Sustainable Aviation Fuel Bill (Third sitting)

Mike Kane Excerpts

Committee stage
Thursday 17th July 2025 Public Bill Committees

[Greg Smith]

It is a pleasure to serve under your chairmanship, Mr Western. As I have throughout the passage of the Bill, I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests—I am taking a safety-first approach here—and the donation from Nemesis of synthetic road fuel for a constituency surgery tour last year. That is not relevant to sustainable aviation fuel, but I want to be entirely transparent about it, as I have been throughout the passage of the Bill.

Before I speak to amendment 3, a broad comment about all the amendments I will speak to today is that, fundamentally the Opposition are not a million miles from the Government on the Bill. However, as I am sure you expect us to do, Mr Western, it is our job as His Majesty’s loyal Opposition to kick the tyres and ensure that the Bill is as strong and workable as it can be. We share the ambition to decarbonise aviation and ensure that everybody still can fly for pleasure or business, and that businesses can move goods around the world using air freight.

It is in that spirit that I tabled amendment 3, which aims to ensure that the producers that come forward for the various contracts consider the full breadth of the sustainable aviation fuel technologies available. On Tuesday, we heard oral evidence from manufacturers of wholly synthetic, waste-derived and feedstock-derived sustainable aviation fuels. It is important to look at the panoply of fuels in relation to the long-term environmental impact and the practicalities of producing them today.

As I said on Second Reading, my big fear, which led to my tabling the amendment, is that industries might be stood up only to be turned off again in 10 or 20 years, as the technology becomes redundant. For example, in the oral evidence session on Tuesday we almost had a debate about the possible pitfall of there not being a waste supply to create waste-derived sustainable aviation fuel. Many local authorities up and down the land, my own in Buckinghamshire included, are tied up in 10, 20 or even 30-year financial obligations to, for example, the financing of energy for waste incinerators, which in some parts of the country are connected to heat networks. It may therefore not be possible for councils to say simply, “No, we want to move our waste to a equally productive but different form.” Those contracts exist.

The point of the amendment is to ensure that we look through that very clear lens to see which of the technologies available for producing sustainable aviation fuel will have the longevity of supply and relative environmental impact in the long term. From the evidence we heard the other day, it is clear that some technologies are at a different point of development from others, but none is actually that far away.

For example, the evidence we heard from Zero Petroleum was that it is ready to scale a wholly synthetic production facility right now. Of course, that does not happen overnight—it takes some considerable time to build any facility—but the scalability is able to happen right now. The Government should reflect on that point and should not look just at the technologies that are available right here, right now. I would argue that, too often in this country, we look for alignment with the technology that is available today, when that which is only hours, days, weeks or months away may well be better and worth waiting for.

That is the point of the amendment: ensuring that we get this right for the long term, so that we have a supply of sustainable and, I hope, synthetic—entirely man-made from air and water—fuels available for this country, so that we have the liquid hydrocarbons there, available for purchase, using the price mechanism which sits at the heart of the Bill to get production going, so that our aviation sector can continue to flourish and be available for all that wish to use it.

[The Parliamentary Under-Secretary of State for Transport (Mike Kane)]

It is a pleasure to serve under your chairmanship, Mr Western. We often discuss our bicycles and their technology, but today we have to talk about the revenue certainty mechanism, which I am glad we are doing.

The RCM is part of the Government’s agenda to decarbonise aviation in the United Kingdom. I will address the amendment moved by the hon. Member for Mid Buckinghamshire, but first I put on the record my thanks to him and other Opposition parties for their general support for what we are trying to do in the Bill.

This Government back synthetic power-to-liquid SAF, which is why we have introduced a separate power-to-liquid sub-obligation, the SAF mandate. We have a separate power-to-liquid pot in the advanced fuel fund, which we are funding up to £63 million. Any RCM contracts awarded will be on the basis of the design phase of the project, including technological pathway and feedstock designation. I hope that answers the hon. Member’s worries about redundancy, because the process will evolve.

Making changes to feedstock requirements or fuel type after contracts are awarded would be extremely challenging for producers. Instead, during our contract allocation process, it is for the Government to decide on the right mix of SAF that will be supported under the revenue certainty mechanism. Given that, I ask the hon. Member to withdraw the amendment.

The clause allows the Secretary of State to direct the counterparty to enter into a revenue certainty contract with a SAF producer. The Secretary of State will decide who gets revenue certainty contracts through an allocation process. Making the leap from lab to commercial scale is difficult for SAF producers—we heard that in the evidence sessions on Tuesday. Commercial plants typically cost £600 million to £2 billion, so they need to attract a lot of investment, yet first-of-a-kind plants often struggle to get investment because there is no clear, predictable market price for SAF. The revenue certainty mechanism will address that.

Under the revenue certainty mechanism a SAF producer will enter into a private law contract with a Government-backed counterparty that sets a strike price for SAF. If the producer sells SAF for less than the strike price, the counterparty will pay the difference. If the producer sells it for more than the strike price, it will pay the counterparty. This follows the example of similar schemes in the renewables sector, which showed that a private law contract with a Government-backed counterparty is a rock-solid commitment that will drive investment into projects.

