Sustainable Aviation Fuel Bill (Second sitting)

Paul Kohler Excerpts

Committee stage
Tuesday 15th July 2025 Public Bill Committees

[Luke Taylor]

Q Just for clarity—forgive my technical inexperience—what you are suggesting is production of the hydrocarbon at the source, at the base of a wind turbine, which is then collected in tanks rather than transmission over cables?

Doug McKiernan: Correct. Within that report, there were also comparisons to hydrogen—that was a sixfold increase over a two-foot oil pipeline—and to ethanol, methanol and ammonia. It looked at how you get energy from A to B in the cheapest operational expenditure and capital expenditure form. That is a fundamental. The cost of getting the renewable energy is what all the engineering will come back to. I believe the renewable energy will be in remote locations, a bit like oil today. Ultimately, we are going to put renewable energy in those places. Hopefully we do not cover all the fertile soil with solar panels and we can generate it elsewhere, and then use the power-to-liquids to get it from A to B.

[Mr Paul Kohler (Wimbledon) (LD)]

Q Using carbon dioxide to produce SAF is a wonderfully seductive and brilliant solution. You are addressing the regulatory obstacles, but what are the technical obstacles?

Doug McKiernan: To be perfectly transparent with everybody, with carbon dioxide at the moment I think the direct air capture, compared with where we are, is a bit of an Achilles heel. It is probably around two to four years behind in its scale-up, in terms of being able to keep pace with our scale-up, but actually there is plenty of biogenic carbon dioxide around for large-scale commercial plants here in the UK, which could be a stepping stone to the direct air capture. A lot of the work with direct air capture at the moment talks about the cost of it; you can sequestrate the carbon dioxide in the ground. That is not what we want to do as a petroleum company; we want to put that carbon dioxide into a liquid fuel, and then it is net zero. You have carbon dioxide and water coming out of the exhaust—whether that is a turbine or internal combustion engine. If you capture the carbon dioxide again with the direct air capture, you are then net zero.

When you integrate that direct air capture with our process, the cost of direct air capture is probably reduced by 80%, because we have an exothermic reaction going on, and the majority of the cost in direct air capture is in the de-absorption of carbon dioxide. Once you have absorbed it from the air, you have to heat up the catalyst again—or the material that has absorbed it—to get the carbon dioxide out again, and we have an exothermic reaction. We would not have those costs associated with our process. Integration of our direct air capture with our power-to-liquid solution in three to four years’ time would be quite a mature technology, and definitely scalable within the UK.

[The Chair]

Time is pressing; we have only four minutes left.

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

Q Partly because you are based in Oxfordshire, my mind goes to universities. I wondered—based on what was said by a previous contributor—where we are with this technology compared with other countries. I do not know whether you are working with universities, but I am sure you are working with young people to develop skills. Is there is a risk, if the Bill is not passed and we did not get the RCM, that some of the skills that you are developing will be lost to other countries?

Doug McKiernan: There is no question about it. The people who we have recruited have been researching, and have done not only doctorates but post-docs in this area. They have been working in it for nine or 10 years, hoping that there was a company out there that would recruit them and turn their R&D into a reality. These people are very passionate about their career and what they want to do. They are not going to work for the money; they come to make a difference. We have recruited a lot of those people. They will go wherever the company is that will make what they want to do happen.

[Mr Kohler]

Q Have you overcome the technical problems? Once you have the CO₂, is the technical process now scalable, or are there still many issues involved in it?

Doug McKiernan: Our technology at the moment has to be scalable. When I go to the Jet A-1 ASTM committee at the end of the year, it has to be scalable. That is part of getting of getting the certification. We have to have a scalable process as well as a quality of fuel—so yes, we are there.

[The Chair]

We have a minute left, but there are no further questions from Members. I thank the witness for his evidence.

Examination of Witness

Ruben van Grinsven gave evidence.

--- Later in debate ---

[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.

[The Chair]

I thank the witness for his evidence.

Examination of Witness

Matt Gorman evidence.

