Sustainable Aviation Fuel Bill

Baroness Pidgeon Excerpts

Committee stage
Wednesday 10th December 2025 Lords Chamber

[Baroness Pidgeon (LD)]

My Lords, this group of amendments is trying to tease out the details around revenue certainty mechanism contracts.

Amendment 2 from the noble Lord, Lord Moylan, says that the contracts must not exceed 10 years and must have a no-cost break clause at five years. Amendment 3 from the noble Baroness, Lady Bloomfield, on the other hand, wants the contracts to be increased from 10 to 20 years—we have already heard the reasons around that. So there is a difference in thinking from the two Members. However, what is key here and clear from the debate so far is that flexibility is needed, depending on the type of industry involved here. The Minister briefed Members about the thinking behind the 10-year contracts at a recent meeting, so I hope he can explain from the Dispatch Box to reassure Members that the Government have in mind the right length of contracts for this emerging area.

Amendment 5 in the name of the noble Lord, Lord Ravensdale, as he outlined, is trying to put flesh on the bones of the revenue certainty contracts by developing an allocation framework similar to contracts for difference for energy. Although Amendment 6 looks at the role and amount of revenue certainty contracts for power to liquid fuels, both of these are really important points which I hope the Minister can address, as well as whether this is the right stage for such detail or whether some of that should be coming through at secondary legislation stage.

[Lord Moylan (Con)]

My Lords, I have listened with great interest to this short debate. It is almost certainly my fault, and I will probably need to be mildly humiliated as I am corrected on the topic, but we have discussed the length of contracts by reference to Clause 1(7) and it seems to me that it says nothing at all about the length of contracts. The Minister now has the opportunity to correct one or both sides of this question.

Clause 1(7) states:

“No direction may be given under subsection (1) after the end of the period of 10 years beginning with the day on which this Act is passed”.


Following on from that immediately, subsection (8) gives the power to the Secretary of State by regulation to amend subsection (7) so as to extend the period for a further five years. This is saying when the counterparty can enter into contracts, not when the contracts start. It is not saying when the contracts end. As long as the contract is awarded in the first 10 or 15 years, it could be for 100 years. Nothing that has been tabled by noble Lords in relation to this clause would affect that.

However, in my Amendment 2, I have bitten firmly on the question and said that no contract, whenever it is awarded, may last for more than 10 years and that it must contain a break clause after five years. I am talking in my amendment about the length of the contract, but the other noble Lords who have talked about longer contracts are not talking about longer contracts at all. I may have got that completely wrong—

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[Lord Moylan (Con)]

My Lords, since we were congratulating the noble Earl, Lord Russell, earlier, may I take this opportunity—it may surprise him a little—also to congratulate the noble Lord, Lord Addington, on his new peerage and continued membership of your Lordships’ House?

In rising to resist, for the moment, that Clause 6 stand part of the Bill, I am moved simply by the letter and comments of the Constitution Committee. The Constitution Committee wrote on 5 November to the Minister to say that, while it understood that

“a degree of flexibility is required”,

it regards

“the lack of specificity in the Bill”

about the levy, which is set out in Clause 6,

“as a potential inhibitor of detailed legislative scrutiny”.

The Minister made certain remarks that relate to this in the last group. He was very bland and reassuring in explaining that we must not know anything about the levy at this stage, while we have a chance to scrutinise it, because it is all being consulted on and will look absolutely wonderful by the time it comes out. But that was not enough for the Constitution Committee, and it is worth making a marker at this point that it is not necessarily enough for noble Lords.

At the very least, I would have thought that the Constitution Committee deserved a reply to its letter, but I understand that it has not received one. The Minister might want to give an assurance that he will reply to the letter to explain why this lack of specificity is justified and what compensates for the fact that legislative scrutiny is not being permitted in relation to the levy.

[Baroness Pidgeon (LD)]

My Lords, this stand part notice is interesting, and the point made by the noble Lord, Lord Moylan, explains why it is tabled. It seems to be almost wrecking the Bill if you are trying to remove the mechanism. The purpose of this Committee is to look at the concerns and issues, and to try to find the best system in this complex area. I will be interested to hear the Minister’s response to this, because our view is that it is important to keep the mechanism in the Bill. Clearly, a committee has expressed some concerns, and it will be useful to hear from the Minister.

