Sustainable Aviation Fuel Bill

Lord Moylan 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—

[Lord Harper (Con)]

I am grateful to my noble friend for giving way for two reasons. First, despite having asked the clerk for advice, I omitted to declare an interest at the beginning of my speech, which I will now correct. I draw the attention of the Committee to my entry in the register as the non-executive chair of RVL Aviation, as I did at Second Reading. Secondly, on my noble friend’s specific question, I referred in my speech to his amendment. I had the misfortune of supporting his amendment before he had so ably spoken to it, but I agree that it is the contract length that is important and not just the period from when the Bill becomes law.

[Lord Moylan (Con)]

We are all agreed that we should be talking about contract length, but my amendment is the only one that refers to it. That is the point that I am trying to make.

The noble Lord, Lord Ravensdale, in respect of competition, says that there must be at least an opening in the future for these revenue certainty mechanism contracts to be awarded competitively. He seeks to put this in the Bill now and appeared to say that, if this is not done now, through a device such as that which he is proposing, there would not be in future an opportunity for competitive procurement. If I have misrepresented him, I will give way and be corrected—I see that he is about to rise, so I might as well complete the point before he corrects me. My understanding is that there is nothing to prevent competitive procurement taking place from day one under these arrangements. Therefore, it is not necessary to put in place an arrangement to secure it. I am open to being corrected on all hands about this, because I am groping my way in the dark through this thicket.

[Lord Ravensdale (CB)]

I agree with what the noble Lord has said. The Minister provided the clarification at Second Reading that there is nothing in the Bill that prevents competition. However, for consistency with the other legislation that I outlined that has such direction on similar competitive processes in the energy Acts, and for clarity on the strategy, it would be beneficial to have that process set out in the Bill.

[Lord Moylan (Con)]

I am grateful to the noble Lord for explaining that. I am glad we are broadly ad idem, but he helps me to my third point.

The assumption by the noble Lord, Lord Ravensdale, appears to be that the procurement of all future SAF, including non-HEFA SAF and potentially at some stage power to liquid, will have to depend upon or be supported by a revenue certainty mechanism, or at least some form of subsidy or support from the state. That appears to be the assumption. I wholly deprecate that assumption. It is appalling that we should embark upon this project with a view to a regime of perpetual subsidies. If SAF is not rapidly producible on a commercial basis in this country then, as I shall come to in other amendments, the whole project should be reconsidered at this stage.

However, I am comforted in thinking that the Government do not envisage perpetual subsidy by my reading of Clause 1(7) and (8). These are the subsections that I referred to before, so I will not read them out again, but why would the Government put in place what is, in effect, a sunset clause if they envisaged a need for perpetual subsidy? The Minister may want to confirm this, but subsections (7) and (8) taken together are a sunset clause. At the end of 10 or possibly 15 years, no more contracts can be awarded without further primary legislation. There is a degree of confusion, which I may have participated in, concerning what we are discussing. We are giving the Minister the opportunity to bring a blast of fresh air to clear the fog and explain it all to us, so that we know what we are talking about, because up to now I am not entirely sure that we all do.

My Amendment 2 has been explained very well by the noble Baroness, Lady Pidgeon. I do not need to elaborate on what it says, but I have not yet given any rationale for why it should commend itself to the Committee. Amendment 2 seeks to limit the length of contracts. The reason is very simple. This Bill is a large slice of corporate welfare. Having given to the industry, through the SAF mandate which we approved last year, a guarantee of uptake of SAF so that you know that your product is going to have to be bought, this is not enough for them, and we are now going to give them, in addition, a guaranteed price. That is what they are demanding.

I do not blame them for demanding that. Let us have guaranteed demand and a guaranteed price—that is a very pretty place to be in. Let us transfer all the risk somewhere else. Who is going to pay that guaranteed price? Not the Government, because it is not a subsidy. They have discovered from the electricity market the contract for difference, which the noble Lord, Lord Ravensdale, has referred to as a model—a structure which has given us the highest electricity prices in the civilised world. This points to the cost of SAF falling on the airlines and, potentially and ultimately, on the passenger. We will come to this later, but the Government have assessed what that might mean in pounds per ticket. That is the subject of a later amendment which I will not trouble your Lordships with now.