As we heard in our evidence sessions on Tuesday, British SAF producers are ready. They have the tech and the innovation; they just need the final piece of support from the Government to take off. That is why SAF producers, airlines, environmental groups and investors back these measures.

A Government-backed counterparty will enter into the contracts rather than the Secretary of State, because investors value the day-to-day independence of a Government-owned private company and its insulation from political change. The counterparty will also have expertise in contract administration. This follows the model of contracts for difference schemes in other renewables sectors, where the Low Carbon Contracts Company, a Government-owned body, enters into the contracts, rather than the Secretary of State for Energy Security and Net Zero.

When we consulted on how the revenue certainty mechanism should be administered, stakeholders strongly supported having a counterparty. The clause ensures that the Secretary of State can exercise control over how and on what terms the counterparty enters into the revenue certainty contracts. This is consistent with the approach for similar schemes. The Government will set eligibility and assessment criteria for the competition to allocate contracts, which will focus on ensuring value for money, maximising the benefits of UK SAF production, and supporting viable projects. Any restrictions on our ability to decide which projects to allocate contracts to would affect those objectives and jeopardise the whole scheme.

The allocation process and the terms of the contract will need to be consistent with the requirements of the Subsidy Control Act 2022, which makes sure there is oversight of the mechanism by the Competition and Markets Authority through the mandatory referral process. The oversight will ensure that the objectives of the revenue certainty mechanism address the subsidy control principles set out in that Act. This includes ensuring that the scheme addresses an identified market failure, that any funding provided is proportionate to achieve that objective, and that any distortions of competition, investment or trade are minimised effectively.

Clause 2 provides that producers must be notified of a direction made under clause 1 that affects them. This provides transparency and ensures that producers are aware of any directions towards them. It also gives the Secretary of State powers to revoke a direction and its effect, which protects the Government from entering into a contract where a producer has not met the criteria defined during the allocation process due to unexpected circumstances. We need to ensure that the taxpayer and the sector are protected, and this clause ensures that we can remove ourselves from the contract negotiation process if any issues arise.

Clause 3 enables the Secretary of State to make regulations requiring the counterparty to maintain a register and publish the revenue certainty contracts, subject to any necessary redactions. This will ensure transparency by keeping a register of successful applicants and information on specific agreements, and make it clear which SAF producers have received contracts and on what terms. We will also continue to publish information on the volume of SAF supplied under the SAF mandate. These publication requirements will balance transparency and the commercial and confidential nature of contracts and negotiations. We believe that any stronger requirements to publish information may make producers reluctant to enter into negotiations or affect our ability to ensure value for money.

[Greg Smith]

I accept many of the arguments that the Minister has put forward. I note he acknowledged that, off the back of the evidence sessions on Tuesday, all the current technologies are ready. That is a really important point for the Committee and the whole House to reflect upon as the Bill progresses. There has been something of a narrative from the usual vested interests in the country suggesting that one technology or another is not in the right state to be able to move forward, or to produce sustainable aviation fuel at the scale we need as a country. It is very welcome that the Minister acknowledged in his remarks that the technologies are already to scale, whether the fuel is HEFA-derived, waste-derived or entirely synthetic following the Fischer-Tropsch process at large.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Mike Kane]

Clause 4 enables the Secretary of State to designate a counterparty for the revenue certainty mechanism. It also sets out that the counterparty must be a company wholly owned by the Government. There are several reasons for doing that. First, a Government-owned counterparty will be highly creditworthy, meaning that producers will find it easier to get cheaper financing, so their costs will be lower and the SAF they produce cheaper.

Secondly, the counterparty will have day-to-day operational independence, giving investors confidence that the scheme will not be changed or dismantled. This approach follows similar schemes for renewable electricity generation and for hydrogen production and carbon capture. For those reasons, the Low Carbon Contracts Company, a Government-owned private company, acts as the counterparty. The LCCC has significant expertise in delivering similar contracts, and we have worked closely with it when developing the Bill.

The clause also states that the Government-owned counterparty must consent to being designated. In practice, it is very unlikely that the designated counterparty would fail to provide or withdraw its consent, but it is important that there is a theoretical exit option, as the Government cannot force a private entity to undertake actions that may be to its detriment.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Transfer schemes

Question proposed, That the clause stand part of the Bill.

[Mike Kane]

Clause 5 enables the Secretary of State to make the scheme transferring the property rights or liability of a company whose designation has been revoked to the new designated counterparty. The power might be needed if it is no longer appropriate for the designated counterparty to continue its current role. The clause will give the Secretary of State the power to act quickly to avoid any disruption to the revenue certainty mechanism, including to existing revenue certainty contracts or negotiations.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Levy on suppliers

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 7 to 9 stand part.

New clause 2—Review of Sustainable Aviation Fuel Levy Impact—

“(1) The Secretary of State must, within twelve months starting on the day on which Regulations are made under section 6 of this Act, publish and lay before Parliament a report which reviews the impact of those Regulations on the sustainable aviation fuel industry in the UK.