[Lord Hendy of Richmond Hill (Lab)]

My Lords, I also congratulate the noble Lord, Lord Addington, on his forthcoming appointment as a life Peer.

The noble Lord, Lord Moylan, raises the correspondence from the Constitution Committee. I did in fact reply; the copy of my reply does not have a date on it, but I did reply because it has been reprinted. A full reply was sent to the Constitution Committee, and it referred to what we were just talking about—the current levy design consultation, concluding on 8 January 2026. As the noble Baroness, Lady Pidgeon, says, without a levy we would not be able to deliver the revenue certainty mechanism. We continue to work closely with industry on the details of the levy’s operation. The current levy design consultation will conclude on 8 January 2026, before any levy regulations will be laid in Parliament. Final decisions on the levy design will be informed by this consultation.

It is appropriate that the levy provisions are set out in regulations made by the Secretary of State, so that there is flexibility to respond to changes in the sector. Flexibility is required so that the levy is set at the appropriate level to ensure that the RCM can be delivered effectively and the counterparty’s costs are recovered. The Government have set out the potential costs and benefits that may arise from the RCM scheme, including the levy and the cost-benefit analysis published in May 2025. The Government will actively monitor and control scheme costs, including through the setting of strike prices and by controlling the scale and number of contracts awarded. I assure noble Lords that the regulation under this clause will be subject to the affirmative procedure, so there will be further opportunities for scrutiny as to how this power is used.

We have engaged with the Constitution Committee; I now have the date of my letter, which was sent on 17 November. Following this debate, I will ensure that copies of both the Constitution Committee’s letter to me and my reply are sent to all noble Lords who participate in this debate.

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[Earl Russell (LD)]

My Lords, this group of amendments is on reporting and impact. My Amendment 15 might seem like a straightforward reporting amendment with a duty on the Secretary of State, but I believe it goes to the heart of what we are trying to do here. It will help to support the Government’s own commitment to help us to decarbonise our aviation sector, and to build a credible and sustainable fuel sector here in the United Kingdom.

Knowledge is power, and it is important that we know the impact of the legislation that we pass. It is important, with the revenue certainty mechanism, that we know how it is working in practice, that we have these reports, and that they are available to Parliament and to the public. This will also help to ensure that sufficient volumes of SAF are being produced to meet the mandate and to ensure the transparency of the monitoring mechanisms. The Government’s “jet zero” strategy recognises that SAF could deliver 32% of the emissions reductions needed by 2050, yet we have no consistent public data on how much SAF is already being produced, the types that will be developed, and where the bottlenecks might lie in the future system.

This amendment does what it says on the tin. It seeks to help answer some of those questions and to help the monitoring process. It would give Parliament and the public the evidence that they need to hold this policy to account. It would also help the sector to have confidence that the transition is coming, and that in turn would provide greater confidence for those who wish to invest in this sector. Reporting is a common requirement—we see it in the renewable energy sector, in the transport sector, and in the electric vehicle update—yet it is missing in this Bill. I believe it is important to put it in, and I do not believe that it would impose undue bureaucracy on the Government or their officials. Indeed, it would help to deliver clarity to everybody. That is all I want to say on the amendment: it speaks for itself.

I turn to the other amendments in this group. I support my noble friend Lady Pidgeon’s Amendments 16 and 17; I will let her speak to them. Amendment 19A, tabled by the noble Baroness, Lady Jones, calls for a report no later than three years after the day on which the Act is passed. That report will assess the impact of the revenue support mechanism for sustainable aviation fuel on deforestation outside the United Kingdom, and land use change outside the United Kingdom arising from the cultivation, harvesting or production of feedstocks for sustainable aviation fuel.

