Sustainable Aviation Fuel Bill (First sitting)

Debate between Lewis Atkinson and Luke Taylor

Committee stage
Tuesday 15th July 2025 Public Bill Committees

[Lewis Atkinson (Sunderland Central) (Lab)]

Q Building on the point Mr Ervine made about the potential wider economic contribution of SAF, I am particularly interested in the jobs. We have heard that 70% of existing fuel is imported, and therefore a significant part of your economic supply chain is essentially providing economic benefit overseas. Could you say a little more about—if we get this off the ground, as it were—how far you think that value chain and economic benefit will shift into the UK from imports? In particular, could you talk about the potential regional economic benefits of SAF, as opposed to being concentrated on London and the south-east?

Jonathon Counsell: From our modelling and analysis, we still want to have the flexibility to import SAF, because there is a global market there and we do not want to put ourselves at a competitive disadvantage by saying that all mandated SAF has to be produced in the UK. We still want access to imported SAF, particularly 1G SAF; we do not think the UK has much competitive advantage in producing 1G SAF. We think roughly 50% feels about right, and you have to compare it around that. Our view is that, of the mandated SAF, approximately 50% should be produced here in the UK—but, as I said earlier, not all of that will need the revenue certainty mechanism.

One of the key points that I want to make is that the revenue certainty mechanism is for those plants that cannot get funding: they are early stage, first-of-their-kind technology, and cannot get tracker funding because it is perceived to be too high risk by the investment market, and they cannot get that revenue certainty through any other mechanism, so therefore they rely on this mechanism. We think that roughly half of that 50% will need the revenue certainty mechanism.

A good example is LanzaJet in Teesside, the speedboat project that I mentioned earlier. That does not need the revenue certainty mechanism because we at IAG are providing the company with a long-term committed take-or-pay offer. We are giving the revenue certainty to LanzaJet, so that project does not need it; but other projects do, typically including the municipal solid waste projects that take black bag waste. They are at a very early stage, using less mature technology, and they are massively capital intense projects. They definitely need the revenue certainty mechanism, so we must ensure that it is targeted.

As Luke said, we think that by 2030 there could potentially be 10,000 extra jobs in the UK from that UK production. We can share a piece of analysis that we did through Sustainable Aviation that showed what that looks like for each region of the UK. We think there is certainly potential to build plants in Wearside, Teesside, Humberside and south Wales; if we get the policy right, we think there could be up to 14 plants within the next 10 years, which will deliver £1.8 billion in GVA by 2030.

However, the big prize will come in 2050: 60,000 jobs and £10 billion in GVA. We are creating a new energy industry for the UK. I have to congratulate the Government: we have potentially the most powerful package of SAF policy in the world, with the mandate, the revenue certainty mechanism and the advanced fuels fund. Taken together, they mean that we are the envy of the world and we have a huge chance to be a world leader on SAF production.

Lahiru Ranasinghe: To add to that, it would also enable UK aviation to grow. Our estimates are that each aircraft based in the UK supports around 400 jobs and £27 million of GVA. We have over 150 aircraft in the UK as it is, we have three aircraft going to a new base in Newcastle shortly and we absolutely intend to continue with the growth in the UK. By having the RCM unlock SAF production and SAF supply, that opens the doors to us to continue growing, while also decarbonising. That is a massive part of the economic benefit that the RCM helps to unlock, beyond the obvious effects of supporting jobs and production on the ground in the SAF industry.

Luke Ervine: Just to add a note on benefits, it is important to recognise the cost of not having the RCM. We have spoken a lot today about the buy-out. The UK is unique in its ambition to have a 2G SAF mandate, so the cost of not having the RCM is important. If we do not have it, we pay buy-out, and then we are going to lose out regionally to other areas, such as Europe and the US, that do not have those 2G SAF mandates, so it is important that we recognise that there is a cost of not having the RCM.

[Luke Taylor]

Q Thank you all for joining us. The evidence that you have given so far has been very helpful. There was a question earlier about waste hierarchy and the availability of waste feedstocks as one source of raw fuel or raw material for some of the second-generation SAF. Is enough being done across Government, in a holistic way, to ensure that the goals of the SAF mandate, the RCM and this Bill are achieved? Is enough being done to ensure that the things that are needed—waste feedstocks, the reforms to planning and energy production for eSAFs—are in place? What is going to hold back what we are trying to achieve in this Bill, and what needs to be done elsewhere?

