Sustainable aviation fuel (SAF) has long been positioned as the aviation sector’s best chance to reduce carbon emissions in the near term. Unlike other decarbonization strategies that require entirely new aircraft or infrastructure, SAF can be blended with traditional jet fuel and used in existing engines. However, despite clear environmental benefits and ambitious EU targets, demand for SAF remains low.
Heikki Malinen, CEO of Finland’s Neste, a leading SAF producer, has raised concerns that voluntary commitments from airlines to buy more SAF have not materialized. This shortfall, he argues, threatens EU climate goals and leaves producers hesitant to invest further. His solution? Stronger regulations, increased SAF mandates, and tariffs on imported fossil-based fuels.
The Challenge: SAF is Available, but Airlines Are Not Buying
Neste has invested billions in SAF production, yet airlines are only purchasing SAF to meet mandatory quotas rather than voluntarily increasing usage. The cost gap between SAF and fossil jet fuel remains the primary barrier. At 2.5 times the price of conventional kerosene, airlines are unwilling to bear additional costs without a regulatory push.
This lack of demand has forced Neste to reconsider its expansion plans. While the company will complete its refinery project in Rotterdam, additional investments in SAF production are now on hold. Malinen warns that without intervention, SAF production will stagnate, jeopardizing the EU’s goal of making aviation more sustainable.
The EU’s Plan: ReFuelEU Aviation
The European Union has attempted to create a framework for SAF growth through the ReFuelEU Aviation regulation. The law mandates that:
- 2% of aviation fuel must be SAF by 2025.
- This increases to 6% by 2030 and 70% by 2050.
These incremental mandates are meant to provide certainty for SAF producers while allowing airlines to adjust gradually. However, industry experts argue that this approach is insufficient without additional incentives or penalties.
Could Tariffs on Fossil Fuels Be the Solution?
Malinen suggests one way to accelerate SAF adoption is by imposing tariffs on fossil-based jet fuel. If traditional kerosene becomes more expensive, SAF will become a more competitive option.
While this approach is controversial, it has precedents. The EU has already introduced carbon pricing mechanisms for aviation through the EU Emissions Trading System (ETS). Expanding this model to include direct tariffs on fossil fuel imports could further shift the economic balance in SAF’s favor.
The Future of SAF: Will Regulation Be Enough?
Beyond tariffs, stronger regulations could include:
- Higher blending mandates to push airlines toward greater SAF adoption.
- Financial support mechanisms to reduce costs for SAF producers.
- Tax incentives or subsidies for airlines that voluntarily exceed blending requirements.
These measures would not only ensure stable demand for SAF but also provide the certainty needed for companies like Neste to continue investing in production capacity.
Conclusion
The EU’s approach to sustainable aviation fuels has been ambitious, but voluntary airline commitments alone will not be enough to scale up SAF production. Stronger regulations, combined with economic incentives and possible fossil fuel tariffs, could create a more favorable environment for SAF adoption.
Neste’s call for stricter policies highlights the urgency of the issue. Without decisive action, Europe risks falling short of its aviation decarbonization targets, leaving climate goals and SAF producers in limbo.