Recognising the large element of corporate welfare in the Bill and the need to get away from that and to incentivise competition, I suggest that there should be some basis for limiting the contract, and therefore the benefits that accrue to the producers of SAF. I am grateful to my noble friend Lord Harper for supporting this. I have suggested 10 years, which is of course an arbitrary number—it might be six years, it might be seven years, or it might be eight years. I have also suggested including a break clause, which I put at five years, so that if the Government saw that this was all going well and that the thing was becoming commercial, they could walk away—which must be their ambition. I put that break clause at five years, which is an equally arbitrary number. If the Minister agreed on the principle, I am sure that he and I could sit down and rapidly agree a maximum length of contract and an appropriate term for the break clause.

It is in that direction that we should be looking if we are not to burden young people. There are not so many young people in the Committee this evening. Many of us are getting to the point where our best flying days are behind us, but when you look to young people who perhaps work in other parts of the House and say, “You are going to be paying for this for the next 20 years. You and your wives and children, and even potentially your grandchildren, are going to be paying for this slice of corporate welfare, so if we don’t get it right the burden falls on you”, and one thinks about that, then of course one is moved very strongly, and is surely moved in the direction of supporting my Amendment 2.

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Moved by

[Lord Moylan]

4: Clause 1, page 2, line 15, at end insert—
“(9) A direction given by the Secretary of State under subsection (1) may only require the designated counterparty to enter into a revenue certainty contract with a producer in respect of sustainable aviation fuel that is, or is projected to be, manufactured at a production facility located within the United Kingdom.(10) For the purposes of this Act, no sustainable aviation fuel producer shall be eligible for a revenue certainty contract if any certified component fuel or precursor which constitutes more than ten per cent of the final sustainable aviation fuel volume is not also manufactured at a production facility located within the United Kingdom.”Member’s explanatory statement
This amendment seeks to legally ring-fence the financial support provided under the Act, preventing the levy raised from UK aviation fuel suppliers from being used to subsidise sustainable aviation fuel production facilities located outside the UK.

[Lord Moylan (Con)]

My Lords, it may be for the convenience of the Committee if I move Amendment 4 in the name of my noble friend Lord Grayling, who has taken the deepest and most knowledgeable interest in the Bill but has had to excuse himself from the Committee because of pressing family matters. However, it is not my intention to speak to his amendment; I wish simply to create an opportunity for other noble Lords who may wish to speak to it to do so. I will say in regard to it, speaking, if you like, from the Front Bench, only that it raises very interesting questions about the potential beneficiaries of the revenue certainty mechanism and whether they are tied to production within the UK itself. I will be interested to hear what the Minister has to say in response to the questions implicit in the amendment. For now, I beg to move.

[Lord Harper (Con)]

My Lords, I support Amendment 4 in the name of my noble friend Lord Grayling and the similar Amendment 18 in this group in the names of other noble Lords. They both have the same intention, which is to make sure, as set out in the Explanatory Notes to the Bill, that the point of the revenue certainty mechanism is to support UK SAF production, not SAF production that takes place elsewhere. I think my noble friend Lord Grayling had two purposes in tabling the amendment: first, to make that point explicit; and, secondly, to test with the Minister what definition of UK production the Government are going to adopt in their contracts. What does that mean for the components of the fuel, and where do the different stages of production have to take place? What will be the lines about what qualifies as UK production?

Clearly, what we are intending to do, certainly with the plants that have received capital support from the Government, is to have the end-to-end process here in the UK, the plants here in the UK and effectively all the value created in the UK. But there may well be businesses that do only part of that in the UK. It is important for the Government to be clear about where the lines are going to be and what they are going to insist on in the contracts, so that the money coming from UK consumers is going to support UK jobs as part of that industrial policy. That is, after all, the point of this. There is no point in having a revenue certainty mechanism if all it is going to do is deliver SAF production elsewhere in the world. We could just let it get on with it, frankly, and not be too worried about it.

The point is to make sure that we produce that fuel here for two reasons, as I understand it. One is the industrial policy argument of making sure that we develop the technology here, but there is also the learning from what happened during the Covid pandemic when countries resorted to holding on to essential fuel supplies for their own industries. During that period, the international trade in some of these internationally traded commodities gummed up, and we found that some of those strategic supplies were not available. UK production is important for both those reasons, and I think it would be of benefit to the Committee to hear from the Minister exactly how the Government are going to deliver that.

