Sustainable Aviation Fuel Bill

Earl Russell Excerpts

Committee stage
Wednesday 10th December 2025 Lords Chamber

[Baroness Jones of Moulsecoomb (GP)]

My Lords, my name is attached in support of Amendment 18, but I did not ask for it to be. I asked for it to be attached to a different amendment in the name of the noble Earl, Lord Russell, but I think this is a great amendment anyway and I am fully in support.

[Earl Russell (LD)]

My Lords, I welcome the noble Baroness’s support. I am sorry to hear that the noble Lord, Lord Grayling, cannot be here, and I wish him and his family well. I thank the noble Lord, Lord Harper, for speaking to his amendment.

My Amendment 18 in this group is on UK SAF production. I thank my noble friend Lady Pidgeon, the noble Lord, Lord Ravensdale, and the noble Baroness, Lady Jones, even if it was the wrong amendment, for adding their support to it. This amendment seeks to ensure that the Government’s support for sustainable aviation fuel translates into genuine homegrown industrial capacity, as we have heard. We support the Bill and its aims, and we want to see it move forward. Other countries are moving forward, such as the United States through its Inflation Reduction Act, and across Europe progress is being made. We need to act decisively to make sure that we do not become a passive importer, and we welcome that the Bill seeks to prevent that.

We believe that this reporting mechanism would help to strengthen the Bill to make sure that these issues are defined and reported on. There is an important distinction between manufacturing and simple operations such as blending, trading or storage. Too often, limited progress is repackaged as domestic production when it is not, so in this amendment we have sought to define what UK production means: that the main chemical or biological conversion processes take place here. We believe that clarity is essential, and having it is in the Government’s interests as well as ours. The amendment does not seek to tie the Secretary of State’s hands. It provides a clear framework for defining what counts as UK production. It also allows flexibility to set out more detailed rules by regulation on the extent of processing ownership and the evidence required for compliance, while maintaining robust accountability.

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[Lord Harper (Con)]

My Lords, I will speak briefly in support of my noble friend Lord Moylan’s Amendment 11. He set out the point of it in great detail so I will not repeat what he said but will just emphasise two of the points.

The first is about transparency. It is very important that we are transparent about what we are doing here. Having sustainable aviation fuel and making aviation more sustainable is an important policy goal. It is one that we supported in government and the present Government support, and the principle of it was also supported by the Liberal Democrats. We should just be open about the cost involved in doing it. There are two reasons to be transparent. First, that is how you generate confidence among the public as they can see that aviation is becoming more sustainable. There is a cost involved but that cost is sensible and one they are prepared to pay. Secondly, transparency enables there to be competition or downward pressure on the costs, which is easily missing if the costs are obscured. Having the costs transparent is very helpful and will also mean that different suppliers are not able to hide these costs in their invoicing.

The second point is that I am still unclear about how a mechanism based on market share would work. As well as the lack of clarity and the risk of that leading to overcharging, there is a risk of being backward-looking and looking at historic market share. I am also not clear whether the intention is that different suppliers would, in effect, have different costs being added to what they have to charge, which would seem to have an adverse competitive effect. We want people to bear the cost of the levy, but do not want different suppliers to be picking up a different proportion of that based on their historic market share and then having to charge a different price per litre to competitors. That seems to me to lock in a previous competitive structure and outcome. Part of what we are trying to do here is to encourage new producers and new people to come into the marketplace with new fuels and to enable that competitive process to take place. It is that competitive process that will make sure that we get SAF produced at the lowest possible cost, which is important for consumers. I would welcome some clarity from the Minister and would urge for that clear price per litre of fuel that can be placed on people’s invoices and for transparency.

I also want to speak briefly to Amendment 26 in the name of my noble friend Lord Grayling. It would place a sunrise clause or a commencement period on Section 6 so that it does not come into force until the first SAF producer is six months away from producing that sustainable aviation fuel in the UK. I think what my noble friend is driving at in this amendment is to make sure that the costs of producing SAF do not start being paid until a domestic plant is almost ready to go and payments to that producer ready to go—that, in effect, we are not starting to charge people in advance and saving up the money on the basis that at some point many years down the road a producer is going to start producing. There is merit in this amendment. Six months may not be the right period but it would be helpful to understand whether the Minister is broadly supportive of the principle and for him to set out the Government’s view on that. That may be an issue that the Government can return to on Report, as the Minister has indicated he will on the earlier group of amendments, or he may have a different way of dealing with the issue raised by my noble friend.

