Sustainable Aviation Fuel Bill (Second sitting)

David Reed Excerpts

Committee stage
Tuesday 15th July 2025 Public Bill Committees

[Graeme Downie]

Q Sitting in the audience, you will have heard me ask this question of the last person. We had a witness this morning who said they did not believe the revenue certainty mechanism was required, and that the market would essentially take care of this on its own. You described it there as “compelling”. Do you agree that the RCM is required in the Bill, or do you think the market could take care of itself?

Ruben van Grinsven: Ideally, you want the market to take care of it. As evidenced by a lack of investment to date and by a lot of feedback from industry, it is difficult for investors now, without the revenue certainty mechanism, to invest. Is it essential? That is a very black-and-white question. I think it is going to be extremely helpful to convince people to invest.

We absolutely support the Bill because additional SAF production in the UK is going to be helpful for decarbonising the aviation sector, and we very much support that. Additional supply projects in the UK are going to be very helpful to meet the targets and help decarbonise the aviation industry. Yes, we very much support the Bill.

[David Reed (Exmouth and Exeter East) (Con)]

Q I think it is fair to say that the international supply chain is becoming more constrained and that there is a more protectionist international global economy. Can you give us a flavour of some of the economic and logistical challenges that you would face, importing SAF into the UK? As a follow on, if there is a requirement around energy security to set up shop in the UK, given the known knowns, would you look for subsidies from the current Government to set up production in the UK?

Ruben van Grinsven: I am afraid I cannot fully answer that question because it is not the part of the business that I am in. I am not importing SAF to the UK, so I do not know how trade limitations are currently impacting SAF supply. I would have to ask a colleague and come back to that question. It is also hard to predict what the future is going to bring for global trade and how protectionism will impact the global free trade of all types of fuels.

If you produce domestic fuels, that is, of course, going to be helpful if you want energy security. I must say, though, that if you look at the volumes that we are talking about today, the energy security element in the early days is going to be limited because of the volume of the fuels involved.

[Amanda Hack (North West Leicestershire) (Lab)]

Q I want to put on the record that I have an airport in my constituency, so many relevant companies are based there.

You are a global company in a global marketplace. The airlines I have spoken to want to source SAF from UK markets. How attractive is that to your organisation as a global business—responding to your customers’ wanting you to deliver locally? How much does that play a part in that investment?

Ruben van Grinsven: I am going to answer in a slightly similar way. My role is very much investigating and developing supply assets. I am really looking at building SAF plans. I am not very familiar with how customers demand locally produced fuel. In general, customers look for affordability and, therefore, at price and eligibility legislation. At this point, those are the more driving factors for people to buy certain fuels.

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[David Reed]

Q If British money is being spent on British technologies, and if you are leveraging capital to go on those SAF programmes, where is that money coming from? Is the investment attitude right in this country toward green technologies and SAF? Which countries are quite front-footed in their approach to investing in these technologies?

Josh Garton: We are most active here in the UK and Europe with sustainable aviation fuel and the investors that are interested. We deal with commercial banks, private equity and other investors, and they are all very enthusiastic about the prospect. Unquestionably, they want to deploy capital into this space, but they will not be throwing out their investment rulebook when it comes to their risk-return profiles and the way that they assess risk. For that reason, we need things like this revenue certainty mechanism in place to provide confidence that investors, when they deploy capital in this space, will get the returns they need to justify their investments, or that lenders providing debt capital into this will get the returns they need within the regulatory frameworks in which they operate.

[Amanda Hack]

Q Obviously, when you are looking at green investment, there is a huge element of risk in new technologies. Are there other levers of Government that would de-risk them from an infrastructure point of view, or are there other things that we could do on top of the Bill to de-risk it?

Josh Garton: Yes, I think there are. As I said, the revenue certainty mechanism seeks to address price risk primarily. The mandate deals with volume, and it provides that volume certainty in the market. When we think of the second and third-generation fuels that we need to develop to meet the aviation decarbonisation targets, these are somewhat novel technologies—in fact, they are novel technologies—and there is no market for the fuel at the moment. That means the technologies themselves are not commercially mature yet, so even with a revenue certainty mechanism in place, there is still a level of technology risk that some investors are not willing to tolerate at this point in time.

We need further support to help the first-of-a-kind projects get through FID, even with the revenue certainty mechanism in place. That can include deploying things like first-loss guarantees, or other forms of Government involvement, such as being the first lender through something like the NWF taking a slightly more risk-on approach to the financing of these first-of-a-kind projects. That way we can prove that the technologies are commercially viable, and then help scale the sector.

