Sustainable Aviation Fuel Bill

Keir Mather Excerpts

Report stage
Wednesday 15th October 2025 Commons Chamber

[Greg Smith]

I am grateful to my right hon. Friend the Father of the House; I could not have put it better myself. It is essential that whatever measures, on any matter, are brought forward by any Government—be it the current Government or any future Government—real people’s lives and the cost base be reviewed regularly, so that we are not making people poorer, or stopping people from being able to do what they want, be it go on holiday, travel for business or move goods around.

With that, I come to amendment 8 and the cost impact on passengers. The amendment would require the designated counterparty to report on the impact of the revenue certainty mechanism on passenger air fares. One of the most contentious areas surrounding the Bill, and indeed the Government’s whole approach to net zero, is: what does it actually cost real people? The amendment seeks to clarify that, and it gives the Government the opportunity—in theory, they should cheerfully embrace this—to lock in a claim that they profess to believe, namely that the Bill will have an impact of plus or minus £1.50 on air fares. The previous Minister repeated that statistic time and again on Second Reading and in Committee. The new Minister has the challenge today of either sticking with his predecessor’s assertion, backing the amendment and locking in protections for consumers, or admitting that this may well be more costly to air travellers.

It is worth noting that during the evidence stage of Bill Committee, none of the witnesses was willing to affirm the Government’s figure. In fact, some noted that the estimated price appeared low. For example, Jonathon Counsell from International Airlines Group stated:

“We think there are potentially some elements that have not been included in that calculation, but £1.50 per passenger feels quite low when you think the costs of the SAF itself will be nearer to £10.”––[Official Report, Sustainable Aviation Fuel Public Bill Committee, 15 July 2025; c. 17, Q12.]

Consumers need peace of mind that the Bill will not cost them dear, and will not act as a financial barrier to the family holiday or any other trip, so failure to back the amendment can only mean uncertainty.

I turn to amendment 11, which is focused on transparency. The amendment would require the Secretary of State to set a standardised levy rate, payable by all suppliers of aviation fuel, that must be publicised by suppliers of aviation fuel on invoices to their customers. Valero, for example—one of the world’s largest renewable fuels producers—has contacted the Opposition arguing for the amendment, saying that it would offer a workable solution; it would support the development of new SAF production without significantly impacting the industry as a whole. The amendment would apply the levy equally to all jet fuel suppliers, providing a fair and transparent mechanism for supporting the broader SAF industry.

Just this week, I have been contacted by Virgin Atlantic, which is arguing that transparency safeguards must be in place to keep costs low for consumers. As organisations including the International Air Transport Association have highlighted, since the mandate came into effect in January 2025, fuel suppliers have been adding compliance risk premiums to the cost of mandated SAF, contributing to the price of SAF and doubling it for some carriers. That is to cover the eventuality that they do not meet the 2% mandate target and must pay the buy-out price for any missed volume. Virgin Atlantic has argued that to prevent SAF prices increasing further, the revenue certainty mechanism must have sufficient safeguards in place to ensure transparency over cost pass-through. There must also be a transparent process for refunds in the event of over-collections, and all revenues generated under the RCM should be ringfenced, rather than going into the general taxation pot.

Amendment 9 looks at British technology and intellectual property. It would require the designated counterparty to prioritise UK-based technology when entering contracts. As I said from the Dispatch Box on Second Reading, there is a historical reality that we need to confront, and the amendment would stop history repeating itself. The historical error that I refer to is this: a great many projects supported by grants from the advanced fuels fund use foreign-owned technology. It cannot be right that the British state, while arguing for domestic fuel security, funds overseas technology when we have incredible innovators and manufacturers right here.

Domestic fuel security must mean domestic fuel IP, manufacture and supply. It is important both to develop a UK market for SAF, eSAF and local production, as is provided for by the Bill and the mandate, and to support and encourage the use of home-grown technology for the manufacture of those products. That not only retains revenue in the United Kingdom but leverages a huge amount of revenue for future exports through technology licensing. The amendment tackles that head-on, and a failure to back it would be a failure to back United Kingdom innovators.

Lastly, amendment 10 is on technological choices. It states:

“The terms under subsection (4)(c) must include a requirement for the producer to consider the longevity of supply and relative environmental impact when prioritising between organic and synthetic derived sustainable aviation fuel solutions.”