[Earl Russell (LD)]

My Lords, my Amendment 10 and my consequential Amendment 12 are in this group. This amendment to Clause 6 would replace subsection (3) with a requirement for a standardised levy on aviation fuel, uniform across suppliers, publicly displayed on invoices and expressed in pence per litre.

At the outset I want to make two quick points. First, on these Benches we support this Bill and the principle of the revenue certainty mechanism. Our concern is in relation not to the levy but the method of its deployment and use. As drafted, our worry and the worry of industry is that it is not clear and, in some cases, it creates burdens and frictions in this process for industry, which it would be useful to find a way to avoid. Secondly, my amendment comes from conversations I have had with Valero Energy, one of the UK’s major aviation fuel suppliers. I have no connection with the company. It came to me after the amendment from the noble Lord, Lord Moylan, was tabled. It believes that the proposed text that I have tabled here offers the most effective remedy to the Bill’s flaws.

Having said that, I support the noble Lord’s amendment, and my amendment is very similar. I do not want to repeat the arguments that have already been made here, but I will just reinforce a couple of them. Industry is concerned about this. It feels that it creates fiction, is an inefficient way of doing these things and could slow down investment in the market. It will discourage new entrants, and suppliers will have difficulty planning as they will not have certainty and will need to settle bills at later dates. The department says that this is administratively simple. It might be for government, but industry feels that the opposite is the case and that disincentive is enough that some companies are thinking about the levels of investment they want to make. That, I know, is an outcome that we do not want and the Government do not want either.

I am extremely grateful to the Minister and his officials for having a quick meeting with us. I am fully aware that consultations on this matter are ongoing and was greatly reassured by the conversations we had with Ministers. I know that officials are working extremely hard to find a way forward. I am hopeful that between now and Report, with this amendment, a government amendment or some fresh thinking, these issues can be looked at again. This is genuinely to help make sure that the Bill works not just for the Government but for industry and does so in a way that does not create unnecessary friction.

I turn to the other amendments in this group. We are generally supportive of Amendments 7 to 9 tabled by the noble Lord, Lord Grayling, and would be interested in the Minister’s response to them.

However, we have concerns with Amendments 24 and 26, which were spoken to by the noble Lord, Lord Harper. As he said, they would include a sunrise clause in the Bill. These are very large investments that we seek these companies to make in large and substantial plant in this country. I do not think that I would make that level of investment with such conditions attached. I would worry that delaying the payments will create uncertainty and fear for those who want to invest in the jobs and growth we need in this country. It could create a downward, damaging spiral for the investment we need.

However, there may be a need for the Government to have a bit of a further think about how the early days of the levy will operate, and how to talk about reporting back on those processes of early investment—we have already discussed reporting—to show that investment is happening and is on track. That could show that that investment is being monitored and going towards the end process that we all want, with the plants being set up and running, and producing the fuel.

Before I sit down, I point out that we support the Government’s own amendments that have been tabled. If the Minister could just give an update in relation to Scotland, we would welcome that.

[Lord Hendy of Richmond Hill (Lab)]

I thank all noble Lords for the brief debate on this group of amendments.

Amendments 7, 8, 9, 24 and 26 seek to address how funds from the levy are used. I first reassure noble Lords that moneys raised through the levy will be used only to support eligible SAF plants in the United Kingdom. The purpose of Clause 6 is to provide a power to place a levy on aviation fuel suppliers to meet the costs of payments made by the counterparty to SAF producers and to cover the counterparty’s administrative costs.

Clause 6 restricts the costs incurred by the counterparty in carrying out its functions under the Bill and, under this clause, the levy funds will be used only to meet the costs of the RCM scheme. The majority of the costs will be incurred only once SAF is being produced and sold by producers who have entered into RCM contracts. It is important that the counterparty be able to recover its costs, which include the costs of administering the contracts, the levy and the payment of surpluses. I hope noble Lords will agree that the counterparty should be self-sustainable.

