Sustainable Aviation Fuel Bill (Second sitting)

Greg Smith Excerpts

Committee stage
Tuesday 15th July 2025 Public Bill Committees

Doug McKiernan: My name is Doug McKiernan. I am a co-founder of an e-fuels company based up in Oxfordshire. We have been going for five years. We have 40-plus staff, and are primarily focused on Jet A-1 development.

[Greg Smith (Mid Buckinghamshire) (Con)]

Q29 For transparency, I should declare that I have visited Zero Petroleum on a couple of occasions and met with people there. Mr McKiernan, your product is a power-to-liquid product; it is not derived from feedstocks or waste. Do you think that a power-to-liquid solution is the long-term solution for sustainable and synthetic fuels for aviation use? Do you worry that any part of the Bill incentivises short-term solutions over long-term solutions?

Doug McKiernan: On the first part of the question, given my knowledge of the sector as an engineer, I do not believe that there is a long-term solution other than power to liquid. At the moment, in the ASTM fuel standards, there are a lot of bio-based, sugar-based and food-waste solutions. In my view, those are not truly scalable, and their cost will only ever go up, because of the shortage of land and so on. The power-to-liquid side is truly scalable. The feedstock is air, water and renewable energy. It is extremely clean, and it gives the industry the opportunity—in, say, 10 or 15 years’ time—to move to fuels that are even more performant than current fossil-based fuels.

We are very supportive of the Bill, and we think it will be useful for us if it goes through. It will give confidence to the sector and bring investment, which then helps to bring capability to the UK. It is a great way to kickstart the e-fuels industry, which is the medium to long-term solution, not a short-term solution. We have been working in this sector for only five years. Because of our education system, we probably have some of the best talent in this sector globally, and we are able to recruit that.

We have already made significant inroads into the quality of the fuel, which is over and above anything else that is now available—and when I say that, I mean globally available. This little company that we have—and it is little—has been able to outperform some of the bigger competitors in the field. Towards the end of this year, we will submit our product to the ASTM governing body to get it certified. The intellectual property that we are generating is key to the UK. We need to make sure that the IP is generated here in the UK and kept here because I believe that in five years from now all the big decisions around e-fuels—all the important ones—and the freedom to operate will have been worked out, and we do not want that to be worked out anywhere other than in the UK. It will enable us to kickstart the energy generation within the UK so that we have a sovereign capability for energy generation. I hope that answers your question.

[Greg Smith]

Q It does. I have one brief additional question, mindful that we have only 20 minutes with you. Off the back of that protection of UK IP, do you think the Bill could be strengthened to bring in greater protection of technologies such as those that have been developed by Zero and other companies in the UK, so that when the strike price is set it does not end up with foreign-owned technology being incentivised in the United Kingdom? Do you believe that you, along with others that have similar technologies, can scale fast enough to meet the other side of the coin of this Bill, the SAF mandate?

Doug McKiernan: That is a very good question. I think we are in a race. At the moment we need the Bill to give confidence to investors. That will help us to scale. That is the main benefit in the short term. With regard to the IP, there needs to be a mandate somewhere in Government to support core e-fuels development. A lot of small companies at the moment are not getting that, so we are at risk of going abroad with the technology. The Aerospace Technology Institute heavily sponsors hydrogen and electric, but does not really support the core technology of e-fuels. Although we have this mandate, which we think is great, there is a bit of a gap there that could do with addressing.

[Graeme Downie (Dunfermline and Dollar) (Lab)]

Q This morning, we had a witness say that they did not believe the revenue certainty mechanism was required, that the market would essentially take care of the solution itself, and that the mandate was all that was needed. What is your response to that, and how would it affect your company in particular?

Doug McKiernan: Without this Bill and the mandate and quotas that have been set, I think the investment industry will step back from that, which would hurt us as a company. We would not be able to scale up. It would make things extremely difficult and would push the pace at which we could get to net zero to the right.

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[The Chair]

We will now hear from Ruben van Grinsven from Shell International. This session will have until 2.40 pm. Can you introduce yourself for the record, Ruben?

Ruben van Grinsven: Good afternoon. My name is Ruben van Grinsven. I work for Shell and I am based out of the Netherlands, at The Hague—the former headquarters of our company, which has now moved across the street. Shell is active in quite a large part of the value chain of aviation refuelling. We provide both SAF and fossil aviation fuel to airline customers today. We do the blending, we do the transportation and we do sourcing, which means that we buy both aviation fuel and SAF from across the world to meet our customers’ needs. We are also actively looking at the production of generations 1, 2, and 3 of SAF.

