The UK’s Renewable Transport Fuel Obligations (RTFO) have been a critical component in the country’s strategy to reduce greenhouse gas (GHG) emissions from transport. With the introduction of the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024, significant changes have been implemented, specifically targeting the aviation sector. This legislation aims to create strong and reliable long-term demand signals for Sustainable Aviation Fuel (SAF), positioning the UK as a central hub for SAF investments. This article delves into what producers need to know about these obligations, the new SAF mandate, and its broader implications for the industry.

Overview of the Instrument

What does the legislation do?

The 2024 instrument regulates aviation fuel in the UK by mandating suppliers to increase the proportion of sustainable aviation fuel (SAF) in the jet fuel mix starting from January 1, 2025. This is achieved through two primary obligations: the main SAF obligation and the power-to-liquid (PtL) obligation. The legislation also amends the RTFO Order 2006, preventing the issuance of certificates for renewable transport fuel benefiting from any global support scheme.

Jurisdiction and Application

The legislation extends to the entire United Kingdom, impacting all aviation fuel suppliers within its borders.

Policy Context

Critical Success Factors

1. GHG Emissions Reduction: The measures are expected to deliver between 11 and 54 MtCO2e reductions from 2025 to 2040.
2. Investment in SAF: Providing a long-term demand signal to encourage investment in the UK SAF industry.
3. Innovation Incentives: Promoting innovation in less commercially developed fuel pathways that offer significant GHG reductions.

The SAF Mandate

Key Components

• Main Obligation: Suppliers must blend increasing proportions of SAF into aviation fuel.
• Power-to-Liquid (PtL) Obligation: A separate requirement for PtL SAF, which provides the highest GHG reductions but is more expensive and less commercially developed.

Compliance and Calculations

The obligations are calculated based on the energy content of the fuel supplied. For instance, in 2025, if 15 million kg of fossil aviation fuel is supplied, the obligation would be 2.041% of that energy content.

Certificates and Buy-Out Mechanism

Suppliers earn certificates for SAF meeting minimum GHG savings. These certificates can be traded or used to meet obligations. Alternatively, suppliers can pay a buy-out price (£0.137 per megajoule for the main obligation and £0.145 for the PtL obligation).

Impact on Producers

Supply Chain Adjustments

Producers must adapt to new supply chain requirements, ensuring that SAF meets the specified criteria and is blended in the mandated proportions.

Investment in Technology

The emphasis on PtL fuels and the restrictions on HEFA SAF necessitate investments in new technologies and production processes. Producers will need to explore alternative feedstocks and innovative production methods.

Market Dynamics

The introduction of a separate SAF mandate is expected to create a robust market for SAF in the UK, driving demand and potentially leading to higher prices for SAF. Producers will need to balance the costs of production with the potential revenue from certificates and the buy-out mechanism.

Legislative and Legal Context

Evolution of the RTFO

The RTFO, established under the Energy Act 2004, has been a cornerstone of the UK’s strategy to promote renewable transport fuels. The 2024 instrument builds on this framework by introducing specific obligations for SAF, separate from the existing RTFO for road transport fuels.

Legal Amendments

The instrument amends the RTFO Order 2007, preventing the issuance of certificates for SAF benefitting from global support schemes. This ensures a level playing field and prevents double-counting of benefits.

Consultation and Industry Feedback

Public Consultations

The Department for Transport conducted extensive public consultations in 2021 and 2023, receiving feedback from a wide range of stakeholders. The overwhelming support for the SAF mandate indicates strong industry backing for the new obligations.

Government Response

The government’s response to the consultations reaffirmed its commitment to the SAF mandate, outlining the high-level ambition, fuel eligibility criteria, and compliance principles.

Detailed Discussion of Key Elements

Energy Content and Calculations (5.10)

Understanding the calculation of the obligations is crucial for compliance. The obligations are determined based on the energy content of the fuel supplied, measured in megajoules (MJ). This method ensures a fair and standardized approach to calculating the blending requirements, as energy content directly correlates with the environmental impact of the fuel.