--- Later in debate ---

[Tom Collins]

Q You have mentioned that the UK is taking a strong leadership position on this stepping-stone technology with SAF. If the UK were to prepare itself now, early on, to be in a leadership position in sustainable aviation using hydrogen, what do you think that would look like?

Matt Gorman: I think it would look broadly like what the UK is doing. We think about it in three buckets: the plane, the airport infrastructure and the regulatory environment. It is worth remembering that UK aerospace is one of the jewels in the crown of our manufacturing sector. We have a very long history in aerospace, and the Aerospace Technology Institute funds some of that technology development alongside the private sector. That is important.

With airport infrastructure, we have always said, certainly for Heathrow, that we do not want to be a blocker. We do not want a hydrogen plane to be designed but not able to fill up at our airport. We keep an active watching brief on technology developments. We have taken a stand at Heathrow to trial hydrogen technology so that we can understand and build understanding. That is partly to influence the regulatory environment so that we are supporting the roll-out of hydrogen.

The latest views from manufacturers are that we will probably start small with hydrogen—small plane sizes and small ranges—and build confidence there before getting bigger. However, that could play a real role in domestic connectivity. I think we are doing the right things, but it is a both/and with SAF and hydrogen, not an either/or. I would also say that SAF is the solution that we know exists today and that we can deploy today, so we need to get it moving.

[Mr Kohler]

Q First, given the obvious international aspect of aviation, does it make sense for the UK mandate and the EU mandate to diverge, or would it make more sense if they were the same? Secondly, we heard from one witness that the levy would encourage tankering, with air operators filling up in other locations. Does that happen now, and is it an issue that you can see being made worse by the levy?

Matt Gorman: On the first question, I touched earlier on the fact that the EU and the UK have taken different trajectories, certainly into the longer term. I will be a little bit careful in what I say, because we are just finalising our thinking on what we submit to the Government, but increasing ambition with SAF will be important in the UK as we build confidence in production and scale-up of the technology. We can see a case in future to be more ambitious with the UK mandate. I think the Government said that they want to keep that actively under review, which we support.

On the question of tankering, it happens to a limited extent today. We do not fly the aircraft, but our understanding, from when we last looked at it several years ago, is that on short-haul aircraft in particular, where there is a very rapid turnaround and you do not necessarily want to take time to fill up the aircraft at the other end of the route, the CO₂ penalty was not huge in terms of the industry overall. I am not close enough to comment on whether the levy poses a particular challenge there, but when the Government get to the stage of consultation on the detailed design of the mechanism and are working with the industry, it will be important to design it in a way that avoids that wherever possible.

[Amanda Hack]

Q We talk an awful lot about the customers and what they might see on the price of their ticket, whether that is for freight or for going on holiday to Spain or wherever, but are your customers demanding that you be more environmentally friendly? As an airport, how far do you need your customers to support the transition to SAF?

Matt Gorman: It is a great question. All the evidence from our polling of customers, as well as what we read in regular polls and consumer surveys, shows that people are broadly concerned about climate change and environmental issues generally. In terms of aviation, they see that there is a role for customers, but they are clear that the industry needs to set out a plan and take action. They understand that airports do not necessarily fly planes, but that we clearly have a responsibility. They expect us to set out the plan, communicate it and take action at the airport where we can. In that sense, all the evidence shows that consumers support us taking action.

As the answer to an earlier question alluded to, the net zero transition will have some costs to consumers. The challenge is how we keep those costs as low as possible while reaching the goal of net zero. I think the balance of the mandate and the revenue certainty mechanism is well designed to achieve that. We think that domestic production in the long term so we are not reliant on imports—we have discussed the energy security angle—is a good way of helping to manage price certainty in future. Consumers are supportive, engaged and willing to pay a bit more to support the transition to net zero, but the industry and Government need to take action to manage it cost-effectively.

[Mr Kohler]

Q May I go back to my first question? I hear what you say about being more ambitious, as the EU is towards the end of the mandate or as it progresses, but do you see any problems with the mandates being out of kilter? Or is that not an issue?