(2) The report under subsection (1) must include, but is not limited to—

(a) an assessment of the impact of the levy on—

(i) demand for sustainable aviation fuel (‘SAF’) in the United Kingdom, with particular regard to whether the levy has increased production of and demand for SAF in such a way as meets SAF Mandate obligations; and

(ii) demand and production of UK produced SAF compared to non-domestic production;

(b) an analysis of any beneficial impact of Regulations made under section 6 of this Act as opposed to projections of benefits of using alternative revenue streams to fund the revenue certainty mechanism, including but not limited to, aviation industry contributions to the UK Emissions Trading Scheme; and

(c) recommendations for any further actions or policy adjustments that may be required based on the findings of the review.

(3) When carrying out a review under this section the Secretary of State must consult relevant stakeholders, including but not limited to—

(a) aviation fuel suppliers,

(b) sustainable aviation fuel producers,

(c) airlines,

(d) consumer representatives, and

(e) environmental groups.

(4) In this section, ‘SAF Mandate’ means an obligation imposed on a provider of SAF under the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024.”

This new clause would require the Secretary of State to carry out a review of the effect of the introduction of the levy; sets out things the review must consider; and stakeholders the Secretary of State must consult during the review.

New clause 6—Review of International Alignment of Sustainable Aviation Fuel Support under this Act with schemes in the ECAA—

“(1) Within twelve months of the day on which this Act is passed, the Secretary of State must publish and lay before Parliament a report detailing the degree to which the levy imposed under section 6 and the revenue certainty mechanism established under this Act aligns with relevant policies and support schemes for sustainable aviation fuel in the European Common Aviation Area (ECAA).

(2) The report required under subsection (1) must include, but is not limited to—

(a) an assessment of the current level of alignment of the levy and the revenue certainty mechanism with ECAA policies and support schemes concerning sustainable aviation fuel; and

(b) recommendations for specific steps or policy adjustments that may be required to increase alignment between aviation in the United Kingdom and the ECAA, where such alignment would be beneficial for the United Kingdom's sustainable aviation fuel industry.”

This new clause requires the Secretary of State to publish a report within twelve months, assessing the alignment of the Sustainable Aviation Fuel levy and revenue certainty mechanism with the European Common Aviation Area.

[Mike Kane]

Clause 6 enables the Secretary of State to introduce, through regulations, a levy on aviation fuel suppliers to meet the costs of payments made by the counterparty to SAF producers and to cover the counterparty’s administrative costs. We plan to fund the revenue certainty mechanism through a levy on industry because it is right that the costs of decarbonising air travel are borne by the aviation sector rather than the taxpayer. We are levying aviation fuel suppliers because placing the levy higher up the supply chain spreads costs across the sector and reduces administrative burdens, and because aviation fuel suppliers will benefit from the greater volumes and lower prices for SAF that the revenue certainty mechanism will create.

Broadly, if the counterparty has incurred costs in a set period, we will cover those costs by levying aviation fuel suppliers based on their share of the fossil fuel market during that period. We are continuing to work closely with industry on the details of how the levy will operate. This approach is in line with the approach of other contracts-for-difference-style schemes, such as in the renewable electricity sector where there is a levy on electricity suppliers. The clause will also ensure that the counterparty’s obligations and activities in respect to the levy are appropriately regulated. I assure Members that the regulations under this clause will be subject to consultation and the affirmative parliamentary procedure, so there will be further opportunities for scrutiny in this area.

Clause 7 enables the levy regulations to require a person who is liable to pay the levy to provide financial collateral to the counterparty. This acts as a failsafe if there is cause for concern about non-payment. It ensures that if a levied party does not make a payment, the counterparty can take any owed money through the collateral. Without this power, there is a risk that non-payments to the counterparty lead to the Government needing to provide financial assistance to ensure that the counterparty can make payments under the revenue certainty mechanism contracts.

Clause 8 enables the levy regulations to include provisions to ensure that the levy is administered efficiently. It allows the Secretary of State to confer statutory functions on the counterparty, such as collecting levy payments and enforcing regulations. It is vital that the counterparty has the powers and functions it needs to operate efficiently and effectively.

Clause 9 will allow us to make regulations on who will calculate matters relating to the levy, and how—for example, how levy payments should be calculated and who is responsible for doing so. It ensures that calculations are made in an appropriate way by people who are qualified to do so. The regulations made under this clause will be subject to consultation and the affirmative procedure.

[Mr Paul Kohler (Wimbledon) (LD)]

I rise to speak on clause 6 and new clause 6. As we have heard, clause 6 would create a levy on fuel producers. While I do not necessarily believe that to be the wrong approach, as with much of the Bill, the devil will be in the detail that is not available for us to scrutinise here, for obvious reasons. As my hon. Friend the Member for Sutton and Cheam will make clear, there may be unintended consequences if the regulations are not designed correctly.

In my opinion, leaving much of the mechanism to a later date is not necessarily a bad thing—I agree with the flexibility that is being put in place. With a new, emerging technology and industry, ensuring that the Government’s hands are not tied at this early stage is a strength, not a weakness. That notwithstanding, some assurances should be given about how the mechanism will be designed, and how the potential flaws raised in the written evidence received by the Committee will be sidestepped. I point in particular to the written evidence from Valero.