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[Lord Hendy of Richmond Hill (Lab)]

I join the noble Earl, Lord Russell, in sending the noble Lord, Lord Grayling, our good wishes for him and his family. I congratulate the noble Earl on his recent nomination for a life peerage. That is an odd sentence to say, but there you go. The noble Baroness, Lady Jones, has got lucky by signing this amendment, as she will shortly hear.

The revenue certainty mechanism is intended to support only eligible SAF plants in the UK, and this will be ensured through the allocation process. This Government are committed to supporting the UK SAF sector through our advanced fuels fund, which is supporting projects across the UK, and through the revenue certainty mechanism. The UK SAF sector will create jobs and growth opportunities in the UK, help secure a supply of SAF for UK airlines and enhance energy security.

On Amendment 4, SAF projects that use imported precursors still offer significant economic benefits to the UK because of the investment needed to construct them and the employment that they would provide. I fully recognise the strong points made by noble Lords this evening around UK production being in the Bill, and I will seriously consider this point ahead of the next stage of the Bill. I will invite noble Lords who have spoken tonight—or rather those who tabled the amendments—to meet me and my officials ahead of the next stage. I therefore invite the noble Lord to withdraw the amendment.

[Lord Moylan (Con)]

My Lords, I beg leave to withdraw Amendment 4 in the name of my noble friend Lord Grayling.

Amendment 4 withdrawn.

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Moved by

[Lord Moylan]

7: Clause 6, page 4, line 19, after “contracts” insert “in respect of sustainable aviation fuel manufactured in the United Kingdom”
Member’s explanatory statement
This amendment seeks to ensure that the levy is raised for the purposes of manufacturing sustainable aviation fuel in the United Kingdom. Connected with another amendment in the name of Lord Grayling, it seeks to prevent the government from diverting the levy funds to other broader aviation or climate-related policies.

[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.

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The Government’s amendments set out the requirement to consult the devolved Governments before making regulations under the regulation-making powers set out in Clauses 1, 3, 10 and 11. These powers are in Clause 1(8), which allows the Secretary of State to make regulations extending the period of time under which they can direct the counterparty to enter into contracts by up to five years at a time; Clause 3(1), which gives the Secretary of State powers to make regulations requiring the counterparty to maintain a register of information on revenue certainty contracts and publish details about them; Clause 10(1), which gives the Secretary of State powers to make regulations requiring the counterparty to pay a surplus to levy payers, and require levy payers to pass on the benefits of that surplus to their customers; and Clause 11(4), which gives the Secretary of State powers to make regulations which amend financial penalties in line with inflation, and make provision on how a company’s turnover is determined for the purpose of financial penalties. I conclude that this does not affect the delivery of the Bill or the policy intent. Final decisions will still be taken by the Secretary of State for Transport.

[Lord Moylan (Con)]

My Lords, I beg leave to withdraw Amendment 7 in the name of my noble friend Lord Grayling.

Amendment 7 withdrawn.

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Debate on whether Clause 6, as amended, should stand part of the Bill.

[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.

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[Lord Harper (Con)]

My Lords, since they are both still in the Chamber, I add my congratulations to the noble Lord, Lord Addington, and the noble Earl, Lord Russell, on their life peerages so that they will remain with us. I will not get into the ranking thing we got into earlier, but it is very good they will both still be with us.

On the substance of these amendments, transparency is broadly a good thing. As I said in response to an earlier amendment, being transparent about this is very helpful. Given that Amendment 15, tabled by the noble Earl, Lord Russell, talks about reporting on progress, this might be a suitable opportunity to ask the Minister, when he winds up this group, to respond to the question I asked him at Second Reading and provide the Committee with an update on the plants we hope to see in the UK and where they have got to. The Minister very kindly responded to some of the questions Members raised at Second Reading in his recent letter of 2 December, including one or two that I raised. I am very grateful to him for being courteous and doing that as he said he would, but he did not touch on where we were at with those plants. Given the significant amount of money in the various rounds of support that we have given—both through the Aerospace Technology Institute and directly from government—it would be helpful for the Committee to have an update on some of the timeframes. We have been contacted directly by some of the providers with updates on when they think their plants will be ready, but it would be helpful to have that wider picture.

Although the noble Baroness, Lady Jones of Moulsecoomb, knows that I do not agree with her overall view about aviation—we had that exchange at Second Reading—I will take the opportunity, as it does not happen very often, to support the thrust of her amendment. Transparency is very helpful. She will know from my comments at Second Reading that I generally do not support the use of food crops being grown specifically for this purpose, but she will also know I have one potential exception: if, by doing so, we can keep the present United States Government focused in this space, it would be a win.