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[David Reed]

Q You did your independent report in 2023. Obviously, the world has changed rapidly in the past couple of years. We are seeing global economic change, with tariffs, international supply chains becoming more contested, and increased conflicts and volatility. How have the conclusions that you drew in 2023 changed, and where would you say that delta is?

Philip New: I think the key change has been in the United States. When I wrote that report, it was in the context of Biden’s Inflation Reduction Act. The concern was that we might be out-competed by investment in America, and we would end up being a net importer of stuff from America, not just in first-generation SAFs but in second-generation SAFs. They have lower energy costs, which are very important in these sorts of industries, and their build costs are about 20% less than ours. That was a real worry then.

Especially coming out of the big, beautiful Bill, America is out of the game. That is kind of a good thing at one level, because it means that, particularly with the way the mandate is designed around second-generation SAFs, we now have a globally unique position. We could therefore become an incubator for a series of technologies that will have to play a significant role in aviation decarbonisation over the next couple of decades. The bad news is that if we fail to get this new industry kick-started, I do not think we can hope to rely on imports from somewhere else to get us out of trouble. It will mean that we will not meet our mandate targets.

[David Reed]

Q Just a small follow-up, if I can. You are saying that the biggest change is the US pulling back from innovation and production of SAF. Is that in direct response to what the Chinese are doing?

Philip New: No. For most global markets that have started to look at SAF, the preferred mechanism has been to impose some form of mandate—even China has put in place the beginnings of a mandate mechanism. None of them are as ambitious as those in Europe and the UK, but that is the normal mechanism. The reason for that is simply that SAF costs more than aviation fuel. Left to its own devices, an airline in a very competitive industry is unlikely to voluntarily buy more SAF than it needs to buy. If it has big corporate clients that want to offset some of their scope 3 emissions and are willing to pay a premium to have their flights decarbonised, that is fine, but there is a real limit to how big, dependable and investable that market will be.

That is where America is right now, and it is because of the structure of the other incentives in the American mechanism. A critical part of that was a change in the big, beautiful Bill, in which the premium given to SAF producers was removed completely. They now get no more money than those making diesel for ground transport use, but it costs more money to make SAF. The airlines do not have an incentive to buy SAF because there is no mandate, and the producers do not have an incentive to make SAF because it costs more to make and they get less credit from the American mechanisms in place to support renewable fuels.

[Luke Taylor]

Q As a good Liberal Democrat, I want to talk about bins again. Incineration and energy recovery facilities are broadly seen as the least worst options. If there is now an alternative, lots of us will be very interested in the opportunities for local authorities and for making conditions better for our residents. If that means cheaper bin collection, we will all be in favour.

I have questions about the big picture. It has the potential to disincentivise recycling. Does the increasing value of SAF feedstock undermine the efforts to recycle? Another, more technical question is: could plastics recycling be better diverted into this process to solve a lot of the problems we have with exporting plastics for recycling and the energy used to do that?

Many of our energy from waste facilities are now linked to heat networks. Is that bigger picture being considered—not just producing electrons, as you say, but using waste heat for district heating networks? There is a bit of additional complexity.

That leads into the bigger question of the holistic view across different Departments and the incentives that the Bill creates, which I am sure are all positive. It promotes better, more sustainable options in different Departments. Is enough work being done elsewhere for this to work within the bigger system? You have 15 minutes.

Philip New: My roots are as a fuels and energy guy, so I will not be able to respond with much expertise to the more specific questions about the waste sector. However, I will do my best by starting with the general statement that I think you are quite right that the second that waste becomes more valuable than an alternative use of that waste, you have to start questioning whether it is really waste. Funnily enough, that is more of an issue in some of the first-generation products that we are using, where the waste is becoming more valuable than virgin vegetable oils. That is a different issue, but it is very important.

In this case, as long as people either do not get anything for waste or have to pay to get rid of it, the risk of it distorting other parts of the hierarchy is manageable, particularly with a sensible degree of oversight and monitoring. I would not lose too much sleep about that. You will have to help me with the other part of the question.

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[Tom Collins]

Q As you mentioned, this is an enabling Bill and what will really count is how the RCM rounds are designed. You have talked about the need for us to realise economies of scale and advances in technology as we move through larger and larger availability of feedstocks. Do you see that kind of mechanism as being a useful vehicle for us to make those economies of scale and bring that innovation to bear?

Geoff Maynard: The short answer is yes, I do. I think it will be very effective. As many previous witnesses have said, it provides a guarantee to investors that they will get a return on their money. A point that perhaps has not been made is that it gives quite a lot of authority to the Secretary of State. If he sees that the process of moving to SAF is slowing, he can instruct the counterparty to let additional contracts and thus speed up the process and the amount that we have. There is a considerable degree of confidence that, properly used, it will produce the desired results.

