Uncertainty Clouds EU SAF Mandates, Investors Warn
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Investors warn policy uncertainty for EU SAF mandates threatens production investment, risking the bloc's aviation decarbonization targets.
Key Takeaways
- •Mandates a 2% SAF blend in 2025, rising to 70% by 2050 under the ReFuelEU Aviation regulation.
- •Cites regulatory uncertainty and high costs as key barriers to final investment decisions for new SAF production facilities.
- •Highlights a major gap between mandated volumes and current SAF production, which is 3-10 times more costly than jet fuel.
- •Prompts calls from industry groups for more production incentives to complement mandates and de-risk investment.
Significant investor uncertainty surrounding the European Union's ambitious Sustainable Aviation Fuel (SAF) mandates is threatening to derail the capital-intensive projects needed to meet them, according to industry leaders. This hesitancy casts doubt on the viability of the ReFuelEU Aviation Regulation (ReFuelEU Aviation), a cornerstone of the bloc's aviation decarbonization policy, which legally requires a 2% minimum share of SAF at EU airports starting in 2025.
The core issue is a growing disconnect between aggressive regulatory targets and the slow pace of investment in new production facilities. The ReFuelEU Aviation framework, part of the EU's broader 'Fit for 55' climate package, mandates a steep climb in SAF usage, rising from 2% in 2025 to 6% in 2030, 20% in 2035, and ultimately 70% by 2050. While designed to force a rapid transition to cleaner aviation fuel, the policy's rigidity and the immense cost of SAF are creating significant headwinds for producers and airlines alike.
Production and Cost Realities
Current SAF production levels are far from what is needed to meet the upcoming mandates. According to the European Union Aviation Safety Agency (EASA), SAF production in 2024 accounted for just 0.53% of global jet fuel consumption. The International Air Transport Association (IATA) projects that while global SAF output may double to 1.9 million tonnes in 2025, this figure represents a downward revision of previous forecasts.
The economic challenge is equally stark. EASA data shows that SAF is currently 3 to 10 times more expensive than conventional jet fuel. IATA estimates this price premium will add $3.6 billion to the airline industry's fuel costs in 2025 alone. This financial burden is a major concern for airlines, which are expected to pass the costs on to passengers, potentially impacting the competitiveness of European carriers.
Investment Uncertainty and Industry Pushback
The gap between policy and production capacity has led to significant investment uncertainty. Patrick Pouyanné, CEO of energy giant TotalEnergies, has publicly stated he would "make a bet" that the EU will be forced to dilute its SAF regulations, citing the steep jump from the 2% to 6% mandate as particularly problematic for the market. He noted that this uncertainty has led his company to reduce planned investments in SAF production.
This sentiment is echoed in the development of synthetic Sustainable Aviation Fuel (e-SAF), a critical long-term solution produced using renewable electricity and captured carbon. While the ReFuelEU regulation includes a sub-mandate for e-SAFs starting at 1.2% in 2030, a report from Airlines for Europe (A4E) notes that while the EU hosts approximately 60% of the world's announced e-SAF projects, none of the roughly 30 projects have reached a Final Investment Decision (FID). In contrast, the European Commission maintains its position, stating, "We consider the current SAF targets to be realistic and feasible."
Industry groups are increasingly calling for more supportive policies, such as production incentives and tax credits, to complement the mandates. They argue that a 'carrots and stick' approach, similar to policies enacted in the United States, is necessary to de-risk the massive capital expenditures required to build a robust European SAF supply chain.
The Broader Regulatory Context
The ReFuelEU Aviation mandate operates within a complex web of EU climate policy. It is a key component of the European Green Deal, the bloc's overarching strategy for achieving climate neutrality by 2050. All fuels supplied under the mandate must meet strict sustainability criteria outlined in the EU's Renewable Energy Directive (RED).
Furthermore, the policy is designed to work in tandem with the EU Emissions Trading System (ETS). As free carbon allowances for aviation are phased out by 2026 under the ETS, the financial incentive to adopt lower-emission fuels like SAF is expected to increase. To prevent airlines from avoiding the mandate by refueling outside the bloc, the regulation also includes a provision against 'fuel tankering,' requiring carriers to uplift at least 90% of their annual fuel needs from EU airports.
Why This Matters
The current standoff between ambitious policy and market reality poses a critical threat to Europe's aviation decarbonization timeline. If investment in SAF production continues to lag, the EU may face a choice between enforcing unattainable mandates that could destabilize the airline industry or watering down its own climate legislation, undermining its credibility. This uncertainty not only delays the transition to cleaner fuels but also creates a precarious environment for airlines, fuel producers, and the financial institutions expected to fund the multi-billion-dollar energy transition.
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Written by Ujjwal Sukhwani
Aviation News Editor & Industry Analyst delivering clear coverage for a worldwide audience. Covers flight operations, safety regulations, and market trends with expert analysis.
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