[Greg Smith]

Q Good afternoon. You have talked about the sourcing of aviation fuel and blending SAF as well as fossil fuel for aviation. Shell is clearly a global company, but the Bill’s underpinning is the United Kingdom’s domestic fuel security. Where does Shell sit in terms of viewing domestic fuel security for aviation use within the United Kingdom? Do you think the Bill will deliver on not just that primary goal but increasing UK-based SAF production?

Ruben van Grinsven: That is a really good question. We are looking globally at various opportunities to build SAF production plants. The second and third generations especially are more challenging than the first generation. To make the investment case robust, we need to solve a whole number of challenges—some are around ensuring that we can make the technology work, and some are around financing. But a lot of it has to do with the value of the product that we make, and the certainty around the value of the product.

The revenue certainty mechanism being discussed in the Bill is very compelling. There is always a combination of different factors. It is partially fundamentals about whether we can get the right feedstocks, but part of it is also about the certainty we have about the price we are going to get for our products. The revenue certainty mechanism is absolutely very helpful.

[Greg Smith]

Q That is helpful, but on this particular point about UK-based production, a global company like Shell—there is nothing wrong with this position; it is what you do—will source SAF from wherever it is cheapest around the world. Does the Bill go far enough to pump-prime UK-based production so that a global giant like Shell—nothing wrong with being a global giant—will choose UK-based plants, or will the mechanism in the Bill not produce SAF at a cost that you think is competitive for your usage, blends and potential future use when compared to that from suppliers overseas?

Ruben van Grinsven: There are two elements. One is whether we can invest in a UK plant. That is hard to tell at this point in time for two reasons. We do not fully understand all the details associated with the Bill. I think the principles are very promising, but there are many things that need to be detailed out, which, at the end of the day, will decide how appealing the investment is going to be. There is a lot of that.

Can UK-produced SAF be competitive in a global market? I think that depends a little bit on the type of technology, but it is also very timebound. At this point in time, this is not the cheapest place to make e-SAF, just because power is more expensive than other places in the world. But if we continue to build out the renewables, as I have seen in plans before, I think there are going to be more affordable electrons around that can then be converted into e-SAF. In the longer term, e-SAF can be competitive.

For other technologies, I think things are less location dependent. Ethanol to jet, for instance, is very feedstock dependent, and I think that the UK can be as competitive as other places. Again, the fundamental competitiveness is one element. The other element is whether the whole investment case makes sense, and part of that is financing —and part of the financing is driven by revenue certainty. It is not just the fundamentals but the whole package that determines the attractiveness of the investment.

[Greg Smith]

Q That is very helpful. On one last point of clarity, when you talk about the long term for e-fuels, we can all put a different definition on “long term”. What do you mean by that—10, 20, 50 years?

Ruben van Grinsven: I do not know. I do not know exactly what the price projections are for renewable power in the UK. It is hard to guesstimate that, so I do not know.

[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.

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[Chris Vince]

Q Obviously, the Bill is trying to make it easier for us to produce SAF in this country, which is really important. I gather—if this is correct—that part of your role is to source SAF around the world. Do you feel there will be a greater need, and therefore a strong argument that we should be pushing ahead with SAF and producing it here in Britain? Although you said you cannot commit to where you will buy your SAF because of cost, would you say you will be in a place where you need more and more—and so it is very likely that you will have to source SAF from Britain, because you will need as many sources as possible?

Ruben van Grinsven: Especially for the second and third generation, SAF needs to develop. I think the consensus is that HEFA-based SAF is, at this moment, the most mature and affordable, so it is a great option. However, we also all believe that we are going to run out of feedstock at a certain time.

If you want to continue decarbonising aviation, you need additional forms of SAF—and that is where the second and third generations come in. We need to start developing those now, to learn how it is done and establish the technology and the fundamentals behind it. Starting that now is essential, and doing it in the UK could potentially give you a head start. If you do this before everybody else, you would have a technological and commercial head start, which could be an advantage.

[Greg Smith]

Q If the Bill becomes an Act, Shell will find itself in a peculiar place given that it will be both a levy payer, as a fossil fuel producer, and a developer of SAF potentially looking to benefit from the strike price. The Government put an analysis in the public domain on Second Reading: they suggested that the ultimate cost to the end user, such as somebody getting a flight—there will be a different calculation for those using air freight—will be plus or minus £1.50. Witnesses earlier suggested that that might be a “conservative” estimate—in their own words. Where would Shell see the ultimate cost pass on to the end user?

Ruben van Grinsven: The principle makes sense: at the end of the day, additional cost will find its way to the end user. We do not have enough information at this point in time to calculate what the cost is going to be because a lot of the details of the Bill are unknown. We would like to better understand how this is going to work, what the volumes are, what the timing is going to be, and how we will organise the contracts between the supplier and the off-taker. There are a lot of things that we do not know at this point, and therefore it is difficult to model what the final cost of the levy is going to be for the end consumer. I do not know; it is difficult to answer.

