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The UK Sustainable Aviation Fuel Act 2026: Enhancing revenue certainty for clean aviation investment 18 June 2026

Introduction

The UK introduced the SAF Mandate on 1 January 2025 to force fuel suppliers to supply specified, increasing quantities of SAF. Despite this, there has been marked reluctance from the private sector to fund SAF projects in the UK and elsewhere. This reluctance reflects concerns across the investor spectrum about the challenges in securing long-term offtake agreements at sufficiently high prices which can underpin the investment required to develop and operate SAF plants on a profitable basis. Despite the significant impact the blockade of the Strait of Hormuz has had on kerosene prices, the price of even HEFA SAF (developed from waste oils and fats) remains materially higher than kerosene, albeit the gap has narrowed and the war has increased focus on the security benefits of SAF.

The Sustainable Aviation Fuel Act 2026 (the “Act”), the core operative provisions of which came into force on 5 May 2026, is intended to address this reluctance to invest in SAF projects by introducing a revenue certainty mechanism (“RCM”) for domestically produced SAF. However, the Act only establishes the framework for RCM rather than providing much needed detail which would enable prospective project developers and their financial backers to proceed to FID.

The Act’s key provisions

RCM

The Act’s key provision is the introduction of revenue certainty contracts (“RCCs”), to be entered into between eligible SAF producers and a government-owned entity (the “designated counterparty”). RCCs will be awarded through competitive allocation rounds, during which prospective producers will bid for contracts by proposing the strike price at which they are willing to supply SAF, with contracts awarded to those projects representing the most efficient use of support.

RCCs are modelled on the Contracts for Difference (“CfD”) regime used in the UK power sector. Under this structure, an agreed ‘strike price’ is set for eligible SAF produced over a contract period of up to ten years (with the possibility of extension by a further five years), providing producers long-term revenue visibility and protection against market volatility. Where the market reference price specified in the RCC falls below the strike price, the designated counterparty pays the difference to the producer; where the market price exceeds the strike price, the producer pays the difference back. This two-way payment mechanism stabilises revenues by effectively guaranteeing the strike price, thereby reducing exposure to price fluctuations and improving the bankability of SAF projects. There is currently no liquid market index for SAF in the UK – a key difference between the SAF RCC support and the power CfD, whereby the power CfD uses baseload or intermittent electricity market indices. This is one of the key areas for the RCM, in Spring the Government consulted on different options for the RCM market reference price (including linking it to the price of Jet A-1 Fuel with a SAF premium).

Eligibility for RCCs is expected to be limited to projects that achieve a specified minimum reduction in lifecycle greenhouse gas emissions compared to conventional jet fuel, assessed on a recognised ‘well‑to‑wake’ basis (i.e. considering emissions across the full lifecycle of the fuel, from production through to its combustion in flight). Projects must use approved non-fossil feedstocks, including both established HEFA pathways and a broader range of non-HEFA technologies utilising more scalable inputs such as municipal solid waste, agricultural residues or synthetic fuels derived from captured carbon and renewable hydrogen. Projects must also demonstrate sufficient technical maturity and commercial viability. Further detail on the applicable sustainability criteria and feedstock requirements under the UK and comparable regimes is outlined in our article.

"Importantly, access to RCC support is also expected to be conditional on projects satisfying certain initial requirements, including the entry into sufficiently robust and bankable long-term offtake agreements between SAF producers and airlines or other end users."

Importantly, access to RCC support is also expected to be conditional on projects satisfying certain initial requirements, including the entry into sufficiently robust and bankable long-term offtake agreements between SAF producers and airlines or other end users. Some may query whether this in effect means that the only projects which will get help are the ones which least need the help.

Levy Funding

The RCC regime is industry-funded, relying on levy payments from fuel suppliers that supply aviation fuel in the UK and are subject to renewable transport fuel obligations under section 124(1) of the Energy Act 2004. In practice, this means that jet fuel suppliers (both conventional kerosene and SAF) in the UK aviation market will be required to contribute to the fund. Contributions are expected to be calculated by reference to each supplier’s share of fuel supplied or overall market activity, with any surplus funds potentially being redistributed among contributing suppliers. To support the operation of the regime, the levy regulations also include financial safeguards designed to ensure contributions are actually paid, including requirements for fuel suppliers to provide financial security (such as collateral) to the designated counterparty and the imposition of penalties for non-compliance. This is in essence very similar to the power CfD scheme and other power subsidy schemes. Fuel suppliers will increase the price of fuel to pass through such costs to the airlines who likewise will pass on such costs to travellers, which will no doubt prove unpopular with the general public. Elsewhere, namely with the RO scheme, the Government is switching the burden away from customer energy bills to a general tax. There is an important distinction in this respect, as high energy prices have a higher prejudicial impact on low-income households. There is also the contemplation of moving to an index-based reference price as soon as the market is more established.

