UK Proposes Support for Green Jet Fuel – Funded by Oil Companies

The UK government announced this week a proposal for new support for greener jet fuel, a key element of which is a price guarantee to be funded by fuel companies.

Companies such as BP and Shell would pay a fee for every liter of fossil-fuel-based jet fuel. If the price of SAF falls below a set amount, the funds from the fuel industry would be used to top up the difference. If above, SAF producers would pay back the difference. 

The goal is to encourage production of sustainable aviation fuel (SAF) by giving producers more certainty.

A representative from the fossil fuel industry said the industry does not yet have a position on the government’s proposal. Fuels Industry UK, which represents oil companies operating the UK such as Shell, BP and Exxon Mobil, said: “The new proposals are being considered by fuels sector companies which expect to respond to the consultation closing at the end of March.”

Earlier this year, the government enacted a new law that requires commercial airlines use SAF for at least 2% of its total fuel use. This will rise to 10% in 2030.

The mandate, however, sparked concerns in the aviation industry. IAG CEO Luis Gallego warned in the Financial Times in 2024 that airlines will be forced to raise prices to fund the cleaner and more expensive SAF.

But the government said this plan would help keep costs down and boost production.

“As this is still a new and emerging industry, today’s proposals will tackle the current uncertainty in the sector by introducing an industry funded price guarantee – known as the Revenue Certainty Mechanism (RCM) – to ensure a steady income flow for producers, even if the price of SAF fluctuates, helping to keep down costs for airlines and holidaymakers,” the Department for Transport said in a statement.

A SAF Price Guarantee Could Be Good For Airlines

Independent aviation analyst Matt Finch told Skift that the set fee would be “good for airlines,” as it would keep the price of SAF stable. 

“It could also make SAF producers more investible. There is too much risk in the system, if governments remove SAF mandates, that’s a stranded asset,” Finch said.

He added that mandates and pricing systems however will not solve supply issues. SAF producers need raw materials such as used cooking oil and plant oil. 

Last year, 95% of the UK’s SAF supply came from imported used cooking oil from China, a supply that could shrink as China brings in its own green fuel mandates later this year.

UK aviation minister, Mike Kane said:    

“We are committed to building the technology and fuel supply that will see greener flying become a reality, in a way that protects consumers. As part of our Plan for Change, these proposals will power up SAF production in the UK, support thousands of green jobs and bolster expansion plans.”  

Tim Alderslade, chief executive of the aviation body Airlines UK, whose members include British Airways and Virgin Atlantic, said the goal must be to “produce as much SAF as possible.”

He added that it must be “at the cheapest possible price for consumers, to help the industry get to net zero, support growth in UK aviation whilst minimising the impact on passengers.”

Skift’s in-depth reporting on climate issues is made possible through the financial support of Intrepid Travel. This backing allows Skift to bring you high-quality journalism on one of the most important topics facing our planet today. Intrepid is not involved in any decisions made by Skift’s editorial team.