On top of that, I think it is going to change over time. Over time, if the market is short and the prices are high, money might flow towards the levy, so it would be like a negative levy but then it might turn into a positive levy. It is very difficult to assess that and put a number on it.

[Mr Kohler]

Q Some of the evidence we have received from the contributors to the consultation expressed concern over the levy calculation. Under clause 6, it could be based on historic market share. Do you share those concerns about complications in the levy calculation? Should it be a simple levy placed on sales going forward, rather than on historic market share?

Ruben van Grinsven: Again, that is hard to judge because we do not have the full details of how this is going to be done. I agree that it is a very thin-margin business, so we have to make sure that the levy is distributed properly, and that we do not give certain people a disadvantage or advantage just based on calculation methods. We need to design it very carefully so we do not disturb the market too much. We will be able to assess that much better when we have more details about the Bill.

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[The Chair]

We will now hear oral evidence from Matt Gorman from Heathrow airport. For this session, we have until 3 pm. Welcome, Mr Gorman. For the record, can you please introduce yourself?

Matt Gorman: Sure. I am Matthew Gorman, the carbon strategy director for Heathrow airport.

[Greg Smith]

Q Good afternoon, Mr Gorman. I will lead with the question that I asked the previous witness about end-user cost. Clearly, Heathrow’s business model relies on you having many people coming through and getting on aircraft, or arriving in the UK on an aircraft. If the cost of flying were to increase significantly, that might impact Heathrow’s very business model, with fewer people being able to take those flights. Some of the evidence we have heard today seems to challenge the Government’s presumption, presented on Second Reading, that any cost increase to the end user, as a result of the Bill and the SAF mandate, would be plus or minus £1.50. Do you share the Government’s view on that, or do you share some of the other witnesses’ views that that might be optimistic?

Matt Gorman: Let me start by saying that we take this issue very seriously, for the reasons you have outlined. It is central to our business. SAF is key to delivering the industry’s net zero transition plan: it is about 40% of the solution. I do not think that anyone can forecast the future costs and prices with exact certainty, but I will say that we test all our demand forecasts for Heathrow against a range of different carbon price scenarios, from low to high—“high” being the Department for Energy Security and Net Zero’s high scenarios. We do that because it is important for us to understand and our investors to understand, and because climate disclosure legislation now requires us to share that information in our annual report. We have concluded that demand for flying from Heathrow remains robust even in high carbon price scenarios in future. We are confident about that.

The Government have shared their analysis on the revenue certainty mechanism and the reasons behind it. That is one of the carbon costs that consumers will bear—there are clearly others—but I come back to the point that all our forecasts have shown that demand is robust.

[Greg Smith]

Q In respect of procurement of SAF to be available at the airport, will the Bill safeguard domestic fuel security? I ask that question largely through the lens of the challenge to Heathrow if fuel were suddenly to be unavailable in the United Kingdom for you to supply to the airlines on site. Is there any way that the Bill could be improved to shore up the domestic security position?

Matt Gorman: It is a good question. We welcome the Bill. As SAF is so important, the sector and Heathrow have advocated over a number of years both the mandate, which was passed as legislation at the beginning of the year, and the revenue certainty mechanism. It has benefits for energy security, green jobs, growth and decarbonisation. That has been one of the drivers for the sector to support it. The decarbonisation benefits are clear. On jobs and growth, earlier witnesses talked about the industry studies showing up to £10 billion of GVA and 60,000 jobs by 2050.

Energy security is one of those reasons. As SAF is a key part of the industry transition plan around the world, there will be global trading of SAF. Kerosene is a global commodity today; SAF will be in future. We think we will import some. However, the sector is supportive of domestic production, which is why we are so supportive of the Bill. I should say that Heathrow is not directly in the fuel value chain—we do not buy, make or sell fuel—but we are very involved in the debate, because it is so significant. All the fuel producers and investors we talk to say that the revenue certainty mechanism will help to unlock investment decisions in the UK. I am not sure whether the Bill could be improved to do that even more. I do not have a view on that.

[Julia Buckley (Shrewsbury) (Lab)]

Q I have two questions. The first relates to your role on the board of Sustainable Aviation. You referred earlier to the key part the Bill plays in decarbonisation and reaching net zero. On behalf of that board, from the wider sector perspective, do you think that it is possible to reach net zero by 2050 without the Bill?

Matt Gorman: That is a good question. We have not studied it in those terms. We have published a plan to get to net zero, and there are four key tools in the toolkit. SAF is one; zero-emission and hydrogen-powered aircraft are others. More efficient aircraft and more efficient operations deliver a huge amount, and there are greenhouse gas removals for anything that we cannot cut within the sector.

