Sustainable Aviation Fuel Bill (Third sitting)

Paul Kohler Excerpts

Committee stage
Thursday 17th July 2025 Public Bill Committees

[Mike Kane]

Clause 6 enables the Secretary of State to introduce, through regulations, 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. We plan to fund the revenue certainty mechanism through a levy on industry because it is right that the costs of decarbonising air travel are borne by the aviation sector rather than the taxpayer. We are levying aviation fuel suppliers because placing the levy higher up the supply chain spreads costs across the sector and reduces administrative burdens, and because aviation fuel suppliers will benefit from the greater volumes and lower prices for SAF that the revenue certainty mechanism will create.

Broadly, if the counterparty has incurred costs in a set period, we will cover those costs by levying aviation fuel suppliers based on their share of the fossil fuel market during that period. We are continuing to work closely with industry on the details of how the levy will operate. This approach is in line with the approach of other contracts-for-difference-style schemes, such as in the renewable electricity sector where there is a levy on electricity suppliers. The clause will also ensure that the counterparty’s obligations and activities in respect to the levy are appropriately regulated. I assure Members that the regulations under this clause will be subject to consultation and the affirmative parliamentary procedure, so there will be further opportunities for scrutiny in this area.

Clause 7 enables the levy regulations to require a person who is liable to pay the levy to provide financial collateral to the counterparty. This acts as a failsafe if there is cause for concern about non-payment. It ensures that if a levied party does not make a payment, the counterparty can take any owed money through the collateral. Without this power, there is a risk that non-payments to the counterparty lead to the Government needing to provide financial assistance to ensure that the counterparty can make payments under the revenue certainty mechanism contracts.

Clause 8 enables the levy regulations to include provisions to ensure that the levy is administered efficiently. It allows the Secretary of State to confer statutory functions on the counterparty, such as collecting levy payments and enforcing regulations. It is vital that the counterparty has the powers and functions it needs to operate efficiently and effectively.

Clause 9 will allow us to make regulations on who will calculate matters relating to the levy, and how—for example, how levy payments should be calculated and who is responsible for doing so. It ensures that calculations are made in an appropriate way by people who are qualified to do so. The regulations made under this clause will be subject to consultation and the affirmative procedure.

[Mr Paul Kohler (Wimbledon) (LD)]

I rise to speak on clause 6 and new clause 6. As we have heard, clause 6 would create a levy on fuel producers. While I do not necessarily believe that to be the wrong approach, as with much of the Bill, the devil will be in the detail that is not available for us to scrutinise here, for obvious reasons. As my hon. Friend the Member for Sutton and Cheam will make clear, there may be unintended consequences if the regulations are not designed correctly.

In my opinion, leaving much of the mechanism to a later date is not necessarily a bad thing—I agree with the flexibility that is being put in place. With a new, emerging technology and industry, ensuring that the Government’s hands are not tied at this early stage is a strength, not a weakness. That notwithstanding, some assurances should be given about how the mechanism will be designed, and how the potential flaws raised in the written evidence received by the Committee will be sidestepped. I point in particular to the written evidence from Valero.

Clause 6(3) implies that the levy will be based on criteria relating to the historical market share of fuel suppliers. That has been raised by those in the industry as potentially having unintended consequences. As I raised yesterday with the Minister, who I am not convinced gave me the clearest of answers, there have been worries that it may allow new market entrants not to pay any levy, as they will not have had a previous market share. Will he commit to ensuring that the levy regulations will account for such obvious loopholes?

It is clear that the challenge of decarbonisation, both in aviation and beyond, is great and will not be solved without collaboration with our closest international partners. I therefore tabled new clause 6, which would require the Government to review the differences between our approach to sustainable aviation fuel and that of our European partners in the European common aviation area. With 71% of international air passengers at UK airports travelling to or from Europe, it seems sensible that we should strive to be in broad alignment with Europe with regard to SAF.

I appreciate that there may be differences: in the case of the early part of our SAF mandate, we are going further and faster than the ECAA, but our European partners may accelerate beyond our thresholds later on. However, we believe it is important to remain mindful of what our partners across Europe are doing in an industry that has international competition at its very heart. The new clause would ensure that the Government are fully aware of differences in policy, and alive to any unintended consequences or differences that the Bill could result in for those in the aviation industry. We think that would be helpful.

