which sets out a strategy for increasing the greenhouse gas emission saving resulting from the promotion of sustainable aviation fuel production in the United Kingdom.
(2) The report required under subsection (1) must include, but not be limited to—
(a) proposals for incentivising the research and development of Sustainable Aviation Fuels that maximise greenhouse gas emission savings;
(b) an assessment of, and recommendations for increases to, the minimum required greenhouse gas emission reduction in order for a Sustainable Aviation Fuel to be issued a SAF certificate;
(c) an assessment of, and recommendations for increases to, minimum ratios for renewable content in blended sustainable aviation fuels, for the purpose of more quickly reducing greenhouse gas emissions.
(3) Twelve months after the publication of the report required under subsection (1) and within every twelve months thereafter, the Secretary of State must publish a further report which—
(a) sets out progress against the strategy, and
(b) makes any necessary adjustments to the strategy as a result of developments in the sustainable aviation fuel industry.
(4) In this section, “SAF certificate” has the meaning given in article 2 of the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024.”—(Mr Kohler.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Sustainable Aviation Fuel Bill (Fourth sitting)
Thursday 17th July 2025
(2 weeks ago)
Public Bill CommitteesSustainable Aviation Fuel Bill 2024-26 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 17 July 2025 - (17 Jul 2025)
The Committee divided: - Ayes: 3 / Noes: 10 - Question accordingly negatived.
Mr Paul Kohler (Wimbledon) (LD)
I beg to move, That the clause be read a Second time.
If we are serious about meeting our climate obligations and economic ambitions, then transparency, accountability and evidence-led policy must be at the heart of the legislation. The ambition of the Bill to build a whole new industry is to be lauded, but it lacks the level of scrutiny that such a large project entails. The Bill sets a framework, but frameworks alone do not produce fuel. Nor do they deliver jobs, attract investment or lower emissions. We must not content ourselves with well-intentioned ambition. After previous broken promises by—I am sorry to say—the Conservatives—to have five plants up and running by now, we have already seen that ambition alone will not deliver what we need.
To truly build the sustainable aviation fuel industry, we must track progress, identify bottlenecks and act on evidence. That is what the new clause provides. It demands a detailed assessment of SAF production levels, uptake by airlines and investment in infrastructure. Further, it requires the Government to consult widely with a full range of stakeholders, widely enough drawn to include employees and unions, as well as producers, suppliers, environmental experts, academics and, importantly, the communities whose lives will be affected, whether by new plants, changes in aviation demand or environmental impact.
The new clause would ensure that Ministers come back to the House not with warm words but with evidence, consultation and a plan. I urge the Minister to accept it in the spirit in which it is offered—constructive, collaborative and committed to making the legislation truly fit for purpose.
The Parliamentary Under-Secretary of State for Transport (Mike Kane)
I thank the hon. Member for the new clause, which seeks to ensure parliamentary scrutiny and that the SAF revenue certainty mechanism will run effectively. I also thank him for saying that I am full of warm words, because I am.
I agree with the hon. Member that it is important to have measures to assess the impact of the Bill and make necessary recommendations; however, significant developments in the SAF industry are unlikely within the first 12 months after the Bill becomes an Act. We are committed to deliver the revenue certainty mechanism as soon as possible, but it is vital that such complex contracts are considered carefully, with time taken to get them right. That will involve negotiations with potential SAF producers.
I reassure the hon. Member that we are committed to transparency in the Bill. We have committed to publishing details of who receives revenue certainty contracts and on what terms. We will also continue to publish annual data on the volume of SAF supplied under the SAF mandate. I hope that he accepts the explanations in the spirit in which they are given and withdraws his new clause.
Mr Kohler
I am grateful for the Minister’s flattering and sometimes unctuous words. He makes a good point about 12 months not being sufficient time to give such a report, and I acknowledge the assurances that he has given. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 8
Review of the Potential Conversion of Industrial Sites for Sustainable Aviation Fuel Production
“(1) Within twelve months of the day on which this Act is passed, the Secretary of State must lay before Parliament and publish a report into the merits of converting disused oil refineries and other relevant existing industrial sites into facilities for the production of sustainable aviation fuel.
(2) The report required under subsection (1) must include, but is not limited to—
(a) an assessment of the technical and operational feasibility of such conversions;
(b) an evaluation of the economic viability of such conversions;
(c) the cost effectiveness of such conversions compared to new build production facilities, taking into account—
(i) the ability to use existing infrastructure such as tanks and pipelines;
(ii) the complexities of environmental remediation and site preparation.
(iii) the availability and suitability of a skilled workforce within proximity to such sites.
(d) recommendations for government actions to facilitate and incentivise such conversions, where they are deemed beneficial for enhancing the resilience and increasing the domestic production of sustainable aviation fuel industry.