Clause 6(3) implies that the levy will be based on criteria relating to the historical market share of fuel suppliers. That has been raised by those in the industry as potentially having unintended consequences. As I raised yesterday with the Minister, who I am not convinced gave me the clearest of answers, there have been worries that it may allow new market entrants not to pay any levy, as they will not have had a previous market share. Will he commit to ensuring that the levy regulations will account for such obvious loopholes?

It is clear that the challenge of decarbonisation, both in aviation and beyond, is great and will not be solved without collaboration with our closest international partners. I therefore tabled new clause 6, which would require the Government to review the differences between our approach to sustainable aviation fuel and that of our European partners in the European common aviation area. With 71% of international air passengers at UK airports travelling to or from Europe, it seems sensible that we should strive to be in broad alignment with Europe with regard to SAF.

I appreciate that there may be differences: in the case of the early part of our SAF mandate, we are going further and faster than the ECAA, but our European partners may accelerate beyond our thresholds later on. However, we believe it is important to remain mindful of what our partners across Europe are doing in an industry that has international competition at its very heart. The new clause would ensure that the Government are fully aware of differences in policy, and alive to any unintended consequences or differences that the Bill could result in for those in the aviation industry. We think that would be helpful.

I would welcome the Minister’s observations on both the mechanism that we have suggested and the broader issue of alignment with our European partners. This is, of course, a probing clause. Can the Minister assure the Committee that the Government will keep a watching brief on what the ECAA are doing with regard to SAF from here on?

--- Later in debate ---

[Luke Taylor (Sutton and Cheam) (LD)]

I rise very briefly to speak in favour of new clause 2, which I have tabled. Generally, the intent was to provide a check-in and reporting mechanism for the success of the Bill. We are all in favour of its objectives; I think that it is the care, and the attention to understanding how it is progressing, that is needed. I therefore ask the Minister what measures will be taken by the Government to achieve the aims of the new clause. Will that be through the jet zero taskforce, or will there be another mechanism for us to understand and monitor the progress and success of these measures? I would be interested to hear his response on how that might be done.

[Mike Kane]

I thank hon. Members for their contributions. Let me start by addressing the point made by the Opposition spokesperson, the hon. Member for Mid Buckinghamshire, about the overview and ambition of this legislation. We are the first legislature in the world to attempt to create this revenue certainty mechanism. The SAF mandate was a key commitment in our election manifesto last July, and the eyes of the world, as some of our witnesses said the other day, are on us doing this work, because people are following our lead. I therefore want to bake in the competitive advantage of being ahead of the game in this area, and being a world leader in this area too.

[Chris Vince (Harlow) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Western. The Minister talks about all eyes from across the world being on the Bill. I must declare an interest, because I have an international airport on the very edge of my constituency, which obviously serves Harlow and where people from Harlow are employed. It is the industry itself that is really looking at this debate, and it was very clear from Tuesday’s evidence that the industry, particularly airports such as Stansted and Heathrow, are in favour of the Bill and moving it forward as quickly as we can.

[Mike Kane]

My hon. Friend is a doughty campaigner for Stansted airport, which is near his constituency. Stansted is part of Manchester Airports Group Ltd, or MAG, which I know is extraordinarily keen—along with other airports, AirportsUK, airlines and nearly all the other people who gave evidence—that we pass this legislation.

Coming back to the Bill, new clause 2, which was tabled by the hon. Member for Sutton and Cheam, would make it a requirement to carry out a review of the impact of levy regulations on sustainable fuels and the industry in the UK 12 months after they are introduced. The levy regulations will not have a significant impact in the 12 months after they are made. Contract payments will form the majority of levied costs. However, contracts need to be negotiated and signed, plants built, and SAF produced and sold before costs are incurred, which is very unlikely to happen in the first 12 months. Also, review clauses are commonly included in secondary legislation and we do not need separate powers in the Bill to include them in the levy regulations. The levy regulations will be subject to the affirmative procedure, which will allow Members of both Houses to scrutinise them. Given that, I ask the hon. Member for Sutton and Cheam not to press the new clause when we come to it later.

I turn to new clause 6, which was tabled by the hon. Member for Wimbledon. I understand his concerns about the effectiveness of the SAF revenue certainty mechanism and how our policy aligns with the ECAA. I assure him that the UK’s overall SAF framework and requirements have many similarities to those of the EU, generally allowing the same certification schemes to be used, reducing administrative burden and minimising market access barriers. We actively monitor the SAF market including policies elsewhere in the world, just as the world is monitoring this Bill, to ensure that we provide the right level of support to the sector.

As I have said, I am proud that we will be the first country in the world to introduce a dedicated SAF revenue certainty mechanism. Alongside the implementation of the SAF mandate from 1 January 2025, we are leading the way in having clear and effective policies, grounded in legislation, that address the demand and supply of SAF. International Governments and stakeholders frequently point to the UK as an example to emulate, based on our forward-leaning and comprehensive SAF policy framework.

The UK plays a key role in international discourse on SAF and has cultivated strong bilateral relationships on SAF with countries worldwide. The UK promotes co-ordinated international action on aviation emissions through the International Civil Aviation Organisation. Given the active measures that we have in place, I ask the hon. Gentlemen not to press the new clause to a vote.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clauses 7 to 9 ordered to stand part of the Bill.