I would welcome the Minister’s observations on both the mechanism that we have suggested and the broader issue of alignment with our European partners. This is, of course, a probing clause. Can the Minister assure the Committee that the Government will keep a watching brief on what the ECAA are doing with regard to SAF from here on?

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[Mr Kohler]

I have a brief question. When the Minister talked about the effect of £1.50 either way on airfares, was he talking about the effect of just the levy or the effect of the mandate as well? As we heard on Tuesday, the mandate will have far more of an effect on prices than the levy, given the premium that is likely to be repayable on SAF.

[Mike Kane]

Well done to the hon. Member for Mid Buckinghamshire; he pulled it out of the fire there with the amendments. He is right that we are putting SAF on the statute book. We should have put it on the statute book years ago, which is why it was in our manifesto and we are doing the right thing now. I will address the questions about £1.50 in a moment.

Amendment 4 tabled by the hon. Member would put a requirement on the counterparty to report on the effect of the introduction of the revenue certainty mechanism on air travel prices. Once operating, the revenue certainty mechanism is expected to make minimal changes to fares with an average ticket price, as we have said, decreasing or increasing by up to £1.50 on average per year. I remind him that that is less than a bus fare on Andy Burnham’s Bee Network in Greater Manchester where I live. I would offer to pay it, but it is quite cumulative over time and I do not have that type of resource—I am happy to fund the hon. Member for one year at £1.50 if he so wishes. That figure comes from a DFT analysis.

The costs of the scheme and the impact on ticket prices will be kept under continual review. The Government will also set the approach to the allocation of contracts, the number of contracts awarded and the scale of support they provide. Those controls will help to minimise any potential impacts on airfares. The costs of the scheme will also be reported in the DFT annual report and accounts in the usual way. I therefore ask the hon. Member to withdraw his amendment.

The hon. Member for Wimbledon asked whether the figure refers to the mandate or the revenue certainty mechanism. I assure him that it is just the revenue certainty mechanism.

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[Luke Taylor]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Review of the supply of bioethanol for use in sustainable aviation fuel production

“(1) The Secretary of State must, within six months of the passing of this Act, publish and lay before Parliament a report reviewing measures to encourage the supply of materials for Sustainable Aviation Fuel.

(2) The report under subsection (1) must include—

(a) an assessment of the impact of the closure of bioethanol plants on the ability to encourage overall increases in sustainable aviation fuel production;

(b) options for mitigating any adverse impacts on the availability of supply of sustainable aviation fuel by the closure of bioethanol plants;

(c) recommendations for any necessary Government action to promote a stable supply of bioethanol for Sustainable Aviation Fuel.”—(Mr Kohler.)

This new clause would require the Secretary of State to lay before Parliament a report outlining measures to encourage the supply of materials for SAFs, including considering the impact of bioethanol plant closures on encouragement to increase supply.

Brought up, and read the First time.

[Mr Kohler]

I beg to move, That the clause be read a Second time.

New clause 3 would require the Secretary of State to publish a report within six months of the Act’s passing, reviewing how we can better secure the supply of bioethanol for use in sustainable aviation fuel production.

The success of the UK’s sustainable aviation fuel ambitions will rely not only on bold targets and optimistic projections, but on the reliable availability of the resources needed for manufacturing. Bioethanol will be a resource that can be part of the manufacturing process for SAF, and help support a low-carbon industry in the UK, yet while the Government continue to laud their commitment to green aviation, they have stood by while domestic bioethanol production is at risk from Donald Trump’s bully boy tactics.

Since the signing of the UK-US trade deal, the owners of two UK bioethanol plants based in Hull and Teesside have threatened to close the sites as the trade agreement fundamentally undermines their business position. This Government have given US ethanol producers a 1.4 billion litre tariff-free quota—equivalent to the UK’s entire annual demand for the product—and completely undercut the industry, making the UK vulnerable to the whims of, to put it at its mildest, the mercurial Trump Administration.

The new clause would require the Government to assess the impact of plant closures on SAF production potential, set out options to mitigate supply risks and, crucially, recommend the policy steps needed to promote a stable domestic supply of bioethanol. We cannot afford to leave this to chance, or to the good will of a US President who, as we all know, simply cannot be trusted. If the Government are serious about scaling up SAF production, they must ensure that the raw materials are available. That means a proper strategy to support and stabilise the UK’s bioethanol sector.

