Sustainable Aviation Fuel Bill

Baroness Pidgeon Excerpts

2nd reading
Thursday 20th November 2025 Lords Chamber

[Baroness Pidgeon (LD)]

My Lords, I congratulate the right reverend Prelate the Bishop of Chester on his excellent maiden speech and his commitment to sustainability and rail, which is music to many of our ears in this House. I look forward to working with him in the months and years to come.

As we have heard today, the Sustainable Aviation Fuel Bill aims to encourage investment in sustainable aviation fuel in the UK by creating a mechanism to guarantee a certain level of revenue. The Bill provides for a guaranteed strike price, guaranteeing price for a producer selling SAF over a defined period. The GSP will be funded via a levy on the aviation industry, specifically through a variable levy on all aviation fuel suppliers over a set period. This legislation should help the industry meet its requirements under the SAF mandate, introduced in January this year, which specifies that at least 10% of all jet fuel used in flights taking off from the UK from 2030 must be made with sustainable fuel, rising to 22% by 2040. This is clearly an area where the UK is trying to lead the way in decarbonising the aviation sector.

However, it should be noted that aviation, with all its benefits in connecting people and businesses, was responsible for almost 30 million tonnes of CO₂ in 2022, equivalent to about 7% of the UK’s total emissions. As I understand it, even as emissions from other sectors decline, aviation’s share is projected to rise to 16% by 2035. This is not compatible with our net-zero targets. Sustainable aviation fuel is not a silver bullet, but it is a step forward to help us in the challenging environment that other noble Lords have described.

We on the Liberal Democrat Benches welcome these steps to decarbonise our aviation industry, including investment in sustainable aviation fuels. However, we see SAF as just the first step; we want it to offer a real low-carbon alternative. We believe that the Government should set out how they will go beyond securing investment in SAF and ensure that, longer term, this measure complements rather than detracts from investment in zero-carbon flight technology. We want to see greater innovation, research and development to make the UK the world leader in zero-carbon flight. SAF should be a springboard for that objective rather than a final destination, helping the UK transition to truly climate-friendly options such as battery-electric platforms and hydrogen-fuelled models as these technologies develop. There is a lack of clarity about what level of zero-carbon flight the Government are aiming for, if any, so perhaps the Minister can advise.

It is hard to square an objective of net-zero aviation by 2050 without measures alongside SAF to cut emissions and make climate-friendly flight a reality, and it is hard to look at the decarbonisation of fuel use in aviation while this Government seem intent on expanding airports such as Gatwick and Heathrow, to name just two, leading to many more flights.

There are a number of areas that we will be probing further in Committee. There are some concerns about the levy and the need to ensure that there are no loopholes, that progress is monitored and published and that we are aligned with our European and global neighbours or even ahead of them. Looking at international examples, the EU’s ReFuelEU aviation regulation requires a minimum blend of 2% SAF in 2025, rising to 70% by 2050; it focuses far more on both fuel suppliers and airlines; and, as we heard from the noble Lord, Lord Grayling, it is considering its own revenue support mechanism. Singapore and Thailand’s mandates started a 1% blend in 2026. Japan and South Korea are considering mandates starting some way off, in 2027 and 2030. In China, there is a SAF mandate at 2% that increases to 15% by 2030. Elsewhere, India and Brazil are considering SAF mandates. In the US, while there is no mandate, there is government support, as we have heard, to boost production, in the form of tax credits and other incentives. While there is no consensus on the route map for sustainable aviation fuel and how to support its growth, in developing this mechanism, what international examples have the Government considered to help shape their approach and the Bill before us today?

The levy on fuel producers is not necessarily the wrong approach, but key details are missing and could have unintended consequences if regulations are poorly designed. Leaving the mechanism to be determined later provides useful flexibility for a new and emerging industry. However, assurances are needed on how the mechanism will be designed. One issue that has been raised by industry and by other noble Lords today is that the levy is based on historical market share, which could cause problems. It is not clear if new market entrants might avoid paying the levy if they have no prior market share. Perhaps the Minister can clarify.

Another important issue I have picked up from talking to producers such as Neste is that, although industry in general supports the creation of a revenue certainty mechanism as a means to strengthen investor confidence and unlock the significant investments required for SAF production, there is concern that a level playing field would be guaranteed internationally. There is a strong feeling that revenues of the levy should not be used to support production of SAF that is subsequently exported. This should be about developing and supporting our own UK industry and needs. The levy should be focused on ensuring SAF supply at an affordable price within the UK. Since the UK and EU SAF mandates, I understand that we have seen an increase in the cost of SAF. This mechanism should help with the supply of SAF within the UK and help to ensure a stable price.

I have also been talking to operators that use SAF, for example DHL. In 2024, DHL used 73,000 tonnes of SAF in its own fleet, which is 3.5% of their total fuel share. This is in addition to investing in its fleet to decarbonise and in its ground-handling equipment to move to fully electric. We need to ensure that all operators are looking to decarbonise their whole operations and are not just relying on SAF to tick the green box, in effect.

A final issue that has come up in discussions and been raised by many noble Lords today, including my noble friend Lord Russell, is a concern that the levy will filter down and potentially cost passengers and airlines significantly. Can the Minister explain what assessment the Government have carried out and assure the House that passengers will not be significantly penalised? The combination of a long-term mandate and the proposed revenue support mechanism clearly offers a high degree of regulatory certainty, which is crucial for attracting the significant capital investment needed for SAF production in the UK. I hope the Minister can reassure us on the important points raised today and as we move forward to Committee.