[The Chair]

I remind Members that the order of decisions follows the order in which amendments and new clauses appear on the amendment paper. Therefore, although we have also just debated new clauses 2 and 6, decisions on new clauses are taken after decisions on existing clauses, amendments to those clauses and schedules. There will be an opportunity for a decision on them later.

Clause 10

Payment of surpluses to levy payers

Question proposed, That the clause stand part of the Bill.

[The Chair]

I remind Members to bob if they wish to catch my eye and speak.

[Mike Kane]

Clause 10 enables the Secretary of State to make regulations to ensure that a designated counterparty pays any surplus it collects to the people who have paid the levy. There would be a surplus when a SAF producer sells SAF for above the strike price, and therefore makes payments to the counterparty. In that situation, it is right that the surplus is paid to those who pay the levy. It provides some potential upside to levied parties and will help to balance the flows of payments as the price of SAF fluctuates over time.

The clause also allows the Secretary of State to make regulations requiring someone who receives a surplus payment to pass it on to their customers. This is because we expect levied parties to pass on the costs of the levy to their customers, such as airlines and air freight operators, and it is therefore right that any surplus is also passed on.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Financial penalties

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 2.

The schedule.

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[Mike Kane]

Clause 11 creates new civil penalties that are necessary to secure the payment of the levy and compliance with regulations. Any penalty will be limited to a maximum of the lesser of £100,000 or 10% of the turnover being penalised. This penalty can be imposed for failing to pay the levy and failing to pass on the benefits of surplus payments to customers in accordance with the regulations under clause 10(1)(b). This penalty is consistent with similar penalties under the SAF mandate. The clause also allows these penalties to be adjusted in line with inflation.

The schedule sets out the procedure for notices, appeals and recovery of penalties. It ensures that anyone who has to pay the penalty will be told why, how much they have to pay, their right to appeal and the deadline for making any payment.

I will also speak to Government amendment 2, which inserts “or Northern Ireland” after “Wales” in the schedule. The amendment will ensure that an unpaid penalty is recoverable in Northern Ireland as if it were payable under an order of the county court, as is the case in England and Wales. The amendment corrects a drafting error and does not reflect a change in policy intention.

[Greg Smith]

I do not have a great deal to say on the provisions, other than that it is always regrettable when Northern Ireland is forgotten and has to be inserted via an amendment.

On the clause, I have no problem with financial penalties for failure to comply with the law, so I am not attacking the clause per se, but what will the appeal mechanism be? When it comes to law that involves financial penalties, a company will often have a legitimate case—force majeure, or whatever it might be—as to why it has been unable to comply with the letter of the law, and it is always important, as a matter of natural justice, for an appeal mechanism to be in place. Does the Minister intend to enable appeals where such financial penalties are given?

[Mike Kane]

I am grateful to the hon. Member. Because this will be a matter between the counterparty and the companies invited to bid, it will be subject to normal contract law, but I am happy to write to him on the matter of appeals more specifically.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Schedule

Financial penalties for failure to comply with levy regulations

Amendment made: 2, in the schedule, page 10, line 28, after “Wales” insert “or Northern Ireland”.—(Mike Kane.)

This amendment ensures that an unpaid penalty is recoverable in Northern Ireland as if it were payable under an order of the county court, as is the case in England and Wales.

Schedule, as amended, agreed to.

Clause 12

Power to direct designated counterparty

[Greg Smith]

I beg to move amendment 4, in clause 12, page 7, line 12, at end insert—

“(3) A direction given under subsection (1) must include a requirement for the designated counterparty to report on—

(a) the impact of any revenue certainty contract on the fluctuation of the average price to consumers of an airfare over the proceeding 12 month period;

(b) a projection of the expected impact of any revenue certainty contract on the fluctuation of the average price to consumers of an airfare over the following five year period.

(4) A report under paragraph (a) must be made within one year of the date of Royal Assent to this Act and annually thereafter.

(5) The Secretary of State must lay a report made under paragraph (a) before Parliament.”

Amendment 4 focuses on UK IP, which I alluded to earlier. Given that we have been told throughout the passage of the Bill, and the Opposition agree, that we need to underpin domestic sovereign fuel security, there should be a provision in the Bill that gives preference to UK IP and UK producers—not just those that might happen to make the fuel here, but those that are using UK-derived innovation and technology to do so. Of course, we exist in a global marketplace and are often reliant on imports, but it would be regrettable if the Bill enabled the standing-up of industries that are based entirely on foreign-owned technology. That is what the amendment seeks to correct.

[Mike Kane]

I concur with the hon. Member about domestic fuel production, particularly in the uncertain geopolitical world that we face today, but amendment 4—

[Greg Smith]

I spoke to amendment 5—I apologise.

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[Mr Kohler]

I have a brief question. When the Minister talked about the effect of £1.50 either way on airfares, was he talking about the effect of just the levy or the effect of the mandate as well? As we heard on Tuesday, the mandate will have far more of an effect on prices than the levy, given the premium that is likely to be repayable on SAF.

[Mike Kane]

Well done to the hon. Member for Mid Buckinghamshire; he pulled it out of the fire there with the amendments. He is right that we are putting SAF on the statute book. We should have put it on the statute book years ago, which is why it was in our manifesto and we are doing the right thing now. I will address the questions about £1.50 in a moment.

