Sustainable Aviation Fuel Bill (First sitting)

Chris Vince Excerpts

Committee stage
Tuesday 15th July 2025 Public Bill Committees

[Luke Taylor]

Q Thank you for joining us. I think we are in a slightly unusual position, in that we are all competing to try to make slight improvements to legislation that we all agree is necessary and positive. My question is about the source of the funding for the RCM. The Government made it clear that their preference is that it comes from a levy on users. An alternative, which we see in other jurisdictions, is that it comes from ETS sources, which would slightly more directly couple the emissions component to the consumption. The intention to not predicate the source of funding on the money being provided is clear. Do any of the panellists have an opinion on those two options and the path that the Government have taken for the funding source?

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 I thank the panel for coming to give evidence. Rob, in your opening statement you spoke about this being an enabling Bill. Could you touch on what you think the next steps would be were the Bill passed? I also have a basic but important question: what do you all see as the impact of this Bill, whether positive or negative, in terms of environmental and economic benefits? Is there a risk in not getting on with it?

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 Yes—I recognise that there are a lot of benefits of SAF, but I am wondering how the Bill can help that along.

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 Mr Greenwood has made a compelling critique of the basics—“We have a mandate; why do we need the RCM? There might be unintended consequences.” I know you disagree with him, but I would like to hear why you disagree with him.

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?

--- Later in debate ---

[The Chair]

I will call Chris Vince, then Euan Stainbank and Luke Taylor—will you go one after the other, please?

[Chris Vince]

Q I will be very quick, Mr Pritchard. Thank you all for coming to give evidence. Graeme has stolen a little of my question, which was to understand what you see as the risks to your industry if the Bill does not go forward or, in fairness, if it does go forward. I want to understand the risks involved.

[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?