I feel incredibly strongly about this amendment. It is on a matter that I have championed in this House for many years—in the last Parliament, during my time on the Transport Committee and, since July, from this Dispatch Box. The amendment is in the name of the shadow Secretary of State, my right hon. Friend the Member for Basildon and Billericay (Mr Holden), and it is relevant to new clause 7 and amendment 12 in the name of the hon. Member for Dewsbury and Batley, both of which I have a great deal of sympathy for.

Governments of all political persuasions have professed to be technologically neutral. They seldom are. There is a natural tendency to pick winners and losers. We need to look through that lens, and ask ourselves what the Bill is promoting and using the levers of primary legislation to enable. The disappointing answer to that is the potential to bring alive SAF plants using technologies that have already been superseded—plants that would therefore be temporary at best. Stepping up something with no longevity, and with an estimated build cost of between £600 million and £2 billion, would be no small mistake.

Power-to-liquid solutions, otherwise known as eSAF or synthetic fuel—liquid hydrocarbons literally made out of air and water—are surely the better and sustainable future for aviation fuel. We had debates on Second Reading and in Committee about other solutions. I cannot imagine that anyone is ready to defend growing food to burn it, but equally, waste-derived fuels simply are not sustainable in the long term. Solid waste is not readily available; the primary source is local authorities, the majority of which are on contracts with energy-from-waste facilities and incinerators that have decades to run. Likewise, I am not sure there is enough chip oil in the country to meet our aviation fuel needs.

That leaves power-to-liquid solutions and eSAF. Many say that it is not ready; some say it is too expensive; but those of us on the Public Bill Committee heard loud and clear from Zero Petroleum that it is ready to scale right now. It just needs the green light from the regulators, and with scale will come affordability. Amendment 10 is in many ways a light-touch amendment to bring this debate to the fore. It does not close down other technological routes, but forces the Government to acknowledge the risk, both to the environment and in terms of cost, when choosing contracts under the RCM.

As other speakers have said, the Bill can still be improved. I urge the Minister to accept the amendments, which would improve the Bill, and to ensure a strong and affordable future for sustainable aviation fuel in our great United Kingdom.

[The Parliamentary Under-Secretary of State for Transport (Keir Mather)]

Before I turn to the amendments before us, I would like to thank the many hon. Members who have made considered and helpful contributions. This legislation has been long in the making, and few have been more central in bringing it to fruition than my predecessor, my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane), who I would like to thank personally for his efforts throughout the Second Reading and Committee stages.

--- Later in debate ---

[Iqbal Mohamed]

The Minister mentioned a reduction of 6.3 megatonnes, but what is that as a proportion of the current emissions?

[Keir Mather]

No piece of legislation can deal with all the emissions that we are facing through challenges in the aviation sector. That is why we have this comprehensive package of measures to make decarbonising aviation while allowing passengers to fly at an affordable rate a reality.

The hon. Member for Alloa and Grangemouth (Brian Leishman) spoke with his usual fervent passion in support of his constituents. The National Wealth Fund stands ready to encourage investors to join us in finding a long-term industrial future for Grangemouth, standing ready to invest £200 million once an investable proposition has been identified.

The hon. Member for Richmond Park (Sarah Olney) raised the unfortunate closure of Vivergo. The Government have been working with the plant to understand the financial challenges that it has faced over the last decade, but I would like to reassure her that we do not anticipate supply issues in bioethanol provision. I also thank my hon. Friend the Member for Worcester for his decided and confident support for the measures in the Bill.

The hon. Member for Dumfries and Galloway (John Cooper) said that the market was too nascent, but I encourage him to look at the detail of the Bill. He will see that that is exactly the problem we are seeking to solve through this legislation, by allowing SAF producers to scale at pace and pursue those innovative technologies. He also spoke about Britain as an aviation leader. The RCM is a first-of-its-kind global initiative to allow SAF producers to produce the fuels we so desperately need. He also encouraged me to sort out decarbonisation challenges in maritime. I draw his attention to the fact that the UK Government announced £448 million of funding to decarbonise the maritime sector only a fortnight ago.

My hon. Friend the Member for Derby South (Baggy Shanker) has Jaguar Land Rover within his constituency and is a passionate advocate for both the automotive and aviation sectors there. He spoke about the urgent need to encourage people to fly—to enable them to access the rest of the world, to see their families and to pursue business opportunities. That is something that we are passionate about championing through the Bill.