Amendment 9 intends to ensure that there is a specific mandatory point at which the supplier becomes liable to pay the levy. However, the Government’s view is that it is unnecessary, because the Bill already provides that a person becomes liable to pay the levy at the same point when they become liable to an obligation under the SAF mandate. This aligns the levy to the point at which aviation fuel is eligible for certification under the SAF mandate. The Government think that this simplifies the process for fuel suppliers. I remind noble Lords that the regulations made under Clause 6(1) to set out how the levy will work will be subject to scrutiny under the affirmative procedure, which will give Parliament the opportunity to continue to consider the approach.

On Amendments 10, 11 and 12, as has been noted this evening, we are currently consulting on the detailed design of the levy, including the length of time—it certainly will not be years—which will help inform the drafting of levy regulations. The current levy design consultation will conclude on 8 January 2026, which is of course before any levy regulations are laid in Parliament. Final decisions on the levy design will be informed by this consultation and, to be clear, the Bill as drafted does not specify a particular mechanism and allows the Secretary of State to consider a range of options for calculating the levy paid by individual companies.

To reassure the Committee, the Government are alive to the potential impacts of different levy designs. We are working closely with stakeholders to develop a levy design and engage with them regularly to understand their concerns. We recognise industry’s desire for certainty and transparency. We are looking to design the levy in a way that ensures this, while also ensuring fairness and affordability for the consumer. We recognise that the levy must be dynamic and responsive to the changing market, while also ensuring that the counterparty has funds to make payments under the scheme.

The Government are clear that the levy will not be used to generate unnecessary funds and will raise only sufficient moneys to cover the counterparty’s costs under the revenue certainty scheme. While final decisions will be informed by the open consultation, we are exploring options that deliver this. Many of the proposals and options set out in that consultation could help provide greater certainty and transparency. As I have said, the secondary legislation will be laid by affirmative procedure, allowing both Houses to scrutinise its contents.

In addition, as a consequence of the short debate we have just had, I commit to noble Lords that I will brief them before then on what the levy is and how we currently believe it will work. That is in advance of the consultation closing and the noble Earl, Lord Russell, is right: it will have closed by Report. I think we will then be clearer on how it will work. I hope that I have provided sufficient reassurance on these points for noble Lords not to press their amendments.

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Moved by

[Earl Russell]

15: After Clause 14, insert the following new Clause—
“Report on UK sustainable aviation fuel production(1) The Secretary of State must, in respect of each reporting period, prepare and publish a report on sustainable aviation fuel (“SAF”) produced in the United Kingdom.(2) The report must include—(a) the total volume of SAF produced in the United Kingdom during the reporting period;(b) the types of SAF produced, including the feedstocks and production pathways used;(c) the volume produced for each type identified under paragraph (b);(d) an assessment of the conversion of UK production sites for SAF manufacture;(e) an estimate of the greenhouse gas savings resulting from SAF produced during the reporting period;(f) information reported by air travel providers in relation to their use of SAF;(g) any other information the Secretary of State considers relevant to understanding the United Kingdom’s SAF production capacity and trends.(3) The Secretary of State must lay the report before Parliament within six months of the end of each reporting period.(4) In this section “reporting period” means a period of three years beginning with 1 January 2026 and each subsequent three-year period.”Member’s explanatory statement
This amendment requires the Secretary of State to publish a report on the production of SAF in the UK and for related purposes.

[Earl Russell (LD)]

My Lords, this group of amendments is on reporting and impact. My Amendment 15 might seem like a straightforward reporting amendment with a duty on the Secretary of State, but I believe it goes to the heart of what we are trying to do here. It will help to support the Government’s own commitment to help us to decarbonise our aviation sector, and to build a credible and sustainable fuel sector here in the United Kingdom.

Knowledge is power, and it is important that we know the impact of the legislation that we pass. It is important, with the revenue certainty mechanism, that we know how it is working in practice, that we have these reports, and that they are available to Parliament and to the public. This will also help to ensure that sufficient volumes of SAF are being produced to meet the mandate and to ensure the transparency of the monitoring mechanisms. The Government’s “jet zero” strategy recognises that SAF could deliver 32% of the emissions reductions needed by 2050, yet we have no consistent public data on how much SAF is already being produced, the types that will be developed, and where the bottlenecks might lie in the future system.