(3) In preparing the report required under subsection (1), the Secretary of State must consult relevant stakeholders, including, but not limited to—
(a) sustainable aviation fuel producers,
(b) representatives of the oil and gas industry and workforce,
(c) environmental organisations,
(d) local authorities, and
(e) academic experts.
(4) The report must be accompanied by a statement from the Secretary of State on how the findings of the report will be addressed through Government action.”—(Mr Kohler.)
This new clause mandates the Secretary of State to publish a report within twelve months, reviewing the merits of converting disused oil refineries and other industrial sites for Sustainable Aviation Fuel production.
Brought up, and read the First time.
Mr Kohler
I beg to move, That the clause be read a Second time.
New clause 8 calls on the Secretary of State to publish a report within 12 months on the merits of converting disused oil refineries and other existing industrial sites into sustainable aviation fuel production facilities—and there is an opportunity to have such a report early on. Many Members present, including, notably, the hon. Member for Falkirk, have spoken about the strength and possibilities of SAF to reinvigorate and reuse industrial sites.
The UK has several disused oil refineries and industrial sites, which already possess critical infrastructure—storage tanks, pipelines, grid connections—and are often located near skilled workforces familiar with complex industrial processes. That presents a real opportunity to repurpose existing assets, accelerating the deployment of SAF production, supporting local economies, and reducing the cost compared with greenfield sites, but we must proceed with a clear understanding of the technical feasibility, operational requirements and environmental considerations for such conversions.
Environmental remediation, site preparation and ensuring community support are complex challenges that require careful evaluation. The new clause would mandate a thorough, evidence-based report that would address such technical, economic and environmental factors, and include consultation of a wide range of stakeholders, including SAF producers, the oil and gas workforce, unions, environmental organisations, local authorities and academic experts. The findings will help the Government to shape policies and incentives that maximise the benefits of such conversions where appropriate. I do not think we can simply leave it to market mechanisms; the Government need to intervene here.
This is not about preserving the fossil fuel past, but transitioning our industrial heritage and workforce, and some of our dying economies, to a new sustainable future. The UK’s industrial regions deserve a just transition that leverages their existing strengths to help to power the green economy. The new clause would be a step towards securing the resilience and growth of a domestic SAF industry that can create good jobs, strengthen supply chains and reduce reliance on imports. I urge the Minister to welcome this practical proposal, accept the new clause and commit to a clear timeline for delivering the report. The future of UK aviation depends on not only ambitious targets but pragmatic steps to make those targets achievable and bring the country with us. The new clause would help us to take one such step.
Greg Smith (Mid Buckinghamshire) (Con)
New clause 8 has considerable merit. It is always preferable where new industrial facilities are to be built—in this case for the production of sustainable aviation fuel—for those identified sites to have had former brownfield status and former industrial use. I have no argument with that element of the new clause.
The one note of caution I have on the new clause is that many of the existing sites—certainly oil refinery sites—are not necessarily located in the right places currently for certain SAF technologies. That includes the e-fuels and power-to-liquid solutions, which require, as part of the process, electrolysis and the creation of green hydrogen. Of course, if the hydrogen element that goes into making the SAF is not green hydrogen, the whole problem becomes rather academic—we could still make the fuel, but the reality is that it would not be as green as we want it to be. Those SAF production facilities, by definition, would need to be located in places with potential large-scale offshore wind, electricity production or, possibly, nuclear generation.
If we look across the world at such fuel plants that have been created, Porsche, for example, chose the hills of Chile to produce its particular fuel, because it can leverage off the wind power that it can get up there. In our country, Orkney seems to have been a popular site for harnessing the offshore wind technology available up there. While I fully support the principle that underpins the new clause—for many SAF production sites to be on former industrial or oil refinery sites—I simply wish to add the note of caution that they might not be suitable for every application and technology out there.
Mike Kane
On new clause 8, the hon. Member for Wimbledon is right to talk about deindustrialisation. Growing up in the 1970s, I saw the impacts of that, particularly on the east side of Manchester, with the chemical and mining industries being wiped out. In this day and age, we are still getting over that in my great city. I reassure him that we are supporting the SAF industry, in part, to grasp this opportunity for deindustrialised areas. Emerging SAF projects are often located on former industrial sites, and I remind the Committee that, if we do this right, our low-carbon fuels industry can support up to 15,000 jobs and £5 billion to the economy by 2050.
I also reassure the hon. Member that work is ongoing across Government on the future of our refineries. We are acting urgently in response to the deeply concerning news of insolvency at Prax Lindsey oil refinery, and have put £200 million into the National Wealth Fund to back investment at Grangemouth. I want that work to continue at pace, and am conscious that specific sites will need to be considered on a case-by-case basis. Commissioning an additional separate report would not be beneficial, and would risk delaying potential investment decisions. Given that, I ask the hon. Member to withdraw the motion.