I am grateful for two points the Minister made in his reply. First, he confirmed that the Government were working closely with the US Administration and wanted to keep them on board. That is helpful. Secondly, he confirmed—I hope this was welcomed by the noble Baroness, Lady Jones—that the Government set very high sustainability standards for SAF in the UK and were looking to make sure the revenue certainty mechanism was in line with that approach and did not trespass on it.

The noble Baroness is absolutely right that there is no point in us doing great things in the United Kingdom if the result is that we just drive poor behaviours elsewhere, so having some transparency on that would be very helpful. The specific amendment may or may not be able to be improved, but I would welcome the Minister’s comments on whether the Government intend to add extra transparency to the Bill on Report, or whether we will need to return to that ourselves and use the collective set of amendments here to do some sensible reporting.

We have to make sure that it is balanced and that we do not put undue burdens on people, but transparency in this space would be helpful for the industry in explaining what is going on, as well as for consumers. Given that there is a cost to this, showing consumers what is happening, and the cost of that, would be helpful in demonstrating the trade-offs that we are having to make in this space. I am broadly supportive of this group of amendments.

[Lord Moylan (Con)]

My Lords, generally speaking, monitoring is good, and reporting is better. If the noble Earl, Lord Russell, and the noble Baroness, Lady Pidgeon, want to engage over the next few weeks on the drafting of amendments that could achieve that in a way that is not overly burdensome to those charged with doing that reporting, or overly expensive, I am sure we would be happy to discuss that with them.

On Amendment 19A, tabled by the noble Baroness, Lady Jones of Moulsecoomb, I will save my comments for the last group, in which the noble Lord, Lord Ravensdale, and I have some interesting amendments on precisely these questions of what the source and feedstock of the sustainable aviation fuel are going to be, and what constitutes sustainable aviation fuel. I would be repeating myself if I were to address those questions now and again later.

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Moved by

[Lord Moylan]

19: After Clause 14, insert the following new Clause—
“Impact of this Act on the price of airline tickets(1) Within one year of the day on which this Act is passed, the Secretary of State must publish a report to assess the impact of the sustainable aviation fuel revenue certainty mechanism on the price of airline tickets.(2) The report under subsection (1) must include an assessment of whether the impact of the sustainable aviation fuel revenue certainty mechanism on ticket prices is greater than £1.50 per ticket per year.(3) The Secretary of State must lay the report under subsection (1) before Parliament.”Member’s explanatory statement
This amendment seeks probe the impact of the sustainable aviation fuel revenue certainty mechanism on airline tickets. In particular, it seeks to probe whether the impact is in line with the Government’s analysis as set out in the Department for Transport’s ‘Revenue Certainty Mechanism Cost Benefit analysis’, which suggests that the likely impact on ticket prices is between -£1.50 and £1.50, on average, per year.

[Lord Moylan (Con)]

My Lords, I will speak to Amendment 19 and the other amendments in my name in this group. These amendments cover two topics, and I will try to deal with them fairly briefly, but they are very important. Even if the speech is short, the resonance and consequence of the amendments is long.

There will be a cost to the revenue certainty mechanism that will be distributed to airline passengers through their air fares. How much is it going to be? We are not in the dark on that subject, because the cost-benefit analysis produced by the department makes a stab at this. Paragraph 4.23 says:

“Overall, the Revenue Certainty Mechanism, when covering a limited but reasonable amount of non-HEFA SAF volumes, is likely to result in a small impact on ticket prices. Depending on non-HEFA SAF prices and whether the levy costs are offset by fuel cost savings, the likely impact on ticket prices is between -£1.5 and £1.5, on average, per year”.


The only things of absolute fixity in that sentence are the numbers and the phrase “per year”. Almost everything else consists of a caveat, although I accept that a forecast of this type will have to be caveated to some extent. I want to explore some of the caveats in the next group as well, not merely here. What are we talking about when we refer to non-HEFA SAF? I have an amendment in the last group to explore that.

However, at this stage, I want to know how far the Government are willing to go to commit themselves on the £1.50 cost—let us take the upside—per ticket. Bear in mind that this £1.50 per ticket is the cost not of SAF but of non-HEFA SAF produced using the revenue certainty mechanism in this Bill. SAF is already in use. It is being paid for by airlines and it is painfully expensive —much more than it was expected to be. It is already having a significant impact on airlines’ fuel bills. That is not included in the £1.50, which is purely for the mechanism that sits in the Bill.