Matt Gorman: If we start with the mandates out to 2030, we at Heathrow do not see a particular challenge in the UK’s adoption of a more ambitious mandate. We very actively supported the 10% mandate for the UK. As I say, it is really important that we start to get SAF flowing and to produce it in the UK, with the support of the Bill.

In the longer term, through the work we are doing and our submissions to Government, I expect us to say a bit more about the long-term ambition for the mandate in the UK, but we have not quite finalised that. I will be happy to update the Committee in writing later in the summer.

[The Chair]

There are no further questions from Members. Thank you for your evidence, Mr Gorman.

Examination of Witness

Josh Garton gave evidence.

--- Later in debate ---

[Amanda Hack]

Q In terms of SAF’s growth potential, I would be interested to hear more about how smaller organisations can get involved and how we can ensure that lots of businesses benefit from this huge step forward for our economy. A lot of SAF production will be in coastal areas, but my constituency, which has an airport, is inland. How can that growth potential reach all parts of the UK?

Mike Kane: Indeed, and Amanda, you are a great champion of East Midlands airport in your constituency—I have Manchester airport in mine, and I see from day to day the benefits that growth brings in terms of jobs, skills and inward investment. You make exactly the right point. Good strategy is turning what you have into what you need to get what you want.

We have industrial heartlands dotted right across our nation, including in our coastal communities. They are almost oven-ready to host the technology, inward development and jobs. Our analysis, which was a minimum compared with those of everybody else in the room, is that this would create 15,000 jobs in the next few years and £5 billion in GVA. Those jobs are in many of our run-down coastal communities and industrial heartlands, so this is a win-win on many levels—in terms of decarbonisation, carbon capture, production and the regeneration of parts of our nation that have been left behind for far too long.

[Mr Kohler]

Q I have been looking at some of the written evidence we have received in addition to the testimonies from the witnesses. I understand why clause 6 is widely drawn, but do you recognise that the levy being calculated in too complex a way would produce uncertainty, a lack of transparency, and externalities or transaction costs that we do not need?

Mike Kane: I think clause 6 gives us flexibility. That is what is key in letting the contract. We have made some principle statements here. This is industry-funded; we do not think the taxpayer should pay for the decarbonisation of aviation. We know that at the moment it is a small amount of what transport emits nationally, but because it is one of the harder-to-decarbonise areas, we know that the graph will go up over time. That is why we are funding the fuel suppliers, at the top of the chain here, so that the costs are spread as this goes lower down the chain and eventually to the passenger.

[Mr Kohler]

Q I do not know whether you have seen it, but Valero makes the point in its written submission that if the way that you calculate the levy is too complex, and if you base it on historical market data rather than current data, then with just a standard levy, that will produce problems, whereby new entrants will not be subject to the levy. We have to be sensible about how we calculate the levy. That is all I am suggesting. Do you recognise that as an issue?

Mike Kane: The first thing I would say in response to your question, Paul, is that this is a very technical, short Bill, but there are huge challenges ahead. I want to compliment my officials, who have worked extraordinarily hard to get to this point, and also industry who have worked with us to get to this point. As we go to the strike price and the levy, we will continue to work with industry to make sure we get that right.

Somebody described it earlier—I think it was Mark again—as being like a seesaw. It will go up, it will go down; but by letting the contracts or drawing them in, we can keep that balance in equilibrium, as far as humanly possible. That is the quality of this. While that is not the answer you might want to hear about the end piece, there will be scrutiny of the Secretary of State and of this, and of the legislation, and that will be covered by the Competition and Markets Authority. There will be many levels of scrutiny of how well Government are delivering this.

[The Chair]

I am sure Hansard will pick it up, but just for the record, Minister, you have mentioned Mark twice. I believe it is Professor Mark Maslin you are referencing, rather than the Chair, who of course remains neutral—and is not in a seesaw chair.

Mike Kane: You are always Mr Pritchard to me.