SAF is important. We have always said that a combination of a mandate requiring production and incentives to stimulate investment in the UK is important. We are delighted to see the Government progressing with the Bill: we would like it to be passed as soon as possible, and we would like the consultation on the implementation to move forward. I would simply say that SAF is very important and that the Bill is very important to driving UK production.

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[The Chair]

We will now hear oral evidence from Josh Garton of the Green Finance Institute. For this session, we have until 3.20 pm. Good afternoon and welcome, Mr Garton. For the record, will you please introduce yourself?

Josh Garton: I am Josh Garton, technical director at the Green Finance Institute.

[Greg Smith]

Q Green finance is something of a minefield across various technologies. A straightforward first question is whether the Bill is the most effective way to get finance into UK SAF production via the price mechanism. If the answer is no, what would be a better way of ensuring UK SAF production and the protection of UK intellectual property in that production? Where do you sit in the debate about what the ultimate cost to the end user will be?

Josh Garton: I think that the revenue certainty mechanism that is being proposed is a really good start to getting finance into the sector. Undoubtedly it will not be the only thing that is required: there are other risks that need to be addressed. The revenue certainty mechanism addresses price risk, as it is designed to, but other challenges remain for the second and third-generation fuels, and they may need to be addressed as well. I think that it is the best solution for addressing price risk. As other witnesses have described, when we speak to our colleagues in Europe and elsewhere, they see the package of regulation that the UK is proposing as some of the most promising in the world. The UK will become a very promising place to invest in SAF.

On your question about the price for the end consumer, it is very hard to forecast what that will be. There are a lot of forecasts out there. It obviously depends on the cost of production, the blending of the fuel and many other factors, but the most important thing is that the mechanism for transferring the cost to the consumer be done in a very equitable way, so that you remove any competitive advantages or disadvantages resulting from airlines and other players in the industry potentially gaming the system. I would say that that is a more critical element to consider.

[Greg Smith]

Q From your experience of securing finance for green projects, and given that the other side of the coin to the Bill is the mandate and its demands for increasing percentages of blend of SAF, do you think that the mechanisms within the Bill that we are considering in this Committee will deliver scalability fast enough to meet those elements of the mandate—the 2%, or the 10% over time—or are we going to find ourselves in the position where, to meet the mandate, we will still need to rely to some degree on imports?

Josh Garton: I think that imports will definitely play a role, particularly for the first-generation fuels. The structure of the mandate provides space for second-generation fuels, which are quite novel with the sustainability requirements attached to them, so the UK will be a good place for producing them. The technical design of the mechanism, which is not set out in the Bill, will be what is most critical to ensuring that the mechanism is adequate for facilitating investment.

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[Greg Smith]

Q Building on those last two questions, in terms of the investment landscape in the UK for technology, and for SAF in particular, we are in an emerging technological race where, for example, the mandate itself starts to wind down HEFA use quite quickly. We can see waste-derived fuels coming down, but then we have heard from witnesses, such as Zero Petroleum and other manufacturers of e-fuels and power-to-liquid fuels, that this might be where the technology settles in the long term. How much reticence is there from those who might finance these projects to go there on a technology that could well be stood down in 10 or 20 years in favour of something else coming upstream?

Josh Garton: To go there? Are you talking about the first-generation fuels?

[Greg Smith]

Well, first and second, until we get to third.

Josh Garton: It is certainly a consideration, but I think most investors are very cognisant of the fact that the third-generation fuel, while absolutely necessary in the long term, has some way to go to evolve to that point. There is a lot of space still for the first and second-generation fuels to develop, but there will be some consideration about not building overcapacity in those sectors.

[Greg Smith]

Q Can I gently push you on that? We heard from the witness from Zero Petroleum earlier that they are ready to scale now, in reference to a question from one of the Liberal Democrat Members on the Committee. If that is the case, what do you see as the barriers to those later-generation fuels being scalable now, when one witness who actually does it—sat where you are sat not half an hour ago—said they are ready to scale?

Josh Garton: Certainly, the technologies are at that point. There are still commercial challenges; they have been proven at demonstration scale but not at the commercial scale. In the UK, we have a mandate that provides space for second-generation fuels. While that mandate remains intact, there will be a lot of space for that fuel over the long term. In the EU they have a different structure, where they do not have that same space for second-generation fuels.

[Luke Taylor]

Q I want to be very careful with this question. We have had questions about investors and appetites to put money into these technologies—into refineries, production and particular projects. There was previously a fairly strong consensus on the need to address climate change, and this is one of the projects that we are doing to mitigate those impacts. There is a fair amount of rhetoric at the moment about stopping investment in net zero projects in particular regions, some of which have a heavy dependency on or a high frequency of these sorts of projects—north Lincolnshire, Humberside and such areas. Is there a risk that that sort of rhetoric damages investor confidence and that, with that sort of language and those sorts of pronouncements being made, we see challenges in delivering the jobs and the plants and seeing the capacity that we need come online?