This amendment does what it says on the tin. It seeks to help answer some of those questions and to help the monitoring process. It would give Parliament and the public the evidence that they need to hold this policy to account. It would also help the sector to have confidence that the transition is coming, and that in turn would provide greater confidence for those who wish to invest in this sector. Reporting is a common requirement—we see it in the renewable energy sector, in the transport sector, and in the electric vehicle update—yet it is missing in this Bill. I believe it is important to put it in, and I do not believe that it would impose undue bureaucracy on the Government or their officials. Indeed, it would help to deliver clarity to everybody. That is all I want to say on the amendment: it speaks for itself.

I turn to the other amendments in this group. I support my noble friend Lady Pidgeon’s Amendments 16 and 17; I will let her speak to them. Amendment 19A, tabled by the noble Baroness, Lady Jones, calls for a report no later than three years after the day on which the Act is passed. That report will assess the impact of the revenue support mechanism for sustainable aviation fuel on deforestation outside the United Kingdom, and land use change outside the United Kingdom arising from the cultivation, harvesting or production of feedstocks for sustainable aviation fuel.

I am pleased to support Amendment 19A. It is sensible and essential to the Bill. Without proper monitoring, there is a risk that the UK’s incentives for SAF could inadvertently drive deforestation or damaging land use changes overseas, undermining our climate and biodiversity goals. By requiring the Government to report on international land use impacts, this provision would introduce transparency and accountability into the policy framework. It would help to ensure that the public subsidies truly create sustainable fuels and would help to drive us away from using feedstocks. This is a useful amendment. We cannot have our own decarbonisation at the expense of others. Therefore, it is important that these matters are monitored. I beg to move.

[Baroness Pidgeon (LD)]

My Lords, as we have been debating, this is an emerging field in terms of technology and production in the UK. That is why the Bill is here: to introduce the revenue certainty mechanism for the sector to help support its development and growth. Alongside this, it is important that we have transparency throughout the implementation of the Bill and about the reality in the sector. We have heard much the same from my noble friend Lord Russell and other noble Lords in this debate.

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[Earl Russell (LD)]

My Lords, this has been an interesting and important debate. It is informative that the whole of this side of the House believes—as I think the Minister does as well— in the importance of transparency, reporting and data. I have listened carefully to the Minister’s response, and I recognise the work the Government are doing in various places to publish the relevant information.

Having said that, I have two issues. First, this information is not necessarily collected together in one place as a coherent whole, where it would be possible to review the impact the Bill is having and how it and the revenue certainty mechanism are operating in practice. Secondly, there are the broader issues relating to the impact of different types of fuel and their possible impact on other countries.

I welcome the offer that has been made; it is one for all of us to think a bit more about between now and Report. I would not want to duplicate information that was already gathered; on the other hand, I would not want information to exist in lots of disparate places and not be a coherent and usable whole, or for there to be any gaps in that information. This is one for all of us to go away and think about further, but I am grateful for the Minister’s response, and I beg leave to withdraw the amendment.

Amendment 15 withdrawn.

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It is a very important subject, because we have already complained that the Government are being given great latitude on the design of the levy, without very much, or indeed any, parliamentary scrutiny beyond the affirmative procedure that will arise later. Here, we are giving them, perhaps unwittingly, a huge range from which they might choose what to subsidise. This could be, and should be, narrowed. In the meantime, let us hear what the Minister has to say to the noble Lord, Lord Ravensdale, and myself about these two amendments.

[Earl Russell (LD)]

My Lords, I thank both noble Lords for their amendments; this is one of the really interesting groups. In response to what the noble Lord, Lord Moylan, said about knocking out fuels, I can probably sum up my speech by saying that I am not certain that knocking out fuels is the best thing to do in the transition; we might need to limit the time the revenue certainty mechanism applies to certain fuels. That might be where I am coming from.

Amendment 21 in the name of the noble Lord, Lord Ravensdale, seeks to

“include nuclear-derived power-to-liquid fuels in the scope of sustainable aviation fuels for which Revenue Certainty Contracts can be offered, and remove food crops, using the same definition of ‘relevant crops’ as the Renewable Transport Fuel Obligations Order for surface transport”.