Potential Issues and Legal Risks

Secondary legislation and implementation lag

Many of the Act’s most commercially significant features are yet to be fleshed out in secondary legislation, including the detailed operation of the revenue certainty contract regime and the levy funding mechanism. Further clarification is also expected in relation to matters such as eligibility criteria, pricing methodology, pricing mechanisms and the allocation of liabilities between market participants. For example, since there is no visibility on the likely level of the strike price and no visibility on the market reference price mechanism, equity investors will wonder whether the strike price will deliver an adequate return on investment. The Government will be very aware of what happens if the strike price is too low given the history of the fifth CfD round in the UK which attracted no offshore wind bidders due to the strike price being too low.

Until that framework is implemented, how the regime will operate in practice and whether it will provide a sufficiently stable basis for long-term project financing, is marked by ambiguity. This is particularly significant given the long development timelines associated with SAF projects, which may take three to five years from being funded to reach commercial operation. Delays in finalising key aspects of the regime may therefore slow investment decisions and the deployment of domestic SAF production capacity in the UK.

At the same time, the reliance on secondary legislation leaves scope for the regime to evolve as the market develops and practical implementation issues emerge.

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"Although the Act adopts a broadly technology-neutral framework, in practice the RCC regime is likely to favour certain SAF pathways over others through the allocation of contracts and the setting of strike and reference prices."

Limits to technology neutrality

Although the Act adopts a broadly technology-neutral framework, in practice the RCC regime is likely to favour certain SAF pathways over others through the allocation of contracts and the setting of strike and reference prices. Consistent with the UK SAF mandate’s progressive restrictions on the eligible volumes of HEFA-derived SAF, the current framework appears intended to support the transition towards more advanced SAF pathways, including waste-derived SAF and eSAF technologies. Indeed, Government guidance has indicated that the first tranche of RCCs will exclude HEFA based projects.

However, even within that broader policy direction, commercially less mature pathways, particularly eSAF projects may still face competitive disadvantages. eSAF projects are generally associated with higher costs and longer development timelines, with projects often taking six to eight years to reach full commercial operation, and eSAF likely to be three to four times more expensive to produce than HEFA or Fischer-Tropsch SAF. Industry stakeholders have therefore raised concerns that, without targeted support or ring-fencing, certain technologies might struggle to compete effectively within the regime despite their potential long-term decarbonisation benefits.

Market price uncertainty for non-HEFA SAF

More advanced SAF pathways, including waste-to-fuel and eSAF technologies, remain commercially immature relative to HEFA-derived SAF. Production costs, operating efficiencies and long-term scalability remain difficult to predict, particularly where projects rely on first-of-a-kind technologies.

In addition, these fuels are not yet traded in sufficiently developed markets to provide reliable long-term pricing benchmarks. Combined with the variability in production costs, this makes future market prices difficult to forecast and may create challenges for project developers and financiers seeking the level of revenue visibility and pricing certainty typically required to support large-scale project financing.

"The EU and UK frameworks share a common objective of accelerating SAF deployment, but they take different approaches to supporting investment."

UK Competitiveness

The EU and UK frameworks share a common objective of accelerating SAF deployment, but they take different approaches to supporting investment. The UK regime focusses on revenue certainty contracts for domestic SAF production and, like the EU framework, combines blending mandates with a package of investment support measures. Both regimes face similar challenges in addressing the high production costs and financing risks associated with advanced SAF pathways.

The extent to which the UK framework remains competitive in attracting SAF investment will depend largely on how the RCC regime is implemented in practice; whether it succeeds in providing investors and lenders with adequate long-term revenue certainty and whether it can overcome the current pricing gap between the cost of kerosene and SAF in a competitive global market.

CONCLUSION

The Act represents a significant step towards addressing some of the longstanding bankability and revenue certainty challenges associated with SAF projects. Not least, the regime reflects a broader recognition that blending mandates alone may be insufficient to support the scale of investment required to develop domestic SAF production capacity.

However, the RCC framework’s success will depend heavily on the detail and timing of secondary legislation and whether it ultimately provides investors and lenders with the level of long-term revenue certainty required to support capital-intensive SAF projects. It remains to be seen whether the regime will deliver the investment confidence necessary to accelerate SAF deployment at scale.

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