Josh Garton: Yes, absolutely there is. It feeds into the overall narrative in the UK on the direction of SAF. It is more than just at the regional level; there are murmurings around the strength of the mandate itself and its being upheld. All those murmurings impact the narrative and the appetite for investors. The more we can do to support those first-generation plants to get through to a final investment decision and through to production, the better we prove out the sector as a viable one in the second and third-generation fuels. That narrative then falls away, because we have proof that it is a commercially viable product.

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[The Chair]

We will now hear oral evidence from Philip New. For this session we have until 3.40 pm. Welcome, Mr New. Just for the record, could you introduce yourself?

Philip New: My name is Philip New. A couple of years ago I was commissioned to prepare a report for the Government on the development of a UK SAF industry. Before that, I used to be responsible for BP’s global renewable energy activities.

[Greg Smith]

Q Good afternoon, Mr New. Fast-forwarding from your review to where we are today, is there anything that you wanted to see, that you recommended or that you found in that review, that is lacking in the Bill that this Committee is considering? If that is the case, how would you improve it—or is this the mechanism that you think will pump-prime the UK SAF industry?

Philip New: The main conclusions from the report that I did were, first, that the SAF mandate as laid out—it was at a slightly more formative stage then than it is now—was a really smart way of trying to define the market mechanisms, the targets and the obligations framing a new market. The question then was what other mechanisms would need to be in place, having got the demand side largely mapped by the mandate, to enable supply to occur.

My first thought when I saw the RCM was that there was very little that was needed: if you believe that the market will be short of SAF, as many people do, with a buy-out price and a target, you would expect the product to price close to the buy-out price—that which is available. That sends a very strong price signal to investors. I was unfortunately thinking of that from my historical perspective as a strategic investor and had underestimated the conservatism of the banking community. It was clear to me that they were pushing very hard—perhaps because they had grown very comfortable with the idea of a CFD in other parts of the green transition—and they were really enthused and insistent on the idea of a revenue certainty mechanism. The way that the RCM has emerged so far is very highly aligned with the proposals that emerged in that original report. From that point of view I would say, “So far, so good.” The mandate is evolving well and the RCM feels pretty much where it needs to be.

The questions that are still out there, as I think Josh Garton was referring to, are specific to very first-of-a-kind technologies. Part of the issue with the second-generation products is that, while the feedstocks are already wastes, they are often already being used in other sectors. There needs to be, I think, some greater degree of comfort to enable some of those wastes to be bid away without wrecking the project economics of the SAF developer. A good example is black bin waste. The prospect is that by having more competition for black bin waste, we reduce costs for local authorities. It is really nice if we can get there, but for now, while these technologies are so uncertain and regarded as such a risk, it is difficult for local authorities to commit to them with enthusiasm, because they are afraid that they will end up paying landfill fees if they do not manage to do it.

That is one example suggesting that there should be some more comfort around feedstocks. The rest of the answer are the mechanisms that could be put in place to smooth some of the risk around the very first projects. The risks there are around integrating new technologies for the first time and then getting through some of the operating teething problems, because everyone involved will be coming across those issues for the first time. It took me about four years to get a much simpler plant up and running to a point of satisfactory operation. We should not underestimate the challenges of getting those initial assets over that first set of hurdles, but the RCM is an absolutely necessary part of the mix that needs to be put in place.

[Greg Smith]

Q That is very helpful. As you raised, for example, the black bin waste stream, it strikes me that looking across the differing technologies to produce SAF, the waste-derived ones could end up being the most costly, not least because the bulk of waste goes through local authorities. Many of those—including my own in Buckinghamshire—are tied up in very long-term finance arrangements on incinerators, so they cannot simply take their waste somewhere else because they are locked in a contract. Buckinghamshire is by no means unique in that. Do you see waste-derived SAF hitting an even bigger buffer when the practicalities come, and it either requiring some significant state subsidy to buy out those incinerator contracts or simply not having the waste in the first place?

Philip New: When I first engaged with this, I had exactly the same thought. However, a few things are starting to emerge that sit on the more optimistic side of the balance of risk here.

First of all, over time there will be more and more pressure for the energy from waste manufacturers to access carbon capture and storage. It is not at all the cleanest way of generating an electron in this day and age. It would be reasonable to expect that over the next 15 years, we will see a number of those assets get to a point where the contracts are expiring. They will then need to contemplate refinancing, and if they do, whether or not they have access to carbon capture and storage will become important. Not all of them will be able to either afford or justify it, because they are too distant from where the carbon sinks are. There is a probability that enough capacity will start to come off stream for it to be picked up.