While we recognise and support the ambition behind this amendment—promoting nuclear-derived and more sustainably-derived stuff, thus reducing carbon emissions —we would welcome the Government’s response to the idea of including nuclear-derived power-to-liquid fuels. Our questions relate more to the complete removal of biomass from the revenue certainty mechanism.

I suspect the Minister might say that this technology in relation to the nuclear side is not ready, and we would not disagree. But my question back to the Minister would be: how do the Government plan—if they do indeed plan—to bring these into the revenue certainty mechanism? How will that be done, what is the timescale for doing that, and is it something that can be done by secondary legislation?

We recognise that biomass has some use as a SAF, particularly in the early stages of SAF use. At the same time, we recognise the limitations of biomass as a sustainable fuel and its impact on any use at scale. This amendment raises some fundamental questions about the plans for the revenue certainty mechanism, its role in relation to different technologies for SAF production and how it is best used to advance the aim of zero-carbon flight.

I will be honest: we have some difficult challenges and questions to answer, and this group has certainly raised those. It can certainly be argued, as the noble Lord has done, that crop-based biofuels should not be given long-term support under the revenue certainty mechanism, as production pathways for these fuels are already commercialised at scale, as has been said. It can also be argued that crop-based biofuels offer relatively small CO₂ carbon savings compared with fossil fuels, that they compete with food and can create biodiversity loss in other countries. However, crop-based fuels offer some CO₂ savings when there are very few other options available today at scale.

However, with very few alternatives to reduce carbon emissions from aviation today, the revenue certainty mechanism could also be an important intermediate step in this continuous journey of decarbonisation. So, while we support nuclear derived power-to-liquid, and we share a desire to limit the use of the RCM to support bio crops, this amendment opens some complex policy decisions which need a lot of careful thought. What we are doing here is planning a journey. On that road, we will have different fuels that will jump in and out as we move along it. A lot of the questions that are being asked in this group are around how the Government plan to have those fuels come in and drop out, how that that be done and scrutinised and how the mechanisms will change. The same is true in relation to Amendment 22, on HEFA. The arguments I would make around that are the same.

This is a really important group of amendments, and there is a lot to think about in this space.

[Lord Hendy of Richmond Hill (Lab)]

My Lords, the noble Lord, Lord Moylan, asked some questions in relation to Amendment 19 in his closing remarks. I will write to him and provide a copy to all noble Lords about standing by the cost-benefit analysis on ticket prices and how we can control the cost to passengers by controlling costs through the allocation process. For good measure, I will also clarify the phrase “per year”.

On Amendment 21, I understand the desire of the noble Lord, Lord Ravensdale, to exclude crops from the revenue certainty mechanism. Several other noble Lords also spoke about their concerns on growing crops for purposes other than food at Second Reading. The noble Earl, Lord Russell, just now, was realistic about some of the practicalities of doing so. The sustainability criteria in the revenue certainty mechanism will align with the criteria in the SAF mandate.

As I mentioned before, there will be a call for evidence shortly, focusing on the potential benefits, risks and trade-offs of using crops in SAF production. The scope of the call for evidence will include different types of crops, including feed crops, dedicated energy crops and cover crops. While this call for evidence will neither propose any changes to the SAF mandate nor signal the future direction of the mandate, we would not want to expressly exclude SAF derived from relevant crops from the scope of the RCM if they might be included in the SAF mandate in the future.

We will, of course, continue to engage with industry on these issues. I echo the words of the noble Earl, Lord Russell, that this is developing and things will change over time. We need to understand it, and that call for evidence is part of that process.

The noble Lord, Lord Ravensdale, and the noble Earl, Lord Russell, referred to nuclear eligibility. We will match that in the SAF mandate. We are already supporting nuclear through the advanced fuels fund, which we believe to be right.

Turning to Amendment 22, I agree with the noble Lord, Lord Moylan, that HEFA SAF—I hate these acronyms—has already overcome many of the barriers to investment. For that reason, in our response to the first consultation on RCM, we announced that HEFA SAF projects will be excluded from the first round of contract allocation. I hope what I have said is sufficient to persuade the noble Lord to withdraw his amendment.