Sustainable Aviation Fuel Bill

Lewis Atkinson Excerpts

2nd reading
Wednesday 11th June 2025 Commons Chamber

[Chris McDonald]

I could not agree more. As my hon. Friend the Member for Dover and Deal (Mike Tapp) said, we are indeed an island nation, if anyone had not spotted that, and the quickest way to get about is to go by air. What everyone wants is to wake up on a morning in Stockton and then be sat on a beach in Benidorm by lunch time, and of course they can do that at Teesside airport.

The people of Teesside know that our future is about decarbonising. This Government have invested £4 billion in carbon capture and storage. We have the largest offshore wind monopile factory in our area, and we are producing green hydrogen in Billingham in my constituency—in fact, Billingham produces 50% of the UK’s hydrogen, and Billingham and Teesside more generally is set to become Europe’s main centre for sustainable aviation fuel.

I am sure that sustainable aviation fuel will be produced in Grangemouth, Humberside, the north-west and south Wales, but the market is enormous and, as we heard from my hon. Friend the Member for Middlesbrough South and East Cleveland (Luke Myer), Teesside and Billingham in my constituency is best placed in the whole of Europe to deal with this. The biggest threat to that at the moment is not the fantastic plans of this Government, but the ideological adherence of members of Reform to anti-net zero. As usual, I find myself in this House standing up for new jobs for industrial communities in my area, alongside my hon. Friend the Member for Middlesbrough South and East Cleveland. Where are the Reform Members? They are not here—they are never here.

[Lewis Atkinson (Sunderland Central) (Lab)]

As well as the welcome developments that my hon. Friend alludes to in the Tees, this is about the wider north-east. In my constituency, Wastefront has a £100 million investment and is creating 100 good jobs on the River Wear. Does he agree that jobs are being made in the wider north-east through this Government’s policy and that they are under threat from the policies of Opposition parties that he mentioned?

[Chris McDonald]

I agree. Whether it is in Sunderland or, as I mentioned, the north-west and down in south Wales, we will see jobs in the supply chain throughout all this work. It will also benefit Heathrow and our other major airport hubs.

I thought it might be useful to make a few comments about why I believe SAF is the solution. The hon. Member for Sutton and Cheam (Luke Taylor) gave a great description of why the flight range equations essentially drive us in the direction of sustainable aviation fuel. Electrification certainly would be possible for short-haul flights, but the hydrogen simply does not have the density. As I think the hon. Gentleman also said, infrastructure is important—we heard that from the Secretary of State in her opening statement—because planes take off from one place, but they land somewhere else, and they need to be able to refuel there too.

Sustainable aviation fuel is certainly the right approach, but a couple of Members raised concerns in the debate about the raw materials for feedstock—my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) raised that issue. The hon. Member for Mid Bedfordshire (Blake Stephenson) said that he had learned about second-generation sustainable aviation fuels; it is probably just as well that he is not in his place, because I might blow his mind when I talk about third-generation and fourth-generation sustainable aviation fuels.

Essentially, there are concerns about the raw materials and municipal waste. Although the amount of waste per person will decline, a lot of it is put into energy from waste plants, and the new investments are really about future generations of SAF. We have heard about biomass. If that biomass is not from a feedstock, perhaps that verges into the second generation, but it is third-generation and fourth-generation sustainable aviation fuel that will enable us to scale up this industry. That will open it up to the direct combination of carbon dioxide and hydrogen using green electricity, which will enable us to scale it up. An abundant supply of those raw materials is needed, which is why I am so confident that we will see the industry spread around the whole of the UK.

Why do I say Billingham will become the UK and European centre for this work? There is a justification. Teesside already produces 50% of the UK’s hydrogen, and the chemicals cluster there is well-known for producing pharmaceuticals for fertilisers and various other chemicals. We produced synthetic petrol in Billingham in the 1930s, and we produced synthetic jet fuel there in the 1940s for the Royal Air Force during the second world war. I say that not to imply in some way that we still have the skillset—many of those people are quite rightly enjoying their retirement, or have perhaps moved on from that—but to demonstrate to the House that there is not a big technological risk associated with this technology. Third-generation SAF will rely on the Fischer-Tropsch process, which has been around for 100 years.

In fact, when I talk to investors in the industry and ask them what the big risks are, they highlight economic risks—with which the Government are getting to grips right now through this legislation—and political risk, which is about the consistency of Government policy. As I mentioned earlier, the biggest threat to these jobs and to this industry is the ideology of the Reform party. As we see the jobs and investment, I am confident that people in my local community will vote for jobs and investment in the future as well.