I am pleased to support Amendment 19A. It is sensible and essential to the Bill. Without proper monitoring, there is a risk that the UK’s incentives for SAF could inadvertently drive deforestation or damaging land use changes overseas, undermining our climate and biodiversity goals. By requiring the Government to report on international land use impacts, this provision would introduce transparency and accountability into the policy framework. It would help to ensure that the public subsidies truly create sustainable fuels and would help to drive us away from using feedstocks. This is a useful amendment. We cannot have our own decarbonisation at the expense of others. Therefore, it is important that these matters are monitored. I beg to move.

[Baroness Pidgeon (LD)]

My Lords, as we have been debating, this is an emerging field in terms of technology and production in the UK. That is why the Bill is here: to introduce the revenue certainty mechanism for the sector to help support its development and growth. Alongside this, it is important that we have transparency throughout the implementation of the Bill and about the reality in the sector. We have heard much the same from my noble friend Lord Russell and other noble Lords in this debate.

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[Lord Berkeley (Lab)]

My Lords, following up on the question from the noble Lord, Lord Moylan, about the £1.50, I may be missing something, but if that is a cost to UK airlines for passengers leaving or arriving at UK airports, do we add that to a similar cost which might be applied by France, Germany or Timbuktu? They may have different costs in creating SAF, if they ever get round to doing it. The noble Lord mentioned cabbages. Well, if you are flying to Russia, you probably get lots of cheap cabbages there and you can turn those into SAF. I think we need to know what the total cost is going to be for this particular journey, whether it is £1.50 or £10 or whatever.

Sustainability is fine, but we had a Question today about the Drax power station and wood chips. If you look at some of the consultancy reports on how those wood chips are made, you will see that most of the trees seem to have many years of life left in them, but we do not worry about that, apparently. A bit more detail from my noble friend the Minister would certainly give me a bit of comfort.

[Baroness Pidgeon (LD)]

My Lords, I shall talk about Amendment 19 and the impact on airline tickets, which I think is really important. At Second Reading, a number of noble Lords raised the impact on passengers, and it goes to the whole theme of our discussion this evening, which has been about transparency at every level of the Bill.

We should talk, maybe outside the Chamber, about what sort of comprehensive report we could produce on the impact of this legislation, whether that is the direct impact on the passenger, through the price of their ticket, or in all these other areas we have been discussing today. There is a cost as we transition to the greater use of SAF through the revenue certainty mechanism, and it is really important that passengers and the whole industry understand the true cost of the Bill, so I will be interested in the Minister’s response to the points that have been raised.

[Lord Hendy of Richmond Hill (Lab)]

My Lords, the Government want to ensure that flying will remain affordable for UK holidaymakers and travellers while supporting a United Kingdom sustainable aviation fuel industry. A report on the impact of the Act on ticket prices within a year of its enactment would be premature. Costs need to be negotiated and signed, plants built and SAF produced and sold before any real impact on ticket prices can be measured, but the Government can control costs by controlling how many contracts are issued.

I cannot tell the noble Lord, Lord Berkeley, what the effect on ticket prices from other countries producing this will be, but the Government’s cost-benefit analysis of the revenue certainty mechanism, which noble Lords have referred to, published in May this year, will remain the best estimate of the Act’s impact on passenger air fares over the next period, pending the mechanism working and SAF being produced in some volumes here. The Government take reporting to Parliament seriously. Where appropriate to undertake it, we can present an assessment of costs and benefits reflecting the latest available evidence, but that evidence is not there yet.

Amendments 23 and 25 would require the Government to publish an assessment on the UK’s comparative advantage in the production of SAF. The Government believe that this would be counterproductive and would delay the good progress that we have made for decarbonising the aviation industry through the SAF mandate and the advanced fuels fund. The Government and other noble Lords, including someone on the same side as the noble Lord, Lord Moylan, are certainly more confident about the ability of UK industry to produce SAF than the noble Lord. The points from the noble Lord, Lord Harper, about security of supply are germane here.

The SAF industry has been calling for support to overcome the investment barriers. This Bill will help to drive our missions to kick-start economic growth and make Britain a clean energy superpower, delivering the Government’s manifesto commitment to secure the UK aviation industry’s long-term future. The Bill is a crucial step to establish a SAF industry in the United Kingdom and to drive investment, growth and jobs. I hope that the noble Lord is persuaded to withdraw his amendment.