An industry funded price guarantee for emerging green aviation fuel producers is being proposed in new government consultation.
The so-called revenue certainty mechanism (RCM) would ensure a steady income flow for producers, even if the price of sustainable aviation fuel (SAF) fluctuates, helping to keep down costs for airlines and holidaymakers, according to the Department for Transport.
“The proposals will help to reduce risk, give investors the confidence they need to invest in UK SAF plants and help the sector secure the supply it needs to bolster the SAF industry in the UK,” the DoT noted.
“The mechanism is also designed to limit costs and protect holidaymakers and working people against significant cost increases, with any rises expected to be in line with the usual variation of ticket prices.”
The revenue certainty comes alongside the introduction of a SAF mandate in January, which requires a growing percentage of aviation fuel to come from sustainable sources to support the industry by securing demand and driving production in the UK.
“The revenue certainty mechanism combined with the mandate will contribute to our net zero goals, enabling the aviation sector to continue to grow, including through airport expansion,” the DoT added.
“This is also expected to drive significant investment into the SAF sector, creating green jobs, fostering innovation and driving growth as part of our Plan for Change.”
The consultation will run until March 31, with the Sustainable Aviation Fuel (Revenue Support Mechanism) Bill being laid in Parliament in the spring.
This support will build on the £63 million recently announced by chancellor Rachel Reeves to boost production of alternative fuels in the UK.
The RCM will help deliver certainty in the green fuels market, supporting stable production of the SAF needed for aviation decarbonisation.
However, the DoT added: “This is a temporary measure, while SAF market prices are uncertain, to help scale early technologies while supporting a competitive market for SAF production.
“The government will monitor its impacts and can manage liabilities by capping the support to a pre-agreed volume of SAF, as well as agreeing the strike price within contracts.”
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.”
Airlines UK chief executive Tim Alderslade said that airlines support the RCM as a means of driving production in SAF and ensuring the industry can comply with the mandate.
“The goal must be the production of as much SAF 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,” he said.
Airports UK chief executive Karen Dee said: “SAF will play a key role in decarbonising aviation and a revenue certainty mechanism will not only ensure the UK can access enough supply but also that we can benefit from thousands of jobs and billions in investment.
“Airports will work with government as part of the aviation sector to develop the right solution that will give the market the confidence it needs to bring investment forward, enabling a new UK industry producing homegrown SAF to emerge.
“This, in turn, will allow the UK’s global air connectivity to expand sustainably within our net zero targets and play an increasing role in growing our economy, something the government is prioritising to drive up the prosperity of the whole country.”
Gaynor Hartnell, chief executive of the Renewable Transport Fuel Association, said that the RCM is essential if SAF is to be manufactured in the UK rather than imported.
“Home produced SAF leads to more jobs and improved fuel security, plus it’s a better way of dealing with household and commercial waste than burning it for electricity generation,” she said.
Reeves last month invited Heathrow to bring forward expansion plans for consideration by the summer. The government will then review the Airports National Policy Statement (ANPS) to ensure that any scheme is delivered in line with legal, environmental and climate obligations.