How firm are the Government willing to be on this? This is of crucial significance to the public at large, who would like to see more sustainable aviation fuel. I accept that the noble Baroness, Lady Jones of Moulsecoomb, who is no longer in her place, regards that as a chimera. The public are happy to see it, but they want to know what it will cost them. If we are going to hold out a prospect, as the Government are, of a maximum cost of £1.50 per ticket for this—that is a significant sum for a family of four going on holiday—they would like to know that the Government stand behind it. Airlines that I have spoken to suggest that the cost will be much closer to £10 a ticket, so the Government need to give some justification for the £1.50. That is one of the two topics these amendments cover.

Moving on to the second, I have to apologise in a sense to noble Lords because it is of a more general character. In some ways, it would have been nice if it could have been contrived to come at the beginning of our debate this evening, but the rigidities of our system of numbering and marshalling amendments means that it appears at this late stage. I appreciate that not everybody is interested in it, but I assure noble Lords that, outside this Committee, there is a large audience that is very interested in this question—an audience of people who still believe, to some extent, in capitalism, the principles of Adam Smith and the notion of comparative advantage.

This is asking that the Government make some stab at assessing our comparative advantage in wishing to be a leader in this field. This is, after all, a measure designed to make us a domestic producer, rather than an importer, and a globally leading producer of non-HEFA SAF, compared to the rest of the world. It is, as I said at Second Reading, an industrial policy Bill rather than a net-zero Bill. The SAF mandate was a net-zero measure; this is an industrial policy measure. It is a decision by government that this stuff has to be produced here and not imported—a decision by government that we should be a leader in this field.

The question is: what on earth do we have by way of comparative advantage that means the Government should have alighted upon this particular economic activity as one in which we are to be—or in which we can be, or it is suitable that we should be—a leader in the field? Do we have access to particularly rich streams of feedstock, for example? If non-HEFA SAF—some of it at least—is to be produced from old cabbages collected from people’s kitchens, are our cabbages better than somebody else’s cabbages? Do our wood cuttings and so forth have a particular advantage or a greater richness of oil-bearing quality that puts us ahead of the field? I suspect that the answer to that is no.

Is our refining capacity cutting edge and world leading for turning these things into a usable fuel? I do not know a great deal about that—I see that there are noble Lords in the Committee who, I suspect, know a great deal more about it—but what I do see, as an ordinary reader of the newspapers, is that we are closing down our refining capacity as fast as we can. Far from being a leader, we are falling behind. Of course, this process will be very heavy on electricity usage; I think nobody denies that. Yet we have contrived, no doubt in the interest of saving the planet—I will not go into that further at the moment—to have the most expensive electricity in the civilised world. Do we have skills particularly, or an existing workforce? None of these things are apparent.

So what I am asking—I do not think it an unreasonable request—is that, before the Government launch us, and taxpayers’ and airline passengers’ money, into this reckless scheme of being a world leader in something in which we have no apparent comparative advantage, they set out the economic case for doing so. The contrivance here is that the amendment would be inserted as a commencement blocker, so that the Bill could not commence until this has been done, but I am not wedded to that; it is merely a way of inserting it into the debate. But the Government owe it to the public to have a better case and a better argument for why they should do this.

After all, this is not our first attempt to produce SAF. In the last few years, we have had schemes such as the advanced fuel funds, the Green Fuels, Green Skies fund, the Future Fuels for Flight and Freight competition, and others. But despite those, around 90% of the SAF used in this country is still imported. Why has this not taken off domestically already, with that level of support, if we have the sort of advantage that we should be able to bring to bear, and that will make a success of it this time? I, at least, would like to know. I beg to move.

[Lord Harper (Con)]

My Lords, I strongly support the first of my noble friend Lord Moylan’s amendments—the one about transparency and the impact of the revenue certainty mechanism on ticket prices for consumers. As I think he acknowledged, this is an area where consumers want to see sustainable aviation fuel used, but it is reasonable that they understand the cost of it. Many people who fly are very sensitive to the cost. The industry is very conscious, in all the conversations that I have had with it recently, but also previously, when I led the Department for Transport, about the importance of delivering sustainability at a low cost that does not impact significantly on consumers, and particularly does not price the least well-off, most price-sensitive consumers out of the market and stop them flying. So I think this level of transparency specifically about the cost from the revenue certainty mechanism is very welcome.