[David Reed]

Q Mr Maynard, thank you for being with us. In your role within the aviation policy group, have there been any conversations with colleagues from the Ministry of Defence about the Royal Air Force potentially using SAF and the international logistical challenges of getting SAF into the UK? You raised some concerns earlier on.

Geoff Maynard: We have had some discussions around the edges with the RAF, if I can put it like that. They recognise the need that, at some point, they perhaps ought to be using SAF. It is certainly possible for them to do so, albeit not necessarily to the same percentage that you can use it in commercial jets, as I understand it, because the engines have not been designed for it. There are some issues to resolve before they can use it in the way that the commercial sector does. Does that answer your question?

[David Reed]

Q It does. Do you see this developing in the private sector far faster than in military environments?

Geoff Maynard: Yes, because the use is much greater. There is a lot more SAF to be used in the commercial sector than there is in the military sector.

[The Chair]

Any other questions? No. Mr Maynard, thank you very much indeed for your evidence this afternoon. We are grateful to you for taking the time to meet with us.

Examination of Witness

Professor Mark Maslin gave evidence.

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[Amanda Hack]

Sorry.

Professor Maslin: No, no, I think it’s great. Forgetting schools, I think we need reinvigorate engineering in universities—and I say that not coming from an engineering background. The reason is that, at UCL, we have a huge faculty of engineering and some real areas of expertise, but we need to build those up. We need the chemical engineers who can train the next generation to go into SAFs. We need to energise that.

At the moment, the problem is that the university sector is creaking and underfunded, and top universities are doing things on a shoestring. It seems slightly ridiculous that I am going out to the middle east to get funding to support research into SAFs, but we are having to be entrepreneurial and sell our talent around the world.

[David Reed]

Q Professor Maslin, thank you for being with us today. You talked powerfully about the international nature of this technology set. If a country or business is not going through a good time, that technology might not come through the supply chain. From a UK perspective, where are the main weaknesses with the international supply chain? As a follow-on, are any hostile states actively trying to weaponise elements of that supply chain?

Professor Maslin: The first thing is that we have to work out a way of being self-sufficient in SAFs. If you want the mandate and the Bill to work, we have to have that self-reliance. The problem that is the quality, quantity and supply of SAFs around the world are highly variable. They are not as good as you think they are. We therefore need to be able to protect our own regulations by having a homegrown community.

On weaponisation, no, I have not seen any evidence that hostile states are going after SAFs at the moment, because they are a very small percentage of the aviation mix. At the international level, it would be helpful if the Chicago accords could be renegotiated so that you could tax aviation fuel internationally, even if the tax was small—$1 per tonne, or something like that—to shift the balance away from aviation fuel and towards SAFs being more accountable. I doubt that will be possible in these interesting political times, but that is the problem we have. We are able to tax aviation fuel internally but not internationally. Therefore, at the moment, there is no aviation fuel tax on international flights, which would be a really nice mechanism. Of course, you can see that as weaponising against the fossil fuel industry.

[Luke Taylor]

Q May I start by heartily endorsing your encouragement of engineering as a career or an education? As an aeronautical engineer before I came to this place, I am available for motivational speeches whenever necessary.

From my discussions with industry on the Bill up until now, I am not quite sure that I am convinced about being agnostic to SAF production, source and mechanism. My worry is that it does not give enough ability to shape the environmental benefit of that SAF stream and to incentivise the most beneficial SAF production, such as PTL compared with the earlier gen SAFs, even 2g SAFs. Does the Bill as presented give enough of the right mechanisms to incentivise the right sort of SAFs that will be most beneficial and provide us with the greatest environmental benefit?

Professor Maslin: The Bill provides financial security for industries producing SAFs, which I think is essential. I do not think it has real tweaks to favour particular SAFs—whether you want to do that or not is another matter. The problem is that some SAFs have a better environmental signature, and they are better, but we are going to run out of those.

Ultimately, the real SAFs that we are going to be looking at globally are massive algal productions and artificial kerosene, whereby you produce huge amounts of energy, and you use water and CO₂ from the atmosphere to actually create kerosene. That is extortionately expensive at this moment in time. However, as I said, if there are 14,000 planes, going up 4% per year, by 2050 you will have a very large number of planes in the air at any one moment in time. There will not be enough waste, cropland or algal stuff to produce the SAFs we need. Generations 4 or 5 will be the ones that ultimately look after the aviation industry. I would still say to be agnostic; I cannot believe I am saying this, but let the economics work its way through at the moment to see who comes out on top in the UK, and then take through the next generation.