On top of that, the imposition of the emissions trading tax will start to free up some of the very difficult to recycle plastics, which could be used to make SAF. There is also an interesting stream of waste wood that will become available, particularly as some of the rocks start to fall away, which will start to happen in a couple of years’ time—and assets that at the moment are making renewable electricity out of waste wood will lose their rocks. We also need to remember that it is the local authority that is paying the energy from waste company to move it away.

I have recently been involved with some economic analysis. We assumed that for the first wave of sites there would be a 100% discount. In other words, rather than the local authority paying, it would get rid of the waste for free. The developer would not pay for it themselves, but the local authority would still save the money. We thought that would be necessary to give local authorities the comfort to take on the exposure. Later on, there might be scope for it to become a little more competitive, because people will get more comfortable and there will be more confidence in the technology.

I do not think that we simply have to bail them out. I think there might be something around a guarantee of some description that simply says to a local authority, “Look, if you give a contract to one of these companies and it fails—if it can’t live up to that contract—and you have to put it into landfill and pay the landfill tax, there could be some kind of keep-whole mechanism,” just to encourage them over the line.

The other thing that you could consider is looking at the waste hierarchy. Simply moving this from being recovery to recovery-plus would send a very strong signal to local authorities that putting it into SAF is a better use of their waste than simply incinerating it and turning it into electrons.

[Ms Minns]

Q Building on that, we heard from a couple of witnesses earlier today about the waste hierarchy, but in your view, is there a point at which local authorities should be looking at their local plans for waste and minerals? My local authority is already receiving applications for gasification plants, and it is not alone in this. If they come on stream, they could deprive the SAF producers of the materials that they would want to acquire. At what point do local authorities need to be thinking ahead when looking at their waste and mineral plans?

Philip New: This is quite a challenging conundrum. Right now, the safe place to put your waste is into an incinerator to make electrons. Is that the best place for the journey to net zero or for the local authority’s long-term economics? That is less obvious. It is difficult to put all the obligation on the local authorities to make the right, wise, long-term choice, when they are dealing with some very short-term pressures. This is where I think some extra signals—whether through some kind of mechanism that gives them comfort that they will be kept whole if things do not work out as planned, or some adjustment to the waste hierarchy—could play a helpful role.

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[The Chair]

Q Welcome, Mr Maynard. For this session, we have until 4 pm. Please introduce yourself for the record.

Geoff Maynard: Good afternoon. I am Geoff Maynard, a fellow of the Chartered Institute of Logistics and Transport and a member of its aviation policy group. We meet regularly, maintaining links with universities, industry, airlines and environmentalists to assess developments in the sector, and to advise and inform Governments and the aviation sector on the best way forward, balancing the needs of the environment and the airline sector.

[Greg Smith]

Q Good afternoon. Does the Bill get that balance right? Will it increase UK production of SAF to the point that we have domestic fuel security, or is there a better way of decarbonising aviation fuel?

Geoff Maynard: I think the short answer is yes. It meets that requirement because, unless there are some incentives for SAF—which will cost more than the kerosene that would otherwise be used—there is no incentive for the aviation industry to use it. That presents a problem because there is then no environmental benefit, which we desperately and quickly need. The Bill is a good way forward, as we see it.

[Greg Smith]

Q But it is the mandate that tells them they have to use it. The Bill is about domestic SAF production.

Geoff Maynard: But production is important. You could have a situation in which there is a mandate but nobody can acquire the fuel, except at a totally extortionate price. There would then be pressure on the Government to revise the mandate. That is how we see it.

[Greg Smith]

Q That is a very fair answer. On the cost basis, the Government have said that the end-user cost—as opposed to the cost to the airline or the producer—of buying a plane ticket is plus/minus £1.50 on a fare. We have heard from multiple witnesses today that that is potentially an optimistic figure. Where does your organisation’s analysis put it?

Geoff Maynard: It depends on where you are within the mandate. If you are looking at low mandates, up to about 10%, then the £1.50 figure is probably correct, but as we move further on, it seems unlikely that it will be quite as low as that.

[Greg Smith]

Q Where does your organisation see the price of SAF going in the medium and long term? In theory, if the Bill works, SAF production in the United Kingdom will increase exponentially. Therefore, the unit cost—the per litre or per tonne cost—will come down. How long does your analysis suggest it will take us—as a country, as opposed to a global market—to be able to supply SAF to the airlines at a cost that is closer to the fossil-fuel equivalent today?

