UK DfT outlines SAF revenue certainty mechanism funding
May 19, 2025
The UK Department for Transportation has published its SAF Bill, concluding that “as the aviation industry and its passengers, rather than the general taxpayer, will benefit the most from increased SAF production that the revenue certainty mechanism intends to support,” it retains its position that industry should fund the SAF revenue certainty mechanism strategy.
A new levy on aviation fuel suppliers “relative to their market share of fossil-based aviation turbine fuel” builds on the UK government’s existing SAF mandate, which entered into force at the beginning of this year. However, recognising that “the UK can face challenges sourcing investment into UK SAF production facilities, in part due to uncertainty over future revenues,” the new revenue certainty mechanism aims to “provide a launchpad for this sector to drive growth and investment”.
The mechanism builds on the DfT’s response to an initial consultation (which ran throughout March 2025), focusing on how a SAF revenue certainty mechanism might be funded. “The previous consultation response confirmed that the revenue certainty mechanism will use a guaranteed strike price (GSP), with the first tranche of contracts expected to be allocated to UK projects producing SAF using non-HEFA technologies and feedstocks,” outlined aviation minister Mike Kane. “A thriving SAF industry will drive economic growth, create good green jobs, and secure a domestic supply to meet the SAF mandate”.
The levy on aviation fuel suppliers (expected to impact some 20 companies) “may allow costs to be widely spread across the supply chain,” continued the DfT, adding that “this option is also less administratively burdensome than other options”. 58% of survey respondents agreed with this approach, with the DfT clarifying that “the levy will only be required if the price of SAF in the UK is low”. Without the revenue certainty mechanism, SAF production costs could be prohibitively expensive; stifling growth.
Notably, the DfT feel strongly against taxing alternative parts of industry (such as airlines, airports, passengers or ATC), believing that alongside administrational headaches, “there would likely also be challenges in differentiating airlines’ use of SAF from fossil kerosene and calculating market share based on other metrics could disincentivise airlines to increase their market share based on increased SAF usage”.
Additionally, the potential UK adoption of a similar scheme to Singapore (applying a levy on all air passengers) “does not align with the funding mechanism design principles of simplicity, affordability and fairness with market stability,” continued the DfT. Whereas Singaporean SAF procurement is controlled by the government, “the UK government is not currently set up to be a central SAF purchaser and supplier. Procuring and supplying fuels is currently effectively performed by industry and the market and there is substantial risk of government distorting the market by adopting this additional function,” the DfT added.
With legislation expected to be in place by the end of next year, the DfT will also work to ensure “that both the SAF mandate and revenue certainty mechanism interact positively to avoid unintended consequences or perverse incentives when designing the revenue certainty mechanism and its funding mechanism”. It noted that “collaboration with industry will be crucial in providing an effective revenue certainty mechanism as soon as possible”.