For instance, the main SAF obligation requires suppliers to blend a specific percentage of SAF based on the total energy content of the fossil aviation fuel they supply. In 2025, the obligation is set at 2.041%. If a supplier provides 15 million kg of fossil aviation fuel, they must ensure that 2.041% of the energy content of this fuel is derived from SAF. This approach ensures that the obligation scales with the amount of fuel supplied, maintaining proportionality and fairness across the industry.

The PtL obligation works similarly but applies specifically to power-to-liquid fuels, which are synthesized from renewable electricity and offer higher GHG reductions. These fuels, while more expensive and less commercially developed, are crucial for achieving deeper decarbonization in aviation. By mandating a separate PtL obligation, the legislation encourages innovation and investment in this promising technology.

Certificates and Buy-Out Mechanism (5.15)

The RTFO includes a system of tradable certificates and a buy-out mechanism to provide flexibility in meeting the obligations. Suppliers earn Renewable Transport Fuel Certificates (RTFCs) for SAF that meets the required GHG savings. These certificates represent a certain amount of renewable fuel and can be traded on the market, providing a financial incentive for suppliers to blend SAF.

The buy-out mechanism offers an alternative compliance route. If suppliers cannot meet their obligations through blending SAF, they can choose to pay a buy-out price. This price is set at £0.137 per megajoule for the main obligation and £0.145 for the PtL obligation. The buy-out price acts as a cap on the cost of compliance, ensuring that the obligations remain economically viable while still promoting the use of SAF.

“The introduction of a separate SAF mandate is expected to create a robust market for SAF in the UK, driving demand and potentially leading to higher prices for SAF.”

This system of certificates and buy-outs ensures flexibility and liquidity in the market. It allows suppliers to manage their compliance costs effectively while encouraging the development and adoption of SAF. By creating a market for RTFCs, the legislation incentivizes suppliers to blend more SAF than required, as excess certificates can be sold for profit.

Legal Amendments and Preventing Double-Counting (5.16)

One of the critical aspects of the 2024 instrument is its amendment to the RTFO Order 2007, which prevents the issuance of certificates for SAF benefitting from global support schemes. This amendment ensures that the environmental benefits of SAF are not double-counted across different jurisdictions, maintaining the integrity of the GHG reductions.

Double-counting occurs when the same batch of SAF is claimed to meet multiple obligations or receive multiple incentives across different regions. This practice undermines the actual GHG savings achieved and can distort the market. By preventing double-counting, the legislation ensures that the claimed reductions in GHG emissions are genuine and verifiable.

The amendment also ensures a level playing field for UK suppliers. By excluding SAF that has already received global support, the legislation prioritizes the use of domestically produced SAF that meets the stringent UK criteria. This approach supports the development of the UK SAF industry, encouraging local investment and innovation.

Consultation and Industry Feedback

Public Consultations

The Department for Transport conducted extensive public consultations in 2021 and 2023, receiving feedback from a wide range of stakeholders. The overwhelming support for the SAF mandate indicates strong industry backing for the new obligations.

Government Response

The government’s response to the consultations reaffirmed its commitment to the SAF mandate, outlining the high-level ambition, fuel eligibility criteria, and compliance principles.

“By creating strong and reliable long-term demand signals for SAF, the UK legislation is set to position the country as a central hub for SAF investments.”

Implications for the Aviation Industry

Economic Impact

The SAF mandate is expected to drive significant investment in the UK SAF industry, boosting economic growth and creating jobs. However, the higher production costs of SAF compared to kerosene may lead to increased fuel prices, impacting airlines and consumers.

Environmental Benefits

The mandate is a critical step towards achieving net-zero aviation emissions by 2050. The anticipated reductions in GHG emissions will contribute significantly to the UK’s overall climate goals.

Challenges and Opportunities

Producers face challenges in scaling up SAF production to meet the new obligations. However, the mandate also presents opportunities for innovation and leadership in the growing global market for sustainable aviation fuels.

Conclusion

The Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024 marks a significant shift in the UK’s approach to decarbonizing aviation. By creating strong and reliable long-term demand signals for Sustainable Aviation Fuel (SAF), the legislation is set to position the UK as a central hub for SAF investments. This comprehensive guide has outlined the key components of the SAF mandate, compliance mechanisms, and the broader implications for producers. As the aviation industry adapts to these new requirements, the UK is poised to become a leader in the transition to sustainable aviation, fostering innovation and investment in this critical sector.