Sustainable Aviation Fuel Bill

Lord Berkeley Excerpts

Committee stage
Wednesday 10th December 2025 Lords Chamber

[Lord Moylan (Con)]

My Lords, for the convenience of the Committee, I rise to move Amendment 7 in the name of my noble friend Lord Grayling. While I am on my feet, I congratulate the noble Earl, Lord Russell, on his demotion to a mere barony. I assure him that it will pass, and his family will be able to resume their Earl-like status, I hope for many generations to come.

I wish to speak to my Amendment 11 in this group. I will try to put this in language that I understand—that is, fairly simple language. The levy has to be allocated. If the contracting party has to make payments to the producers of SAF, it will fund this by a levy, and the levy will be applied high up the supply chain; it will be applied to the producers of fuel. The people who produce aviation fuel will be adding a certain amount of SAF to their kerosene—an increasing amount each year—before then selling it to the airlines. As I understand it, that is the mechanism.

The question is: among the competing producers of aviation fuel, how is the levy to be allocated from one period to the next? I will assume for the sake of simplicity that the allocation period is a year. There is no necessity that it should be a year—it could be done six-monthly or monthly—but the Minister can say whether the Government have a clear intention about that.

My understanding is that the Bill envisages that the allocation will be based on market share. Market share can be measured only in retrospect. You can know what a company’s market share was last year or in the last six months; you will not necessarily know what its market share will be for the year to come. But, of course, companies are selling aviation fuel in the year in which they are acquiring market share, so they will not know what their levy is until the end of the year, or period, in which the levy is allocated to them, according to their market share. It will be impossible for them to have a clear notion of what they should be adding to the price of the fuel to compensate themselves for the levy. It is envisaged that they should compensate themselves for the levy through adding to the price of the fuel and selling it on, which is how the airlines and ultimately the passengers pick up the cost.

This is presented by the industry—to me, at least, and maybe to other noble Lords —as a very serious practical difficulty. The tendency will be to overcompensate and add more to the price of fuel than is strictly necessary to cover a levy which companies can only vaguely guess at. I accept that their market share is unlikely to jump wildly from one year to another. That does not happen in mature businesses; I do appreciate that. But the levy is quite sensitive even to modest adjustments in market share from one year to another. To get an accurate price to pass on to the customer, relying on retrospective market share is simply not going to cut it and the result may well be that customers end up being overcharged.

It would be better if the counterparty were able to calculate the levy on a transparent pence-per-litre basis. Another point of capital importance is that this could then be added to invoices so that anyone buying aviation fuel—which would normally be airlines, of course—would see clearly on their invoice how much had been added in respect of the levy. There is a suspicion in the industry, which I am sure the Minister wants to dispel, that the Government would rather obscure the additional cost of the levy, and that a system whereby it was written plainly on the face of an invoice would be unwelcome to them.

It would be useful if the Minister were to dispel that view, but I will leave aside that issue. Even if it were not a consideration, there is the important practical consideration of how this will be calculated by companies which will not know what their levy is going to be. This is an extremely serious issue about the implementability of the Bill. It is bound to come back on Report, because the Bill will not work unless this is sorted out; at least, it will not work in the way that the Government intend.

With that, I recommend my Amendment 11. I will be interested to hear what the Minister has to say about it.

[Lord Berkeley (Lab)]

My Lords, I will speak mainly to my noble friend the Minister’s Amendment 20. This is perhaps an odd order in which to speak on these things, but it does enable my noble friend to respond to me after I have spoken rather than before; I am sure that he would welcome that.

I want to talk about the relationship between sustainable aviation fuel and the production of renewable liquid fuels that could be used in home heating. I raised this at Second Reading and highlighted what I thought was a key point. The production of sustainable aviation fuel, particularly through the HEFA process, generates hydro-treated vegetable oil—HVO—as a by-product. In fact, HVO accounts for around 30% of the output—a significant quantity, I believe.

In the consultation on alternative heating solutions published a couple of weeks ago, the Government rightly acknowledged the role that HVO could play in decarbonising off-grid homes. I declare that my home is off-grid and relies on oil. Indeed, the Government highlighted that it would be the most cost-effective option for consumers of all the options considered. However, the consultation still questioned the feedstock availability of the fuel. What really pleased me was that, in the last few days, a Written Answer has been given to a Member of Parliament in the other place. It states:

“As of the 1^st of January 2025, a market for low carbon fuels for use in aviation and road transport has been supported under two separate schemes”—


the SAF and the RTFO. It continues by saying that targets under both these mandates

“are set considering global availability of feedstocks and competing demands between transport modes and across sectors of the economy”.

It basically says that there is enough material for both aviation and home heating. I think that is a major step forward.

When my noble friend comes to discuss his Amendment 20, I hope he will include a consultation with me, a few colleagues and our noble friend Lord Whitehead, the Minister for Energy Security, to discuss the significant benefits of working together for these two uses given that we have this Bill and a DESNZ consultation. I hope that this is just the right time to have such a discussion because it is a sensible strategic step towards meeting our decarbonisation goals.

--- Later in debate ---

[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.