[Greg Smith]

I absolutely understand and appreciate where the hon. Gentleman is coming from with this new clause. This topic came up in the oral evidence sessions and on Second Reading.

It is of great concern that the slightly lower tariffs deal done with the United States of America has clearly and materially threatened UK production of bioethanol, which of course has many uses. Many of us on the petrol station forecourt will have seen the curious E5 and E10 labels on the petrol pumps, which is about the ethanol blended with the regular fossil fuel. Our consumption of it as a country is particularly high.

As we are debating the potential future of bioethanol in sustainable aviation fuel production, it is incumbent upon the Government to reflect, within the scope of the Bill, on how much domestic supply there can be. So much of the Bill is underpinned by sovereign capability and fuel security—a point on which the Opposition and I think the Liberal Democrats are equally aligned on; it is so important—and so surely this new clause must also be important to the Government. I ask the Minister to reflect on that when he responds.

[Mike Kane]

I am extraordinarily proud that we have a Prime Minister and a Government who are rebuilding the UK’s reputation across the world once again, building trade deals with our closest partners across the planet, whether that be India, America or the recent agreement with the European Union. That is where Britain should be—leading and involved, not on the fringes as we have been for many years.

We are debating sustainable aviation fuel, but this is also about decarbonising the planes that will fly in our skies for generations to come. That US trade deal is zero tariff on aviation technology, which is a huge deal for this country, making it a world leader again in the future.

However, I am worried for the workers and families who have been affected by the trade deal. Ministers and officials, including the Business and Transport Secretaries, have met the companies consistently during this challenging time—those companies were struggling regardless of the time—to understand their concerns, discuss what action could be taken and to support them, because that is what good Governments do. The Department for Business and Trade is in discussions on requests for support from the UK bioethanol sector. As a responsible Government, there is a series of strict criteria and well-established due diligence processes that we must follow to consider such requests.

While I would like to see a thriving UK bioethanol sector, we would not expect a significant impact on the SAF mandate if there were to be a reduction in that sector’s production. That is because the UK bioethanol plants use crops that are not eligible for the SAF mandate. The SAF mandate, which is the framework for the supply of SAF in the UK, sets targets based on the availability of waste feedstocks rather than crop feedstocks. The SAF mandate is a global scheme and can use fuels from all around the world, providing an opportunity to draw upon a diverse pool of feedstocks.

However, we also want to encourage a UK industry. In January, the Chancellor announced £63 million of funding this year to help grow UK supply of SAF through the advanced fuels fund, which has been further extended in the recent Budget through to 2029-30. The SAF revenue certainty mechanism—the subject of the Bill—will also boost investment in UK SAF production.

Finally, under the SAF mandate, a formal review of the whole scheme has been built into the legislation, with the first review taking place in 2030. That will provide an opportunity to make an assessment on the availability of SAF supply. The above steps demonstrate how many of the recommendations set out in the hon. Member for Wimbledon’s new clause are already being undertaken by the Government. Given that, I ask him to withdraw it.

[Mr Kohler]

I hear what the Minister says, but we think that not enough is being done to protect the bioethanol industry in this country. We will therefore push the new clause to a vote.

Question put, That the clause be read a Second time.

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Brought up, and read the First time.

[Mr Kohler]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss new clause 5—Increasing greenhouse gas saving potential of sustainable aviation fuel—

“(1) The Secretary of State must, within six months of the day on which this Act is passed, publish and lay before Parliament a report which sets out a strategy for increasing the greenhouse gas emission saving resulting from the promotion of sustainable aviation fuel production in the United Kingdom.

(2) The report required under subsection (1) must include, but not be limited to—

(a) proposals for incentivising the research and development of Sustainable Aviation Fuels that maximise greenhouse gas emission savings;

(b) an assessment of, and recommendations for increases to, the minimum required greenhouse gas emission reduction in order for a Sustainable Aviation Fuel to be issued a SAF certificate;

(c) an assessment of, and recommendations for increases to, minimum ratios for renewable content in blended sustainable aviation fuels, for the purpose of more quickly reducing greenhouse gas emissions.

(3) Twelve months after the publication of the report required under subsection (1) and within every twelve months thereafter, the Secretary of State must publish a further report which—

(a) sets out progress against the strategy, and

(b) makes any necessary adjustments to the strategy as a result of developments in the sustainable aviation fuel industry.

