Sustainable Aviation Fuel Bill

Lord Moylan Excerpts

Thursday 20th November 2025 Lords Chamber

[Lord Moylan (Con)]

My Lords, what is one to say? The easy part is to start by joining other noble Lords in congratulating the right reverend Prelate the Bishop of Chester on his entertaining and interesting maiden speech, and to welcome him and the many contributions he will no doubt make to your Lordships’ House in the future.

When the Labour Party, the Conservative Party and the Liberal Democrats, even without the support of the Green Party, all agree in supporting a measure, who can withstand them? Some might call it groupthink; others might see in it the spirit that defeated fascism in Europe. But here we are. We have huge support for this Bill from all quarters of the House, but I am afraid that it is the job of the Official Opposition to express a degree of scepticism.

Our debate has ranged very widely indeed, whereas the Bill has a very narrow focus. Many have spoken of it as if it were a net-zero measure. I dispute that. The net-zero measure was the SAF mandate that was put in place, as the Minister said, before Christmas last year, in November, which mandated airlines to use a certain quantity of SAF in their fuel, increasing every year over a period and set out in a statutory instrument. That was certainly a net-zero measure.

However, few noble Lords were open in saying that the Bill is not a net-zero measure as such but an industrial policy measure; in fact, it was really only my noble friend Lord Grayling who was explicit about that. He was explicit also in saying that he supported that industrial policy, which says that not only do we have to require SAF to be used by airlines in this country but we have to be the producer of that SAF. He gave reasons: he said, “Why would you want to use foreign producers? Why would you want to import your SAF?” But there are answers to that.

I am told that there is no future in being an old-fashioned Thatcherite and believing in markets, and that people like me are terribly out of date. However, the noble Baroness, Lady Pidgeon, made clear that SAF mandates are not confined to Britain and the European Union; there are countries all over the world with SAF mandates. She mentioned Thailand and Singapore, and I am sure there are many others as well. SAF is a global business. There is an argument that you might be able to import your SAF more cheaply and have a more efficient market if you were not insisting on producing it all yourself. None the less, the Conservative Party when in power and the Labour Party today have decided on that as a matter of industrial policy.

So what can possibly go wrong, even though it is hard to see what comparative advantage the United Kingdom has as a producer of SAF? The noble Lord, Lord Ravensdale, pointed to one element that seemed pretty damning of our comparative advantage—our very high electricity costs by international standards. He pointed out that this the production of SAF is an electricity-hungry process, but that none the less has to be ignored and overridden.

The Government have decided to be a leader in this uncertain field, and it is uncertain. I think we have agreed that there are three stages of SAF. There is HEFA, which the Government do not want to subsidise, as I understand it, even though, as again the noble Lord, Lord Ravensdale, pointed out, the Bill appears to be drafted so that they could. We need to examine that more closely in Committee. Assuming that the Government do not want to subsidise HEFA, that leaves us with non-HEFA SAF, but the processes for producing non-HEFA SAF are highly uncertain and some of them are first of a kind. We do not even know that they are going to work, but we are putting in place a revenue certainty mechanism so that investors can find out, for practically no risk, whether they are. This is going to be of advantage to the national economy.

Beyond that, as the noble Viscount, Lord Hanworth, said, there is a power-to-liquid option, but the Government do not appear to believe that it is worth investing in that at the moment, even though it is being pursued in the United States with the support of tax credits and, as I understand it, with a large plant in Texas.

Anyway, having decided that this is our industrial policy, we have to find a way of subsidising it. The Treasury has discovered this wonderful thing, the contract for difference, which is a form of subsidy that means that they do not have to shell out any money, because the cost of the subsidy is passed on to the consumer. Contracts for difference have given us the very high electricity costs to which the noble Lord, Lord Ravensdale, referred earlier, which are apparently crippling the process on which we are embarking. So we are to have not a subsidy but a contract for difference, and we are to set up a counterparty that will be able to work that out. It is going to have the skills to negotiate with the hard-faced lawyers sent by the investors to get, as my noble friend Lord Harper said, absolutely that price which offers an appropriate level of reward for the very low level of risk the investors are taking, but not a penny more. Our negotiators will be able to manage that and land it to perfection, and they will have the resources to do that. And so we go on.

Noble Lords have raised a whole series of questions, which I suspect will form the basis of our discussion in Committee. I will add a few myself. Can the Minister clarify whether the Government have made an assessment of the compatibility of the revenue certainty mechanism with the non-discrimination requirements of the WTO’s Article III.4 of the General Agreement on Tariffs and Trade, particularly in relation to the differential treatment between qualifying SAF and imported non-qualifying non-fossil aviation fuels such as HEFA? Also, will he indicate—I assure him that I do not necessarily expect him to answer these questions at the Dispatch Box, though it would be very impressive if he did—whether the Government have assessed whether the RCM would constitute a subsidy for the purposes of the WTO Agreement on Subsidies and Countervailing Measures, and whether any risk of countermeasures or formal dispute settlement from other WTO members has been identified?

I am sure there are further questions, which I can bring up in Committee, but for the moment, there we are. We stand solidly behind the Bill, but we see a large number of holes in it. We are far from convinced that it will do the job that the Government have said it will set out to do. Whether it can be done at a price of £1.50 per ticket seems to be something else that is worthy of exploration—as is what that figure actually means. Since the mandate increases every year, at what point does the £1.50 come in? Surely, the cost per ticket would rise over the course of time as the mandate requirement rises. We will explore both how it was calculated and what it means but, for the moment, we look forward to hearing what the Minister has to say in response to what has been a lively and well-informed debate.