As such, I warmly welcome this legislation. I very much look forward to the day when I can welcome right hon. and hon. Members to Teesside international airport, and enjoy a drink with them in the bar before we jet off to Alicante for our holidays.

Sustainable Aviation Fuel Bill (First sitting)

Lewis Atkinson Excerpts

Committee stage
Tuesday 15th July 2025 Public Bill Committees

[Mr Kohler]

Q To your point on the RCM, the money you put into the RCM will bring down your overall costs, because the premium on SAF will go down, will it not?

Jonathon Counsell: Absolutely—we hope that eventually, as you scale up SAF supply, the cost will come down. Will it ever come down to jet fuel levels? I do not think it will, because of the factor cost element. I agree with Paul Greenwood, who said earlier that one of the disadvantages we have in this country is high energy costs. We are doing SAF contracts with SAF suppliers in the US, where their energy costs are one third of those in this country, so we are at a disadvantage.

On 2G SAF, however, I think we have some real advantages: we have some sites, we have expertise and we have feedstock, both waste biomass and municipal solid waste. We put 20 million tonnes of municipal solid waste into landfill; we even ship 5 million tonnes of it to Europe. That is energy. We should be using it to make SAF. Those advantages can overcome the energy disadvantage in the short term. Hopefully we will sort out that energy disadvantage, but as we scale up those plants that SAF price should come down. It is an investment, but we do not want to double-pay for it.

Luke Ervine: Just to add and clarify, I think Luke Taylor asked a question earlier about ways to pay for the SAF mandate. We have always been very clear about paying twice through things such as the ETS scheme. We would love to see those revenues used to reinvest in the decarbonisation of the aviation industry. Given the economic value it returns and the Government’s growth agenda, we believe that creating a SAF industry also creates jobs and a lot of economic prosperity. The Sustainable Aviation report in 2023 estimated that the UK SAF industry would create about 60,000 new jobs by 2050 and about £10 billion gross value added by the same time. There is a benefit here for the UK economy as a whole purely in terms of the SAF industry, and using some of the taxes we currently pay to fund the RCM would be very helpful.

Lahiru Ranasinghe: I do not have much to add to what has already been said, but the cost of SAF means that the cost of fuel will go up in the long run, even with the RCM. In our minds, the RCM is something that unlocks production, as opposed to something that brings the cost down. The primary role we see for it is in getting production up so that supply can meet demand in the short run. Ultimately, though, we will have higher costs because of SAF, especially as eSAF and power-to-liquid comes in, and those costs will have to be passed through.

We are doing a huge amount to try to be as efficient as we possibly can; that is where the investments in aircraft and how we operate come in. As they say, the best energy is the energy you do not use, and in that way we are trying to manage our costs in the same way we have for the past 30 years, but I completely agree that we have to be wary of adding on to the costs we are already paying in the name of sustainability, both right now and in terms of meeting the mandates.

[Lewis Atkinson (Sunderland Central) (Lab)]

Q Building on the point Mr Ervine made about the potential wider economic contribution of SAF, I am particularly interested in the jobs. We have heard that 70% of existing fuel is imported, and therefore a significant part of your economic supply chain is essentially providing economic benefit overseas. Could you say a little more about—if we get this off the ground, as it were—how far you think that value chain and economic benefit will shift into the UK from imports? In particular, could you talk about the potential regional economic benefits of SAF, as opposed to being concentrated on London and the south-east?

Jonathon Counsell: From our modelling and analysis, we still want to have the flexibility to import SAF, because there is a global market there and we do not want to put ourselves at a competitive disadvantage by saying that all mandated SAF has to be produced in the UK. We still want access to imported SAF, particularly 1G SAF; we do not think the UK has much competitive advantage in producing 1G SAF. We think roughly 50% feels about right, and you have to compare it around that. Our view is that, of the mandated SAF, approximately 50% should be produced here in the UK—but, as I said earlier, not all of that will need the revenue certainty mechanism.

One of the key points that I want to make is that the revenue certainty mechanism is for those plants that cannot get funding: they are early stage, first-of-their-kind technology, and cannot get tracker funding because it is perceived to be too high risk by the investment market, and they cannot get that revenue certainty through any other mechanism, so therefore they rely on this mechanism. We think that roughly half of that 50% will need the revenue certainty mechanism.

A good example is LanzaJet in Teesside, the speedboat project that I mentioned earlier. That does not need the revenue certainty mechanism because we at IAG are providing the company with a long-term committed take-or-pay offer. We are giving the revenue certainty to LanzaJet, so that project does not need it; but other projects do, typically including the municipal solid waste projects that take black bag waste. They are at a very early stage, using less mature technology, and they are massively capital intense projects. They definitely need the revenue certainty mechanism, so we must ensure that it is targeted.