Amendment 4 tabled by the hon. Member would put a requirement on the counterparty to report on the effect of the introduction of the revenue certainty mechanism on air travel prices. Once operating, the revenue certainty mechanism is expected to make minimal changes to fares with an average ticket price, as we have said, decreasing or increasing by up to £1.50 on average per year. I remind him that that is less than a bus fare on Andy Burnham’s Bee Network in Greater Manchester where I live. I would offer to pay it, but it is quite cumulative over time and I do not have that type of resource—I am happy to fund the hon. Member for one year at £1.50 if he so wishes. That figure comes from a DFT analysis.

The costs of the scheme and the impact on ticket prices will be kept under continual review. The Government will also set the approach to the allocation of contracts, the number of contracts awarded and the scale of support they provide. Those controls will help to minimise any potential impacts on airfares. The costs of the scheme will also be reported in the DFT annual report and accounts in the usual way. I therefore ask the hon. Member to withdraw his amendment.

The hon. Member for Wimbledon asked whether the figure refers to the mandate or the revenue certainty mechanism. I assure him that it is just the revenue certainty mechanism.

[Greg Smith]

I am grateful to you for rescuing me, Mr Western, by grouping both amendments in the same debate. I made a mistake, so I put my hands up to that.

I am grateful for the Minister’s response. I will not press the matter to a vote but, as with the earlier amendment, when projections are made I think it is incumbent on the Government to find a way of giving comfort to all the travelling public and all those businesses that use air freight that the provisions of the Bill—I fully accept the comments of the hon. Member for Wimbledon on the wider effects of the mandate—will not produce a much higher cost to them when they go on their holidays or business trips or move goods around the world.

Ahead of Report, will the Minister and his team in the Department look at ways to kick the tyres on those presumptions—in particular given the evidence we heard on Tuesday—and check that they are robust as possible and have the confidence of industry? I would be grateful for that, and we may well return to it on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 13 stand part.

[Mike Kane]

The clause gives the Secretary of State the ability to control some of the activities of the designated counterparty through directions. The counterparty will maintain day-to-day independence and the power is limited to the functions conferred on the counterparty under or by virtue of the Bill. However, it is important that the Secretary of State can direct the counterparty on the exercise of its functions to ensure that the revenue certainty mechanism operates effectively and as intended. Any direction by the Secretary of State must also be published to ensure transparency.

Clause 13 requires the counterparty to provide information or advice to the Secretary of State about the revenue certainty mechanism. That ensures that the Secretary of State can get the information and advice needed to understand how the scheme is working in practice, and to ensure that the revenue certainty contracts and levy are working effectively.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clause 13 ordered to stand part of the Bill.

Clause 14

Financial assistance for designated counterparty

Question proposed, That the clause stand part of the Bill.

[Mike Kane]

The clause will enable the Secretary of State to provide financial assistance to the counterparty to ensure that it can always meet its liabilities under the revenue certainty contracts. The intention is that the counterparty will be funded through the levy payments from suppliers of aviation fuel in the UK. The power is a back-up to assure SAF producers and investors that the counterparty will always be able to meet its obligations.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

New Clause 1

Black bin waste

“(1) The Secretary of State must, within two months of the passing of this Act, publish and lay before Parliament, guidance on the opportunities available for local authorities in England to support the production of Sustainable Aviation Fuel through the use of black bin waste.

(2) Within six months of the publication of guidance under subsection (1) the Secretary of State may, by regulation, require local authorities in England to prioritise the creation of sustainable fuel in the disposal of their black bin waste unless the local authority deems it to be significantly financially disadvantageous to do so.

(3) Regulations under subsection (2) must define the meaning of ‘significantly financially disadvantageous’ for the purposes of this section.

(4) Regulations made under subsection (2) are subject to the affirmative resolution procedure.”—(Luke Taylor.)

Brought up, and read the First time.

[Luke Taylor]

I beg to move, That the clause be read a Second time.

I move the new clause simply to discuss some of the interesting issues that it raises. In the evidence session on Tuesday, we heard about the opportunities for the diversion of residual municipal waste into the production of second-generation SAF. We have heard from many in Committee this morning about the challenges to do with the incineration of waste and the impact of that on our communities, but a lot of us maintain, or agree, that that is the least worst option. The opportunity here is that there is a slightly less worse option for the disposal of that remaining municipal waste.

New clause 1 aims to give the Minister a bit of a nudge towards examining the opportunities and how the waste hierarchy could reflect how that waste is potentially reused. There are also broader questions not only about the residual waste but about plastics recycling, such as whether there is an opportunity to incorporate changes in the way that plastics recycling is prioritised, and whether it is a suitable feedstuff for SAF. New clause 1 is an opportunity to raise some of those questions, and for the Minister to give some assurances and responses on them.

[Mike Kane]

I think the hon. Member for Sutton and Cheam has a point, in that the public will be interested in how this is made. Advanced-waste SAF, including SAF made from non-recyclable municipal solid waste, is a key part of the SAF industry. We have backed and invested in this kind of SAF in our grant funding programme, the advanced fuels fund, as I mentioned earlier, and we are backing it again in this Bill, providing the revenue certainty that advanced waste-based SAF producers need to attract investment and scale up fast.