As my noble friend said, that is not the only cost from developing sustainable aviation fuel, because there is obviously the cost of SAF that is bought from outside those UK plants that benefit from the revenue certainty mechanism, so I strongly support the thrust of my noble friend’s amendment and I will listen carefully to what the Minister says about whether the Government will bring forward any measures on this; it would also support what they had in their impact assessment.

As a final point on this amendment, I agree with my noble friend that the impact assessment is clearly an assessment, an estimate. No one is going to beat the Government up if it is not quite right, but there is a big difference between a £1.50 charge per ticket per year and a £10 charge per ticket per year, or more, and it is important that we have a rough idea of where we are on that, so that is very welcome.

On the other amendments, I will add just one thing which I alluded to earlier. It is not just an industrial policy question, it is about security of supply, particularly if there are certain circumstances that impact it, as we saw during the pandemic or as we might see if there were another energy price shock. Actually, there is an industrial policy question about producing stuff in the UK; there is also a question about availability or making sure that we have access to those fuel supplies. Both questions are important, as is having the Government be clear and transparent about it.

Both the previous Government and this one have set out some of the thinking in terms of the decision we made to have the advanced fuels fund and the different rounds of that. We have set out some of the thinking in the money that has been going into this through the ATI funding as well. Bringing all that together and having a very clear exposition of the Government’s policy in this space is welcome and will actually do nothing but benefit the Government. So, although I am not sure that the mechanism for delivering it is the right one, I think the thrust of my noble friend’s amendment is right and I strongly support its intention, if not the specific mechanism.

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[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.

[Lord Moylan (Con)]

My Lords, before I go any further, I just return to paragraph 4.23 of the cost-benefit analysis, where I read out something earlier thinking that I understood it, but now I do not think that I understand it at all. Perhaps it is a bit late procedurally for the noble Lord to explain it to me now; he might write to noble Lords. It says that

“the likely impact on ticket prices is between -£1.5 and £1.5, on average, per year”.

What is “per year” doing there? Surely, it is on average per ticket. Why does this say per year? That would assume that maybe you fly once a year. However, if you fly more than once a year, it would not be per year at all; it would still be per ticket, but it would not be per year. Explaining to me what that means would be extremely helpful.

What we wanted to hear—what the public wanted to hear—from the Minister on this particular question was that he put himself and the Government squarely behind £1.50 as the upper estimate of the cost of the measures in this Bill. He did not do that, and we have noticed it. It will get around. On this occasion when he had the chance, he could have said £1.50, as my noble friend Lord Harper said. Of course, it could be a bit more, it could be a bit less, but it is of the order of £1.50. He could have said, “That is what we the Government believe. I, Lord Hendy, on behalf of the Government, am putting myself behind that estimate: £1.50, not £10, not £15, but something of the order of £1.50 is what we are backing”. He did not, and we have noted that. We are not going to let that matter drop.

Concerning comparative advantage, the Minister made what I thought was an uncharacteristically sneering remark, implying that I did not think that Britain was capable of producing SAF. He was trying, I think, to draw a wholly false distinction between my views and the views of my noble friend Lord Harper. Britain can do anything—of course Britain can do anything. Britain can particularly do anything if we throw millions of pounds of subsidy at something. I think back to the day when Britain could produce vans at British Leyland because it was being given very large amounts of subsidy. That was until we found a way of producing cars in this country that did not require those subsidies and we became a leader in car production here under the flag of the Japanese, who invested in order to make a profit, not simply to farm subsidies. It is not a question of whether we can do something.

The whole point of comparative advantage is that you are comparing things. The question is whether this is the best thing we can be doing with the very limited money we have available, or are there other things that would be more productive and would bring greater prosperity to the country? What is the particular advantage we have in relation to this, which means that it is the thing that the Government should be backing?

Doing that does not need to hold up the Bill. It would if it were constructed as a commencement blocker, as it is at the moment, but we could of course all reach agreement around a table on a commitment for the Government to do this within six months of the commencement of the Act. It would not have to hold things up. It is a contrived objection. It is the complete lack of interest in the question on the part of the Government that is so depressing.

Despite those comments, I am grateful to the noble Lords who have contributed, and I beg leave to withdraw Amendment 19.

Amendment 19 withdrawn.