(4) In this section, ‘SAF certificate’ has the meaning given in article 2 of the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024.”

[Mr Kohler]

As we are all aware, aviation is one of the most challenging sectors to decarbonise and one of the fastest growing sources of emissions worldwide. While other sectors benefit from mature, low-carbon technologies, aviation remains heavily dependent on fossil jet fuel, and is one of the few industries where there is not an alternative available already. The Bill will attempt to grow the alternative industry, but it is clear that its provisions are only the first steps on a long journey to reach net zero by 2050 in aviation. If we are serious about hitting net zero by 2050, we must be equally serious about tracking our progress and course-correcting where necessary.

New clause 4 would require the Secretary of State to conduct an annual review of what contribution the revenue certainty mechanism is making in helping the UK achieve its target of net zero aviation emissions by 2050. It is a simple step that would help us to understand further the impact our SAF policy is having on our net zero targets, and whether other changes or alterations will be needed in the jet zero plan. It would allow us to ensure we understand, year by year, whether we are making the progress the science demands. Are SAF volumes increasing fast enough? Are emissions falling across domestic and international routes fast enough? Are the technologies we are backing delivering real, verifiable carbon savings? To reach net zero, those are the questions we should ask, and we must ensure that we have the evidence base to do so. The new clause would help provide us with that information as a guard against complacency.

New clause 5 would also contribute to our net zero responsibilities. It would require the Secretary of State to, within six months of the day on which the Bill is passed, publish and lay before a Parliament a report that sets out a strategy for increasing greenhouse gas emission savings from SAF production in the UK. It would allow us to understand and ensure that we are implementing new technologies within SAF production. The point of SAF is to reduce the carbon cycle of jet fuel. We should be vigilant in ensuring that anything marked as SAF delivers just that.

New clause 5 consequently sets a minimum standard of the lifetime carbon emissions that can be classed as SAF, and ensures that that is monitored effectively. If we do not embed a culture of accountability, we risk drifting and passing legislation that sounds ambitious but fails to deliver at the pace required. With only 25 years left to decarbonise a sector that today remains overwhelming fossil fuelled, we cannot afford complacency. This Government have rightly set the bold target of net zero aviation by 2050, which the Liberal Democrats support, but targets must be matched with transparent measurement and a willingness to adapt. These new clauses would simply give us the tools to do just that, and I urge Members to support them.

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[Mike Kane]

My kingdom for a chemistry degree! I will let the hon. Gentleman know the answer to his question in due course.

To go back to the point, new clause 5 would duplicate the process already embedded in the SAF mandate legislation. I therefore ask the hon. Member for Wimbledon not to press the new clause.

[Mr Kohler]

New clause 4 was of course a probing amendment, and the Minister has satisfied most of us that enough will be done to report on our progress towards net zero. I was less convinced by the Minister’s answer to new clause 5. With or without a chemistry degree, the point is a simple one: SAF is green, but some SAF is greener than other SAF. I am not convinced that the Government are yet embracing that or doing enough to work out which SAF should be pushed because it is the most beneficial to the environment. We will press new clause 5 to a Division, but not new clause 4. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 5

Increasing greenhouse gas saving potential of sustainable aviation fuel

“(1) The Secretary of State must, within six months of the day on which this Act is passed, publish and lay before Parliament a report which sets out a strategy for increasing the greenhouse gas emission saving resulting from the promotion of sustainable aviation fuel production in the United Kingdom.

(2) The report required under subsection (1) must include, but not be limited to—

(a) proposals for incentivising the research and development of Sustainable Aviation Fuels that maximise greenhouse gas emission savings;

(b) an assessment of, and recommendations for increases to, the minimum required greenhouse gas emission reduction in order for a Sustainable Aviation Fuel to be issued a SAF certificate;

(c) an assessment of, and recommendations for increases to, minimum ratios for renewable content in blended sustainable aviation fuels, for the purpose of more quickly reducing greenhouse gas emissions.

(3) Twelve months after the publication of the report required under subsection (1) and within every twelve months thereafter, the Secretary of State must publish a further report which—

(a) sets out progress against the strategy, and

(b) makes any necessary adjustments to the strategy as a result of developments in the sustainable aviation fuel industry.

(4) In this section, “SAF certificate” has the meaning given in article 2 of the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024.”—(Mr Kohler.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.