The hon. Member’s new clause, however, is not what the SAF producers need, and would place more burdens on our local authorities. There is nothing preventing local authorities from using their municipal solid waste for SAF production if they believe that it provides the best value for money and environmental outcomes. We heard in evidence the other day, when waste actually has a value to it, is it waste any more?

However, municipal waste often needs to be pre-treated and processed before it is used in SAF production. This often means that SAF producers look to buy their waste from processors, rather than from local authorities. We do not believe that access to municipal solid waste is currently a significant barrier for UK SAF production, and it is likely that discussions on the availability of municipal solid waste would happen once a project is close to taking a financial investment decision. I ask the hon. Member to withdraw his new clause.

[Luke Taylor]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Review of the supply of bioethanol for use in sustainable aviation fuel production

“(1) The Secretary of State must, within six months of the passing of this Act, publish and lay before Parliament a report reviewing measures to encourage the supply of materials for Sustainable Aviation Fuel.

(2) The report under subsection (1) must include—

(a) an assessment of the impact of the closure of bioethanol plants on the ability to encourage overall increases in sustainable aviation fuel production;

(b) options for mitigating any adverse impacts on the availability of supply of sustainable aviation fuel by the closure of bioethanol plants;

(c) recommendations for any necessary Government action to promote a stable supply of bioethanol for Sustainable Aviation Fuel.”—(Mr Kohler.)

This new clause would require the Secretary of State to lay before Parliament a report outlining measures to encourage the supply of materials for SAFs, including considering the impact of bioethanol plant closures on encouragement to increase supply.

Brought up, and read the First time.

[Greg Smith]

I absolutely understand and appreciate where the hon. Gentleman is coming from with this new clause. This topic came up in the oral evidence sessions and on Second Reading.

It is of great concern that the slightly lower tariffs deal done with the United States of America has clearly and materially threatened UK production of bioethanol, which of course has many uses. Many of us on the petrol station forecourt will have seen the curious E5 and E10 labels on the petrol pumps, which is about the ethanol blended with the regular fossil fuel. Our consumption of it as a country is particularly high.

As we are debating the potential future of bioethanol in sustainable aviation fuel production, it is incumbent upon the Government to reflect, within the scope of the Bill, on how much domestic supply there can be. So much of the Bill is underpinned by sovereign capability and fuel security—a point on which the Opposition and I think the Liberal Democrats are equally aligned on; it is so important—and so surely this new clause must also be important to the Government. I ask the Minister to reflect on that when he responds.

[Mike Kane]

I am extraordinarily proud that we have a Prime Minister and a Government who are rebuilding the UK’s reputation across the world once again, building trade deals with our closest partners across the planet, whether that be India, America or the recent agreement with the European Union. That is where Britain should be—leading and involved, not on the fringes as we have been for many years.

We are debating sustainable aviation fuel, but this is also about decarbonising the planes that will fly in our skies for generations to come. That US trade deal is zero tariff on aviation technology, which is a huge deal for this country, making it a world leader again in the future.

However, I am worried for the workers and families who have been affected by the trade deal. Ministers and officials, including the Business and Transport Secretaries, have met the companies consistently during this challenging time—those companies were struggling regardless of the time—to understand their concerns, discuss what action could be taken and to support them, because that is what good Governments do. The Department for Business and Trade is in discussions on requests for support from the UK bioethanol sector. As a responsible Government, there is a series of strict criteria and well-established due diligence processes that we must follow to consider such requests.

While I would like to see a thriving UK bioethanol sector, we would not expect a significant impact on the SAF mandate if there were to be a reduction in that sector’s production. That is because the UK bioethanol plants use crops that are not eligible for the SAF mandate. The SAF mandate, which is the framework for the supply of SAF in the UK, sets targets based on the availability of waste feedstocks rather than crop feedstocks. The SAF mandate is a global scheme and can use fuels from all around the world, providing an opportunity to draw upon a diverse pool of feedstocks.

However, we also want to encourage a UK industry. In January, the Chancellor announced £63 million of funding this year to help grow UK supply of SAF through the advanced fuels fund, which has been further extended in the recent Budget through to 2029-30. The SAF revenue certainty mechanism—the subject of the Bill—will also boost investment in UK SAF production.

Finally, under the SAF mandate, a formal review of the whole scheme has been built into the legislation, with the first review taking place in 2030. That will provide an opportunity to make an assessment on the availability of SAF supply. The above steps demonstrate how many of the recommendations set out in the hon. Member for Wimbledon’s new clause are already being undertaken by the Government. Given that, I ask him to withdraw it.

[Mr Kohler]

I hear what the Minister says, but we think that not enough is being done to protect the bioethanol industry in this country. We will therefore push the new clause to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Luke Taylor]

I rise briefly to press this question to the Minister: if the Government oppose the new clauses, how are they are going to incorporate their intent? I think they probably agree with the intent but are probably just resistant to their being outlined as they are. I ask the Minister to go into as much detail as he can on whether that will happen through the jet zero taskforce or something else.