Geoff Maynard: On the face of it, you would expect the cost to fall, but the problem is that there is only a limited amount of raw materials for the generation 1 and 2 fuels to proceed. You will have to move forward to meet the requirements; you will have to move to power-to-liquid fuels, and they are going to be more expensive to produce. Therefore, at some point, as they kick in, to meet the overall figures, the cost base will rise. That is why we believe that, in the longer term, it will be slightly more expensive because there are not the cheaper feedstocks that are currently available.

[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.

--- Later in debate ---

[The Chair]

We will now hear oral evidence from Professor Mark Maslin from the UCL Centre for Sustainable Aviation. We have till 4.20 pm for this session. Welcome, Professor Maslin. Would you state your name and so on for the record?

Professor Maslin: I am Professor Mark Maslin. I am a professor of Earth system science at University College London and the founding director of the Centre for Sustainable Aviation.

[Greg Smith]

Q It is always good to get an academic perspective on these matters. We can get locked into all sorts of technical discussions and lose the bigger picture. From your work in the UCL centre, is there an academic view—a big picture view—on which of the technologies that the Bill could support through the price mechanism to scale up production in this country has the best chance of breaking through and being a long-term solution, on a scale that will give us domestic fuel security and at a cost that will not drive commercial passengers and holidaymakers away from the airlines?

Professor Maslin: We take the very large view that the only way to make the international aviation industry net zero is by SAFs. Electric short haul—possible in the next 20 to 30 years. Hydrogen—forget it; it is never going to work and any pilot will tell you, “Not a chance.” That is just so we have that laid out there.

We need SAFs both UK-wide and globally, and we are talking, as an academic institution, with very large airlines that want to produce SAFs in their own country. As academics, my colleagues and I would not pick one technology. What you need to do is what you are doing, which is having a levy that says, “If you produce SAFs, you will then have this benefit.” Then, you will work out which technology comes to the fore, whether that happens to be alcohol production or waste. You should stay agnostic to the successful SAFs output.

[Greg Smith]

Q That is very helpful. You may have heard me ask previous witnesses about the cost to the end user. The Government’s analysis is that it would end up being plus or minus £1.50 on the airfare, but a succession of witnesses have not been willing to put their name to that, or even to go as far as saying that they think that that is a conservative estimate. Where does your analysis sit on that?

Professor Maslin: Our analysis is slightly different because it is looking at the industry as a whole. On the airline side, there is a worry that these costs will literally be shoved on to the airlines. Many of us do not realise that the difference between this industry and others is that it is a very narrow margin industry. If there is any change in geopolitics, companies can go bust—for example, Finnair. Airlines are worried about this levy system, not necessarily because of the extra cost, but because they are not reassured that when there is a surplus, which goes back to the actual producers, it will be then be passed back to the airline. Again, they are happy with the up and down mechanism, but there seems to be no way of shunting that back to airlines to say, “Okay, you have done well, so you can get some money back.” That is more the concern.

Adding £1 or £2 to the price of a flight does not concern the airlines from the passenger point of view—it will not put passengers off. What will put them off is when the airlines suddenly realise that if you multiply that by 550, which is the number of people in an A380, you suddenly start to bankroll quite a lot of extra money that has to be found. I am hedging my bets, so I will not tell you that it will be higher or lower than £1.50. That is a very small amount per individual, but for the companies that are trying to make aviation work and are positive about trying to move to net zero, this is the perfect time to push, as they have suddenly woken up to the fact that they are laggards.

[Tom Collins]

Q As someone who works in research and innovation, you will be familiar with the UK pain point, where we are often excellent at planning the technologies at low technology readiness levels, and then we lose them to that mid-level valley of death. The UK is strong in sustainable fuels at the research level; this mechanism is intended to help us to navigate through the valley of death, and to reach scale and economic viability. Do you think it is a good mechanism for that and that it will help us to break that trend in the UK?

Professor Maslin: Other levy systems that have been used in the energy sector have been very successful, so I am personally very positive about this because it gives a guarantee. We have seen what I call the solar rollercoaster: suddenly everyone has solar panels, and then suddenly all the companies go bust. What you are doing, very sensibly, is trying to level those bumps in the road. That worked for offshore wind and it should work for this, but there also needs to be support through other mechanisms, such as R&D and mechanisms designed to support small and medium-sized enterprises, so they can get the research they need, to go from “Wow! That’s a brilliant idea!” to being world leading. This is a great mechanism, but the Government need to use the other mechanisms to fund those companies to develop as well.

--- Later in debate ---

[The Chair]

We now move on to the Minister, and we have until 4.40 pm for this session. I suspect that we will be interrupted shortly by a Division, but I think we should proceed. Minister, while you have been active in our proceedings today, taking notes and so on, could you please introduce yourself for the record?