Euan Stainbank (Falkirk) (Lab)
In Grangemouth, we have £200 million dedicated from the National Wealth Fund, and Project Willow, which has two SAF options contained within it. Does the hon. Member acknowledge that, and acknowledge that we need to move at pace to deal with deindustrialisation in such places? His new clause would risk potentially adding another layer of report-making, rather than the real action that needs to be taken in places such as my constituency.
Mr Kohler
Such a report would not require there to be a delay. The report would be within 12 months, and we have already heard from the Minister that not much will happen within the first 12 months. That was the excuse given earlier in Committee for not doing various things. A report to focus attention on these sites would be useful and helpful, and I really cannot see why there should be any objection to it.
Question put, That the clause be read a Second time.
Mike Kane
I beg to move amendment 1, in clause 15, page 8, line 7, leave out paragraphs (c) and (d) and insert—
“(c) section 10 (payment of surpluses to levy payers);
(d) section 11(4)(a) (power to amend maximum financial penalty);”.
This amendment switches the order of paragraphs (c) and (d) so that the sections referred to appear in sequential order. It also corrects a cross-reference. The substance is unchanged.
Mike Kane
Clause 15 provides that regulations are to be made by statutory instrument and that they may make different provision for different purposes and supplementary, incidental, transitional or saving provision. As we have already discussed, the regulation-making powers in clauses 1(6), 6(1), 10 and 11(4)(a) are subject to the affirmative procedure. The regulation-making powers in clauses 3(1) and 11(4)(b), which are largely administrative, are subject to the negative procedure; these powers will not alter the fundamental elements of the revenue certainty mechanism.
Clause 16 provides information on how terms that are used throughout the Bill should be interpreted. It should be noted that our intention is for the revenue certainty mechanism only to support SAF production that would be eligible for the SAF mandate. This will be set out in the eligibility criteria during contract allocation.
Clause 17 states that the Bill extends to England and Wales, Scotland and Northern Ireland. Clause 18 sets out when the provisions of the Bill will come into force. We expect all the legislation for a revenue certainty mechanism to be in place by the end of 2026. We will continue to monitor the estimated delivery date and work with industry to deliver an effective revenue certainty mechanism as soon as possible. Clause 19 confirms that the Bill will be named the Sustainable Aviation Fuel Act upon Royal Assent.
Amendment 1 agreed to.
Clause 15, as amended, ordered to stand part of the Bill.
Clauses 16 to 19 ordered to stand part of the Bill.
Question proposed, That the Chair do report the Bill, as amended, to the House.
Mike Kane
Thank you, Mr Western, for chairing the Committee. I also thank the Clerks, Hansard Reporters and Doorkeepers for overseeing proceedings. The Committee also benefited from the expertise of our witnesses and those who provided written evidence. As this is a hugely technical Bill and the world is watching us, I pay a massive tribute to the civil servants in my Department who worked on it.
I thank all hon. Members who made this issue a manifesto commitment at the general election. I thank the Opposition for supporting the Bill and for their valuable contributions and insights. I thank the shadow Minister, the hon. Member for Mid Buckinghamshire, the Liberal Democrat spokesman, the hon. Member for Wimbledon, and all other Committee members. I thank them for their expertise and insight, and for the broadly positive, collaborative nature that they brought to the Committee. We all want the SAF industry in this country to grow and succeed so that we secure our world-class aviation sector’s future. I look forward to further engagement with hon. Members on the Bill.
Greg Smith
I associate myself with the Minister’s thanks to everyone who has worked so hard on the Bill, particularly the civil servants; I welcomed the ability to discuss the Bill with them in a private briefing before Second Reading. I also thank the Doorkeepers, Hansard and the Clerks for ensuring that the Committee has run smoothly.
It is quite a pleasant experience to engage with a Bill in opposition when there is fundamental agreement on the direction of travel. The other Bill Committee of this Parliament on which I was shadow Minister was for the Employment Rights Bill, where we did not enjoy quite the same level of consensus, but to meet the challenges of decarbonising our aviation industry it is important that this Bill progresses rapidly.
However, I urge the Minister, who has been kind and engaged throughout the process, to continue to reflect on the points that I have raised in Committee and that the shadow Secretary of State, my hon. Friend the Member for Orpington (Gareth Bacon), raised on Second Reading, as well as the many worthy points that the Liberal Democrats have raised. If we can keep going in the spirit of cross-party working and reflect on some of the points about UK intellectual property—making this a UK success story, making the UK a world leader and ensuring that the technologies that emerge genuinely do what they say they will—then I think all of Parliament, not just the Government, can be proud to push the Bill through.
Question put and agreed to.
Bill, as amended, accordingly to be reported.