Sustainable Aviation Fuel Bill (Second sitting)

Debate between Tom Collins and Luke Taylor

Committee stage
Tuesday 15th July 2025 Public Bill Committees

[Luke Taylor]

Q Mr Downie stole my question, so I will develop it a bit further. The RCM sets the levy on to the fuel producers who will likely pass it on to passengers. You operate internationally and see mechanisms being implemented elsewhere in the world. We mentioned the alternative of using the ETS to fund the RCM. How do you see the advantages of one system or the other, and where have you seen alternatives implemented elsewhere that have worked well?

Ruben van Grinsven: That is a good question. First and foremost, the UK is ahead of pretty much everybody else when it comes to developing those mechanisms. I know the EU is basically inspired by the RCM and trying to come up with a similar framework, which it will be announcing in September in the sustainable transport investment plan. I think the initial thoughts are indeed to fund that through ETS.

I do not have a strong preference between ETS-funded or levy-funded. The most important thing is that it is clear, transparent, consistent and predictable. Once we know the details and find out how the whole mechanism will work, we can perfectly live with the levy mechanism—as long as it works practically. So we do not have a strong preference between ETS or levy funding.

[Tom Collins (Worcester) (Lab)]

Q You have just mentioned that you are looking broadly at SAF production and how that is going to play out into the future. Compared with other northern European countries, the UK has excellent access to renewable energy, and we had a very early responding hydrogen industry. What do you see as the UK’s unique opportunities in SAF production?

Ruben van Grinsven: There are two elements. One is the fundamentals: affordable renewable energy, other feedstocks, then the cost of building plants, labour, and everything else. At the moment, in terms of the fundamentals of renewable electricity, the UK does not have a clear advantage because power prices are slightly more expensive, and most of the renewable power in the UK is intermittent. That is an important thing that needs to be overcome.

You have a slight disadvantage compared with, for instance, the Nordics, such as Sweden and Finland; they have a lot of hydro and stable baseload renewable power. On the fundamental side, especially for power, I think there are other places that are currently a bit more competitive. However, many of the other elements, such as feedstock supply, labour and knowledge, are quite similar.

The biggest differentiator is probably the legislative and regulatory landscape. You are creating a market through mandates, which I think is extremely powerful. If you also increase investment certainty through an RCM, that element is unique and, at this point in time, very helpful.

--- Later in debate ---

[Luke Taylor]

Q The SAF mandate is 10% by 2030. The EU target is much lower: 6%, I think. Our target goes up to 22% by 2040, but elsewhere the target increases more dramatically. As Heathrow is such a large user—17% is a massive component—will the mandate be achievable alongside the goals and targets set out in the Bill? You have said that other things need to be done and that this is part of a suite, but I guess the question is whether this is enough. Do you need to see more aggression and more ambition, with investment in firms through skills and through the measures we have drawn out from previous witnesses around the protection of IP? Do you see this as enough?

Matt Gorman: I think this is a very strong start from the UK. I was smiling when the Shell representative said that the EU had been inspired by the measures that the UK is taking. Joking aside, I have talked to fuel suppliers and investors to get a sense of how they are seeing the market. They say that this package, with the mandate and the revenue certainty mechanism, is a really strong policy package from the UK.

To answer your question, Heathrow has been invited by the Government to submit updated proposals for our expansion plans by the end of this month. Within them, we will be setting out our views on our future trajectory to net zero. We think that the mandate and the revenue certainty mechanism are vital. The Government have already said that they want to keep the mandate levels under review; you are right that although we are more ambitious to begin with and the EU is less ambitious, the EU takes over. Our view is that heading more in the direction of the EU’s ambition over time will be important for Heathrow and for aviation generally, but we will keep that under review.

It is really important to get started and make a strong start in this decade, to show that as well as producing SAF globally for use in the UK, as we are already doing, we can produce it in the UK.

[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.

--- Later in debate ---

[Tom Collins]

Q We heard some of the evidence about how effective the RCM could be in light of the difference that CfDs have made. You have already explained how to manage the levers and the number of contracts allocated to get the economics right, but can you explain how that sits alongside the SAF mandate to help us to steer UK innovation and maximise the opportunities for the UK to lead in this sector?

Mike Kane: When we came into Government in July, we had two key aviation policies. The first was airspace modernisation, and we set up the UK Airspace Design Service and passed it into legislation just the other week. In addition to improving resilience in our skies, we hope that that measure will stop planes circling and allow those that currently do not fly in a straight line to fly in a straight line, which reduces the cost of fuel—to go back to the shadow Minister’s point. Lahiru from easyJet said in his evidence that the best energy is the energy we do not use, and airspace modernisation helps us with that piece.

The second part of our manifesto commitment was SAF. After we were elected, we laid the mandate for 2% of all aviation fuel in the UK to be SAF. That came into force on 1 January. Airlines are sourcing SAF and getting supplies of it, but too much of it comes from abroad. While we have a good industry in the UK, companies need the confidence to scale it up.

I will make no party political points, but four or five years ago we were promised that by 2025 five plants would be up and running. If I were going there, I would not be starting from here, but we are getting on with doing this now. I think everyone on this Committee can be extraordinarily proud that this will be the moment that we stepped up and began to decarbonise the aviation industry.

[Luke Taylor]

Q I have one straightforward question, and one that is a little more spiky. First, we have heard a lot about the need to work across Government to ensure that we get the most effective outcome from the Bill. From all the evidence we have heard, it seems to be the right thing and structured well, but how do we ensure that municipal waste streams match up with incentives for heat networks, waste hierarchies and that sort of stuff? We hear a lot about mission-based Government—is that what will give the advantage to being able to co-ordinate across Departments? Will you give us an account of what you are doing so far to pull those Departments and different groups together to make sure it works?

Mike Kane: To get any Bill this far, as any Member will know, it has to have consent right around Government. The Government know exactly what we are doing in a joined-up way. To answer your mission question, we have said that we want to be a clean energy superpower, and this Bill helps us to do exactly that. It gives us sovereign capability here on UK shores to do that; not only is that the right thing to do, but, in the increasingly uncertain geopolitical situation we face, it is becoming almost essential.

The other mission that we have is growth. Today, I heard some very big figures on what that could mean. Our Department figures show at least £5 billion GVA added if we do this, and about 15,000 jobs—[Interruption.]