As Luke said, we think that by 2030 there could potentially be 10,000 extra jobs in the UK from that UK production. We can share a piece of analysis that we did through Sustainable Aviation that showed what that looks like for each region of the UK. We think there is certainly potential to build plants in Wearside, Teesside, Humberside and south Wales; if we get the policy right, we think there could be up to 14 plants within the next 10 years, which will deliver £1.8 billion in GVA by 2030.

However, the big prize will come in 2050: 60,000 jobs and £10 billion in GVA. We are creating a new energy industry for the UK. I have to congratulate the Government: we have potentially the most powerful package of SAF policy in the world, with the mandate, the revenue certainty mechanism and the advanced fuels fund. Taken together, they mean that we are the envy of the world and we have a huge chance to be a world leader on SAF production.

Lahiru Ranasinghe: To add to that, it would also enable UK aviation to grow. Our estimates are that each aircraft based in the UK supports around 400 jobs and £27 million of GVA. We have over 150 aircraft in the UK as it is, we have three aircraft going to a new base in Newcastle shortly and we absolutely intend to continue with the growth in the UK. By having the RCM unlock SAF production and SAF supply, that opens the doors to us to continue growing, while also decarbonising. That is a massive part of the economic benefit that the RCM helps to unlock, beyond the obvious effects of supporting jobs and production on the ground in the SAF industry.

Luke Ervine: Just to add a note on benefits, it is important to recognise the cost of not having the RCM. We have spoken a lot today about the buy-out. The UK is unique in its ambition to have a 2G SAF mandate, so the cost of not having the RCM is important. If we do not have it, we pay buy-out, and then we are going to lose out regionally to other areas, such as Europe and the US, that do not have those 2G SAF mandates, so it is important that we recognise that there is a cost of not having the RCM.

[Luke Taylor]

Q Thank you all for joining us. The evidence that you have given so far has been very helpful. There was a question earlier about waste hierarchy and the availability of waste feedstocks as one source of raw fuel or raw material for some of the second-generation SAF. Is enough being done across Government, in a holistic way, to ensure that the goals of the SAF mandate, the RCM and this Bill are achieved? Is enough being done to ensure that the things that are needed—waste feedstocks, the reforms to planning and energy production for eSAFs—are in place? What is going to hold back what we are trying to achieve in this Bill, and what needs to be done elsewhere?

Jonathon Counsell: That is a really strong point. There is a key question about the waste hierarchy, which Gaynor spoke to. Currently, waste going to SAF is treated the same way as incineration or energy from waste, but the analysis is clear that we can get twice as much energy capture from producing SAF than from producing energy from waste. We feel that you are getting a lot more bang for your buck from using waste to produce SAF than from other things, which we think should be reflected in aviation being prioritised in the waste hierarchy.

On renewable energy, last year the Sustainable Aviation road map made it quite clear that 3G SAF—where you basically electrolyse water to get hydrogen and you capture CO₂ from the atmosphere—is going to take a lot of renewable electricity. We are going to need a lot more of that within the UK if we are going to support a domestic power-to-liquid market.

Luke Ervine: In addition to that, we need to think about other areas of SAF, when we talk about SAF having a nominal value associated with its ability to reduce greenhouse gases. We are working alongside the Department for Energy Security and Net Zero and the Department for Business and Trade to understand how carbon can form part of the solution, and decarbonising the SAF that we are producing is also key. We are also working side by side with the Treasury to understand what the revenues from the ETS look like.

That has been quite successful in the last few years, especially since the advent of the jet zero taskforce, which was a really key turning point. I think we are going to continue in that vein to work cross-departmentally and across industry to work through some of these finer details. I think it has been very useful to be part of the Jet Zero Council; we are actually a co-chair, alongside Mike Kane, of the jet zero taskforce. Carrying on in that vein is very important and useful.

Lahiru Ranasinghe: This also enables us to reduce our dependence on used cooking oil imported from elsewhere in the world as a feedstock for first generation SAF. A strategic move towards 2G and 3G also gives more flexibility and capability for the market to scale up in the long-term, and allows it to use waste products from the UK, as opposed to having to ship it in from China or south-east Asia.

Sustainable Aviation Fuel Bill (Second sitting)

Lewis Atkinson Excerpts

Committee stage
Tuesday 15th July 2025 Public Bill Committees

[Luke Taylor]

Q It is the broader question of how this sits within the system. The implications of this Bill are really broad in the way the incentives will come into a whole different set of markets, including agriculture, waste and local government.