The hon. Member for Sutton and Cheam (Luke Taylor) was pleased to see that the Bill was supported across the House. I can only hope that he is correct in his prediction. We shall see. I note that there are no representatives from the Green party here today to focus on these important measures to decarbonise aviation. Hon. Members from across the House can take from that what they will. The hon. Gentleman was right to outline the broader work that is required to decarbonise aviation, including airspace modernisation, but also to talk up our fantastic UK aviation sector and the hard work that it is undertaking to pursue decarbonisation.

My hon. Friend the Member for North Somerset (Sadik Al-Hassan) pointed to the very important fact that we are endowed with key infrastructure, such as pipelines, pioneered by firms like Exolum, the research facilities in his constituency to which he pointed and the pioneering work of Bristol airport. We need to develop a market to facilitate that infrastructure further. The 70% cut in emissions through SAF is an exciting proposition indeed.

There are a number of Government amendments that I would like hon. Members to consider. Government amendment 6 allows for levy regulations to require the Secretary of State to assist the designated counterparty by collecting information and sharing it with the designated counterparty. It will also allow for the regulations to be used to impose requirements on a person to provide information to the Secretary of State. It is a technical amendment that will ensure that the information required to calculate individual levy contributions is provided at sufficient frequency, while not creating additional administrative burdens for industry.

Government amendment 1 allows the Secretary of State to direct a Government-owned company to provide assistance for the purpose of identifying to whom revenue certainty contracts should be allocated. The allocation process for RCM contracts will be fair and transparent to give confidence to any applicants. In other renewable schemes, contract allocation is often carried out through an auction process. The allocation process for contracts for difference for renewable electricity is carried out through the National Energy System Operator, or NESO, which is an operationally independent, publicly owned body.

That type of approach to allocation may also be suitable for RCM contracts, so the amendment will allow the Secretary of State to direct a body like NESO to support in the allocation process. The final decision on allocation, however, remains with the Secretary of State. Without the amendment, the same allocation process could be pursued, but that would need to be done on a contractual basis through a procurement process, which would add unnecessary cost and complexity to the process. The amendment avoids those unnecessary impacts. I therefore commend it and all other Government amendments to the House.

I would ask that new clauses 1 to 3, which were tabled by the Liberal Democrats, be withdrawn. They were introduced in identical form in Committee, and my remarks will closely reflect the points my predecessor made then. The amendments seek a review of the impact of the revenue certainty mechanism within the next 12 months. I am afraid that that is not reasonable, as the revenue certainty mechanism triggers only once SAF is being produced, and even at pace, that is some years off. It will take time to build SAF plants, initially starting with a contract allocation round with SAF producers. Therefore, we will not see sufficient developments in the next 12 months to warrant a review of the impact of the revenue certainty mechanism. I agree, however, that it is important to have parliamentary scrutiny to measure the impact of the Act and to propose actions if necessary. The SAF mandate already includes a review clause to assess the impact of the statutory instrument, with the first review scheduled within five years. That is in line with comparable schemes.

With regard to new clause 1, I can reassure the House that work is being carried out at pace across Government on the future of our refineries. Commissioning a separate report, as the new clause proposes, risks a delay to future decisions and any subsequent benefits that may be realised. Overall, we expect low-carbon fuel production to support up to 15,000 jobs across the country and to make a contribution to the economy of up to £5 billion by 2050.

[Jim Shannon (Strangford) (DUP)]

I commend the Minister, and wish him well in his new role and in all that he does. The legislation extends to Scotland, Wales and Northern Ireland, so what discussions have been taking place with the Northern Ireland Assembly to ensure that we can see its benefits—to both employment and the wider economy—in Northern Ireland?

[Keir Mather]

The hon. Member raises a very important point. We need to ensure that the benefits of the Act are felt across the length and breadth of our United Kingdom, and that includes engaging with our colleagues in the Northern Ireland Assembly.

I turn to new clause 2. We do not anticipate a substantial impact on SAF production in the event of a decline in UK bioethanol production. The bioethanol market is a global one, and we do not currently foresee any supply issues. Furthermore, the recommendations in new clause 2 are already under way and duplicate measures can already be found in the SAF mandate. In July, a total of £63 million was awarded to 17 projects via the advanced fuels fund. That includes projects that use bioethanol, municipal solid waste and green hydrogen as feedstocks, among other sources. The Chancellor also announced in the spending review 2025 that we will continue to support SAF production throughout the spending review period. The SAF mandate also includes a formal review mechanism embedded in its legislation, with the first review scheduled to take place within five years.