The Parliamentary Under-Secretary of State for Transport (Mike Kane): Thank you, Mr Pritchard. I am Mike Kane, and I am the Minister for aviation, maritime and security.

[Greg Smith]

Q Minister, no doubt we will be able to go through much of this on Thursday and next Tuesday, but a central feature of the debate on Second Reading was the ultimate impact on airfare payers of the price mechanism in the Bill, on top of the mandate. You were very clear at the Dispatch Box that it was plus or minus £1.50. I have no reason to doubt that, but some of the witnesses today have. Is there some more work to be done by the Department as the Bill progresses to kick the tyres on those assumptions? How confident are you that it will stand the test of time, given that multiple witnesses today have challenged that number?

Mike Kane: As the Minister, may I start by thanking all Committee members and witnesses for their time today? I think it is a great question. We have a world-class aviation sector and, if we want to stay world class, it is absolutely essential that we pass this Bill. It is part of our manifesto commitment. We introduced the mandate on 1 January for 2% on the demand side, and this now begins to give investment to the supply side.

You are absolutely right; we have to remain competitive in the aviation market if we are going to remain the third largest on the planet, and one of the most advanced. The figure we have from the departmental analysis teams is that it is plus or minus £1.50 of the price of a ticket over a year. That is less than my Bee Network bus fare, where Andy Burnham keeps the cost below £2. That is what we are looking at.

You ask how we are going to look at this. To answer in all seriousness, we are going to continue to monitor and control by managing the scale of the number of contracts we let. This gives the Secretary of State—whoever it is, from whichever party it is in the future—the power to look at what is happening and scale up or down if the market is badly distorted. We feel that there is no big impact on consumers taking their annual holiday to the south of Spain once a year. They will continue to do that unaffected.

[Greg Smith]

Q Thank you. That is helpful. Can I also ask for your views on a couple of other areas of evidence we heard today? The first is about a point that also came up on Second Reading: the protection of UK intellectual property as contracts are let and participants come forward to take part in the price mechanism. Has the Department done any more thinking on UK IP, so that we are not just producing SAF, of whichever technology, within the United Kingdom for our own fuel security, but doing so with genuinely UK technology driving it?

Mike Kane: As we said, we are agnostic to the technology. As we let the contracts, that is where the innovation will come.

There is a wider question across Government and UK security about intellectual property, and of course we will keep in contact with our colleagues at the Department for Business and Trade who look at that. The world is looking to us at the moment, as Lahiru from EasyJet said this morning, because we are the first doing this. We want to maintain the intellectual property by being first in the world to do this and then, as the companies come forward with the innovative technology, we want to properly IP that and maintain the competitive advantage in the UK.

[Greg Smith]

Q This is my final question before we get to go through the Bill in detail on Thursday and next Tuesday. Accepting the agnostic position, has anything you have heard today from the various companies who have given evidence, be that global giants such as Shell, UK-based innovators such as Zero Petroleum or the companies developing SAFs from waste, changed your thinking on whether there might be emerging winners and losers, given some of the challenges that we have heard about—not least the municipal waste challenges?

Mike Kane: As the Minister leading on the Bill, I would say, “My kingdom for a chemistry degree.” Actually, Mark said something that I thought was very pertinent towards the end: we just have to allow the technology to emerge. That way, as we get to the power-to-liquids and the harder piece to do, in five, 10 or 15 years, there will be a market for it. The beauty of the Bill is that we can let contracts over five or 10 years.

Personally, even though Exxon has reservations about this measure, the only emotion I would convey to Exxon is thanks for producing this fuel now, in this country. Exxon is happy about the SAF mandate; its issue is with the revenue certainty mechanism. That is an area where, once the market is established, the Government have an exit strategy; once the market begins to work, the then Secretary of State will have ways out of it, because Government will not need to be in it once we have established it.

[Chris Vince]

Q The evidence session has been very positive—I think you would agree—with a lot of positive evidence about the Bill and sustainable aviation fuel in general. I have the same question that I have asked a number of those giving evidence today: will you elaborate on what you think would be the risks and potential disadvantages to the UK, if we were to stall on the Bill and not pass it on Third Reading?

Mike Kane: First, I thank you, Chris—you have been a great advocate for aviation since you came to Westminster in 2024, with Stansted airport near your constituency. The No. 1 risk is not doing this—that is the risk. I think Matt from Heathrow and Rob from Airlines UK said that in our approach to getting to net zero by 2050, we have a number of Government policies—airspace modernisation, leadership at CORSIA, the emissions trading scheme, the £2.3 billion investment in the Aerospace Technology Institute and hydrogen regulatory development—but that 40% of that pathway is the Bill. If we do not pass it, we are in serious trouble about decarbonising the industry. That is the key risk.