Philip New: First, I challenge the suggestion that this is an incentive. I think of it more as an insurance policy. If you are a recipient of the insurance policy, if it turns out that the market price is higher than you contracted for—your strike price—you will end up paying. The counterparty will be in receipt of money from the participants in the scheme. It is not a one-way incentive.

One of the charms of the RCM is that it is nicely balanced. If you are worried that the market will go long and there will be lots and lots of lower-priced product that undermines your economics, the RCM is a great way of giving you insurance that your investors will stay whole and happy.

On the other hand, by taking it on, you are sacrificing your exposure to the upside. That is the premium you are paying. I think the balance that has been designed into the RCM is a really attractive way of keeping everyone honest while still enabling investment to flow into the sector. I do not think it should distort the underlying drivers or mechanisms.

That having been said, I worry about the range of sectors that a successful SAF industry will touch. It has the potential to touch them in a very positive way, but it is also exposed to some inadvertent—I would not call it negligent—inattention in somewhere that does not feel a very strong ownership of the space, which could really mess things up. A degree of conscious, whole-system understanding of what it takes to enable a brand-new sector to emerge, and providing some co-ordination of that, would be welcome. Whether that looks a little like mission control in the electricity transition or something else, I do not know, but something to provide more comfort would be important. It touches many parts of the economy and many Departments.

[Lewis Atkinson (Sunderland Central) (Lab)]

Q Mr New, in your report you say that one of the key asks for industry is around confidence. We have talked a lot about revenue confidence today, but I want to go over that a little bit. You ask how the UK Government can demonstrate that they will stay the course, and I guess the core of that is political confidence.

Since your report, of course, we have had a change in Government, and who knows if there might be another one over the investment cycles we are talking about here? Could you say a little about your assessment of how a Bill—putting something in primary legislation, as this does—helps to provide the political confidence that you believe investors are looking for, and also, frankly, helps to mitigate the actions of the varying parties in Parliament as we approach this issue?

Philip New: There were two big pushes from the investment community when I was writing the original report connected with the RCM. The first was that it would just be nice to have that revenue certainty in the first place, and that is what we see in other parts of the green transition.

The other speaks directly to this point. They were very nervous that there might be a change to the mandate design, the mandate targets or something at some stage in the future, and that that would so change the market dynamics and the pricing dynamics that all their assumptions would go out of the window. They were not going to be satisfied with any number of assurances from the Government, because Governments change their minds, so they wanted a bilateral contractual arrangement, which is another feature of the RCM. A big driver of its original definition was precisely to respond to that very concern.

[The Chair]

Thank you for your evidence, Mr New. We will now move on to the next panel. Before I call our next witness, Mr Geoff Maynard, I say to colleagues that there may well be a Division around 4 pm, or perhaps 4.05 pm, so we may or may not get through the whole of this session before then. If there is a Division, we will go and vote. Return within fifteen minutes maximum, please. If there is another vote, which I do not think there will be, it will be a further 10 minutes.

Examination of Witness

Geoff Maynard gave evidence.

--- Later in debate ---

[Lewis Atkinson]

Q I am neither a chemist nor an aviation policy expert, so I will ask my questions from the perspective of my constituents in Sunderland. Looking at this policy area, they would be interested in the potential impacts on jobs and airfares. On jobs, could you say a little more about what you think the potential upside is in areas like mine? On airfares, can you confirm that clause 10, which deals with the payment of potential surpluses back to levy payers, creates the potential for downward pressure on airfares, depending on where the strike price ends up?

Mike Kane: First, you have been a big supporter of sustainable aviation fuel in your constituency, because you have the Wastefront tyre-to-fuel plant, so your constituency is already benefitting from jobs that have been created by that company. The Bill also allows us to scale up the technologies that we want to use, which could be of particular benefit to the north-east. I am also the maritime Minister, and we have announced £1 billion investment at the Port of Tyne for LS Cables, and Teesport is about to announce big investments in sustainability as part of our clean energy mission. The mayor, Kim McGuinness, is absolutely tied into this agenda, and using the whole north-east coast to support our green energy mission is vital.

You are absolutely right that the pressure on ticket prices could be downward. Very recently, there was an article in The Sunday Times by the International Airlines Group, which hedged its SAF supplies a long time ago in advance of this. It says that it will now, as an airline, have a competitive advantage in the price of ticketing over the next few years, because it got SAF at the right price at the right time.

[The Chair]

If there are no further questions, thank you, Minister, for your evidence this afternoon. That brings us to the end of today’s session. The Committee will meet again at 11.30 am on Thursday 17 July to begin line-by-line consideration of the Bill.

Ordered, That further consideration be now adjourned. —(Kate Dearden)