New clause 3 would also duplicate measures that already exist in the SAF mandate. The mandate awards more certificates per litre to SAF with higher greenhouse gas savings, which will encourage SAF developers to continuously improve on their greenhouse gas savings. This will be monitored through the formal review mechanism, with the possibility to update legislation as required.

I hope that this reassures the hon. Member for Didcot and Wantage that, in many respects, the concerns he outlines are allayed by existing measures in the Bill. I therefore urge him not to push his new clauses.

New clause 6, tabled by the right hon. Member for Basildon and Billericay (Mr Holden), would require the Secretary of State to lay before Parliament a report on the economic impact of the legislation within a year of it being passed. Such a report would not show the full economic impact of these measures. Contracts will need to be negotiated, signed, plants built and SAF produced and sold before economic impacts are released. Transparency on reporting in relation to the Act’s economic impact can be achieved through regular updates to the House. Therefore, I do not see the new clause as being effectual, if he wishes to evaluate the economic impact of the RCM. I therefore ask him not to move his new clause.

New clause 5, tabled by the hon. Member for West Dorset (Edward Morello), would require the Secretary of State to introduce a regulation requiring airlines to make an annual report on their use of SAF, both in absolute volumes and as a percentage of overall fuel used. I welcome transparency on carbon emissions to help consumers make informed choices. However, we will be providing data on the supply of SAF under the mandate, including what proportion of the total aviation fuel supply is SAF. Furthermore, many airlines already provide public information on their decarbonisation efforts, and I therefore do not believe this new clause is necessary and ask the hon. Member not to move it.

New clauses 4 and 7, tabled by the hon. Member for West Dorset and the hon. Member for Dewsbury and Batley (Iqbal Mohamed) respectively, relate to power-to-liquid obligations. On new clause 4, the Government have already committed to keep mandate targets under review. The existing legislation enables the Secretary of State to amend obligations under the SAF mandate, subject to consultation with those affected and scrutiny by Parliament. Allowing amendments to the obligations without consulting appropriate parties could be detrimental to our shared ambition of increasing the use of SAF. On new clause 7, the legislation that gave effect to the SAF mandate already makes provision for a review no later than 2030. Given that the mandate has been in place for less than 12 months and the PtL obligation does not come into effect until 2028, it would not be helpful to review earlier than planned. I therefore ask the hon. Members not to move their new clauses.

Amendment 8, tabled by the right hon. Member for Basildon and Billericay, would put a requirement on the counterparty to report on the effect of the introduction of the RCM on air travel prices. This was spoken to by the shadow Minister, the hon. Member for Mid Buckinghamshire (Greg Smith). The Government are committed to delivering value for money in the RCM scheme by controlling the scale and number of contracts entered into, and through the prices negotiated in each contract. The impact on air fares are likely to rise or fall by less than the cost of a cup of coffee. The costs of the scheme and the impact on ticket prices will be kept under continual review. Passengers should also benefit from the lower prices generated from the lower project risk and reduced cost of capital for SAF producers. Therefore, the Bill and the measures in it will not limit people’s ability to fly. Given that, I ask the right hon. Member not to move the amendment.

I turn to amendments 9 and 10, tabled by the right hon. Member for Basildon and Billericay, and to amendment 12, tabled by the hon. Member for Dewsbury and Batley. The decisions on the specifics of contract allocation will be made during the contract allocation process. There will be a fair and transparent allocation process that evaluates the key costs, benefits and risks of each project. That will be developed over the coming months and will be subject to consultation with stakeholders. These amendments would reduce the Government leverage in negotiations by setting criteria in advance and would likely reduce value for money in the contracts signed, which I am sure all of us would seek to avoid. I therefore ask that these amendments are not moved.

Finally, I turn to amendment 11, tabled by the right hon. Member for Basildon and Billericay. In May 2025, the Government published the response to the consultation on funding the SAF revenue certainty mechanism. It confirmed that a variable levy on aviation fuel suppliers would be introduced, and this was included in the contents of the Bill. The Government plan to consult imminently on the detailed design of the levy, but this amendment would pre-empt stakeholder responses, which will be considered in any design decisions. I therefore ask the right hon. Member not to press the amendment.

I hope that my responses have provided the explanations and reassurances that colleagues were seeking. The Bill is a crucial step towards establishing a SAF industry in the UK and driving investment, growth and jobs across our great country. Once again, I urge the House to give the Bill its full support.

[Madam Deputy Speaker (Caroline Nokes)]

Mr Glover, is it your pleasure that new clause 1 be withdrawn?