[Mike Kane]

I always enjoy listening to the rasping oration of the hon. Member for Wimbledon.

[Greg Smith]

Rasping?

--- Later in debate ---

[Mike Kane]

A latter day Hilaire Belloc, in my humble opinion. However, on this occasion, the hon. Member for Wimbledon will no doubt know that I disagree with him.

Committee members will be aware that SAF is considered to be essential in achieving net zero for aviation medium and long-haul flights, which account for about 80% of CO₂ emissions from aviation. The Government update Parliament and the public regularly on the progress towards net zero targets across the economy, including by laying in Parliament an annual statement of emissions and annual publications of official greenhouse gas emissions statistics. They include granular detail on emissions from all economic sectors, including domestic and international aviation. Furthermore, the Climate Change Committee reports to Parliament each year on progress in reducing emissions, including for transport, and there is a statutory duty on the Government to respond to the points that it raises.

To address the points raised by the hon. Member for Sutton and Cheam, we continue to publish statistics on the volume of SAF supplied each year in the UK and under the SAF mandate. Together, these measures provide a clear picture of progress towards decarbonising aviation, so I would ask the hon. Member for Wimbledon to withdraw his new clause.

[Luke Taylor]

The Minister has spoken about the tonnage from SAF, but the real question is whether statistics and information will be available on the sources of each of those SAF types, so that we can examine how each of the various streams of SAF production are contributing and also understand the net carbon benefit. He has talked about the carbon production from the burning, but we need to see the detail of the SAF streams to understand the benefits and the progress towards decarbonisation in more detail. Is that something the Government might consider?

[Mike Kane]

I do not have the answer in front of me, but I commit to providing the hon. Gentleman with an answer in due course. I thought the point he was making was about whether we are being open and transparent across all sectors in the UK in showing how we are decarbonising the aviation sector. [Interruption.] I do now have the answer. Who knew? The miracle of mobile telephony—it will save writing my signature to him with the electronic pen. The SAF mandate and statistics include details of feedstocks and the origin of the SAF. I hope that answers his question, but if he wants more information—we are all keen on this—I would ask him to please keep in touch.

New clause 5, entitled “Increasing greenhouse gas saving potential of sustainable aviation fuel”, was tabled by the hon. Member for Wimbledon. The SAF mandate is the UK’s key policy to decarbonise jet fuel. It does that by securing demand for SAF, by obligating the supply of an increasing amount of SAF in the overall UK aviation fuel mix. The SAF mandate rewards SAF in proportion to the greenhouse gas savings its achieves. That will encourage SAF developers to improve continuously on their greenhouse gas savings. To ensure that the SAF mandate reflects the latest technological and commercial developments, there will be continuous monitoring of trends and the impacts of the mandate. Formal reviews will be conducted and published at least every five years, with a formal review in 2030. The formal reviews will already include certain elements of the new clause, namely the minimum greenhouse gas savings threshold and the minimum targets for supply of SAF. Following the review, there will be an opportunity to update the legislation as needed.

[Greg Smith]

The central question is whether that review, when it comes, looks at the greenhouse gas savings while the aircraft is in use, or gives a whole-system analysis, from the production and use of the fuel to the benefits of using the by-products, post combustion, to make more fuel. That is an important clarification that we need.

[Mike Kane]

My kingdom for a chemistry degree! I will let the hon. Gentleman know the answer to his question in due course.

To go back to the point, new clause 5 would duplicate the process already embedded in the SAF mandate legislation. I therefore ask the hon. Member for Wimbledon not to press the new clause.

[Mr Kohler]

New clause 4 was of course a probing amendment, and the Minister has satisfied most of us that enough will be done to report on our progress towards net zero. I was less convinced by the Minister’s answer to new clause 5. With or without a chemistry degree, the point is a simple one: SAF is green, but some SAF is greener than other SAF. I am not convinced that the Government are yet embracing that or doing enough to work out which SAF should be pushed because it is the most beneficial to the environment. We will press new clause 5 to a Division, but not new clause 4. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 5

Increasing greenhouse gas saving potential of sustainable aviation fuel

“(1) The Secretary of State must, within six months of the day on which this Act is passed, publish and lay before Parliament a report which sets out a strategy for increasing the greenhouse gas emission saving resulting from the promotion of sustainable aviation fuel production in the United Kingdom.

(2) The report required under subsection (1) must include, but not be limited to—

(a) proposals for incentivising the research and development of Sustainable Aviation Fuels that maximise greenhouse gas emission savings;

(b) an assessment of, and recommendations for increases to, the minimum required greenhouse gas emission reduction in order for a Sustainable Aviation Fuel to be issued a SAF certificate;

(c) an assessment of, and recommendations for increases to, minimum ratios for renewable content in blended sustainable aviation fuels, for the purpose of more quickly reducing greenhouse gas emissions.

(3) Twelve months after the publication of the report required under subsection (1) and within every twelve months thereafter, the Secretary of State must publish a further report which—

(a) sets out progress against the strategy, and

(b) makes any necessary adjustments to the strategy as a result of developments in the sustainable aviation fuel industry.

(4) In this section, “SAF certificate” has the meaning given in article 2 of the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024.”—(Mr Kohler.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.