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[Lord Ravensdale (CB)]

My Lords, as the noble Lord, Lord Moylan, referred to earlier, I think this wraps up a number of points in previous groups. It is a good point at which to have this debate about what actually qualifies for support under the revenue certainty mechanism. First, I take the opportunity to congratulate the noble Earl, Lord Russell, and the noble Lord, Lord Addington, on their peerages. It is absolutely brilliant news, and I am really pleased for them.

There are two parts to this amendment, and I would like to deal with them in reverse order. At Second Reading, I asked a question on the eligibility of nuclear energy or nuclear-derived SAF. The Minister said:

“SAF produced using nuclear energy is and will be eligible for the SAF mandate”.—[Official Report, 20/11/25; col. 990.]


I noted that he said the SAF mandate and not the revenue certainty mechanism. What I am really after from the Minister is explicit clarity that nuclear-derived fuels are within the scope of the revenue certainty mechanism, and perhaps some commentary on how this flows through the legislation.

The reason for needing this clarity is that the legislative route is a little convoluted. Clause 16 defines sustainable aviation fuel as

“aviation fuel that is renewable transport fuel”.

Renewable transport fuel is defined in the same clause as

“anything that is (or is treated as) renewable transport fuel for the purposes of Chapter 5 of Part 2 of the Energy Act 2004”.

As I said at Second Reading, I proposed the amendment to the Energy Act 2023 that led to the insertion of Section 131D into the Energy Act 2004, which treats recycled carbon fuels and nuclear-derived fuels as renewable transport fuels. But it was stated there that it required secondary legislation to take effect and to treat these fuels as renewable transport fuels. I noted that this has been done for recycled carbon fuels, but the secondary legislation has not been done for nuclear-derived fuels.

We have this quite convoluted route through the 2004 Act, the 2023 Act, the secondary legislation and the SAF mandate, so I would appreciate that clarity from the Minister on nuclear-derived fuels. That is the second part of my amendment to ensure that they would be within the scope of the Bill.

My second point is around the eligibility for this Bill of certain types of sustainable aviation fuel. I am seeking to exclude first-generation SAFs from the revenue certainty mechanism. I do not see the need for crop-based biofuels to be given support, because the production pathways for these fuels are already there—they are already commercialised at scale. On previous groups we have talked a lot about some of the issues with crop-based biofuels: they are CO₂ saving; they compete with food, potentially raising food prices; they drive land use change and reduce biodiversity. Those fuels have all those other effects, and they are already commercially viable and commercialised, so I cannot see why we need them to be within the scope of the revenue certainty mechanism.

That is brought out in a lot of the government guidance as well. The driver behind the Bill is to provide a mechanism for second and third-generation sustainable aviation fuels. That has been stated repeatedly by the Government. I cannot see a good reason for including these fuels within the revenue certainty mechanism. I look forward to the Minister’s thoughts around that. I beg to move.

[Lord Moylan (Con)]

If noble Lords do not object, I will speak now rather than later in this group because, having read his amendment, I agreed with the noble Lord, Lord Ravensdale, before Committee that it would be sensible if we grouped these two amendments together. We are both trying to get at the same thing and, in a sense, I am not going to say anything very different from what he said, but I am going to take a different approach. It is fair to say that both of us want to limit the deploying of these contracts, or at least to know what limits the Government are going to apply themselves.

As the noble Lord, Lord Ravensdale, said, Clause 16, states that

“sustainable aviation fuel’ means aviation fuel that is renewable transport fuel”,

and earlier it states that

“renewable transport fuel’ means anything that is (or is treated as) renewable transport fuel for the purposes of Chapter 5 of Part 2 of the Energy Act 2004”,

in which the noble Lord played a certain part in amending in 2023.

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[Lord Hendy of Richmond Hill (Lab)]

Yes, that is what I meant to say in answer to the noble Lord. I do clarify that.

[Lord Moylan (Con)]

I was hoping that the Minister would simply and explicitly state that the Government do not intend to see the mechanism used to support all the fuels that appear in the Energy Act 2004 that are currently in scope and that he would look to an amendment to eliminate some of those to give assurance that this mechanism is going to be directed at the fuels we have been discussing and not at that broader list. Would he take advantage of this last moment of Committee to give that assurance that he will be happy with such an amendment and contribute to drafting it?

[Lord Hendy of Richmond Hill (Lab)]

In answer to the noble Lord, I will not do that at this stage, but I will consider what he has just said.