Jonathon Counsell: That is a really strong point. There is a key question about the waste hierarchy, which Gaynor spoke to. Currently, waste going to SAF is treated the same way as incineration or energy from waste, but the analysis is clear that we can get twice as much energy capture from producing SAF than from producing energy from waste. We feel that you are getting a lot more bang for your buck from using waste to produce SAF than from other things, which we think should be reflected in aviation being prioritised in the waste hierarchy.

On renewable energy, last year the Sustainable Aviation road map made it quite clear that 3G SAF—where you basically electrolyse water to get hydrogen and you capture CO₂ from the atmosphere—is going to take a lot of renewable electricity. We are going to need a lot more of that within the UK if we are going to support a domestic power-to-liquid market.

Luke Ervine: In addition to that, we need to think about other areas of SAF, when we talk about SAF having a nominal value associated with its ability to reduce greenhouse gases. We are working alongside the Department for Energy Security and Net Zero and the Department for Business and Trade to understand how carbon can form part of the solution, and decarbonising the SAF that we are producing is also key. We are also working side by side with the Treasury to understand what the revenues from the ETS look like.

That has been quite successful in the last few years, especially since the advent of the jet zero taskforce, which was a really key turning point. I think we are going to continue in that vein to work cross-departmentally and across industry to work through some of these finer details. I think it has been very useful to be part of the Jet Zero Council; we are actually a co-chair, alongside Mike Kane, of the jet zero taskforce. Carrying on in that vein is very important and useful.

Lahiru Ranasinghe: This also enables us to reduce our dependence on used cooking oil imported from elsewhere in the world as a feedstock for first generation SAF. A strategic move towards 2G and 3G also gives more flexibility and capability for the market to scale up in the long-term, and allows it to use waste products from the UK, as opposed to having to ship it in from China or south-east Asia.

Sustainable Aviation Fuel Bill (Second sitting)

Debate between Lewis Atkinson and Luke Taylor

Committee stage
Tuesday 15th July 2025 Public Bill Committees

[Luke Taylor]

Q It is the broader question of how this sits within the system. The implications of this Bill are really broad in the way the incentives will come into a whole different set of markets, including agriculture, waste and local government.

Philip New: First, I challenge the suggestion that this is an incentive. I think of it more as an insurance policy. If you are a recipient of the insurance policy, if it turns out that the market price is higher than you contracted for—your strike price—you will end up paying. The counterparty will be in receipt of money from the participants in the scheme. It is not a one-way incentive.

One of the charms of the RCM is that it is nicely balanced. If you are worried that the market will go long and there will be lots and lots of lower-priced product that undermines your economics, the RCM is a great way of giving you insurance that your investors will stay whole and happy.

On the other hand, by taking it on, you are sacrificing your exposure to the upside. That is the premium you are paying. I think the balance that has been designed into the RCM is a really attractive way of keeping everyone honest while still enabling investment to flow into the sector. I do not think it should distort the underlying drivers or mechanisms.

That having been said, I worry about the range of sectors that a successful SAF industry will touch. It has the potential to touch them in a very positive way, but it is also exposed to some inadvertent—I would not call it negligent—inattention in somewhere that does not feel a very strong ownership of the space, which could really mess things up. A degree of conscious, whole-system understanding of what it takes to enable a brand-new sector to emerge, and providing some co-ordination of that, would be welcome. Whether that looks a little like mission control in the electricity transition or something else, I do not know, but something to provide more comfort would be important. It touches many parts of the economy and many Departments.

[Lewis Atkinson (Sunderland Central) (Lab)]

Q Mr New, in your report you say that one of the key asks for industry is around confidence. We have talked a lot about revenue confidence today, but I want to go over that a little bit. You ask how the UK Government can demonstrate that they will stay the course, and I guess the core of that is political confidence.

Since your report, of course, we have had a change in Government, and who knows if there might be another one over the investment cycles we are talking about here? Could you say a little about your assessment of how a Bill—putting something in primary legislation, as this does—helps to provide the political confidence that you believe investors are looking for, and also, frankly, helps to mitigate the actions of the varying parties in Parliament as we approach this issue?

Philip New: There were two big pushes from the investment community when I was writing the original report connected with the RCM. The first was that it would just be nice to have that revenue certainty in the first place, and that is what we see in other parts of the green transition.

The other speaks directly to this point. They were very nervous that there might be a change to the mandate design, the mandate targets or something at some stage in the future, and that that would so change the market dynamics and the pricing dynamics that all their assumptions would go out of the window. They were not going to be satisfied with any number of assurances from the Government, because Governments change their minds, so they wanted a bilateral contractual arrangement, which is another feature of the RCM. A big driver of its original definition was precisely to respond to that very concern.