BRUSSELS, BELGIUM — The European Union has launched a significant initiative to subsidize airline purchases of over 200 million liters of Sustainable Aviation Fuel (SAF), a volume equivalent to approximately 15% of global SAF production, as announced on June 17, 2025. This ambitious program, funded through the sale of 20 million carbon emission permits, aims to bridge the cost gap between conventional jet fuel and SAF, which is currently three to five times more expensive. The subsidies, offering up to €6 per liter for synthetic e-fuels and €0.50 per liter for biofuels, are designed to boost demand and support the ReFuelEU Aviation mandate requiring 2% SAF at EU airports by 2025, rising to 6% by 2030.
The initiative is a cornerstone of the EU’s strategy to decarbonize aviation, a sector that accounts for nearly 4% of the bloc’s greenhouse gas emissions. SAF, including biofuels derived from feedstocks like used cooking oil and synthetic e-fuels made from captured CO2, can reduce lifecycle emissions by up to 80% compared to fossil kerosene. However, with global SAF production at 1.3 billion liters in 2024 (0.3% of jet fuel supply), scaling adoption remains a challenge. The EU’s subsidies could fund up to 216 million liters of e-fuels or 2.6 billion liters of biofuels, according to Reuters calculations based on European Commission data, significantly amplifying market momentum.
“This is a critical step to make SAF more accessible for airlines,” said Adina Vălean, European Commissioner for Transport. “By leveraging carbon market revenues, we’re creating a financial bridge to scale sustainable aviation fuels and meet our climate goals.” The subsidies align with the EU Emissions Trading System (ETS), which phases out free allowances for airlines by 2026, increasing pressure to adopt low-carbon fuels.
“This is a critical step to make SAF more accessible for airlines,” said Adina Vălean, European Commissioner for Transport.
For airlines, the subsidies offer relief from SAF’s high costs, which can exceed €3 per liter above fossil jet fuel prices. The program also incentivizes producers to expand capacity, with new HEFA, ATJ, and PtL plants announced in Germany, the Netherlands, and Spain. However, stakeholders face hurdles. SAF production is constrained by feedstock availability and renewable energy supply, particularly for e-fuels, which rely on green hydrogen. Airlines have warned that the 6% mandate by 2030 is ambitious, with a Boston Consulting Group report noting the sector allocates only 1-3% of budgets to SAF. Smaller operators and regional airports, meanwhile, benefit from additional grants to ensure equitable access, preventing dominance by large carriers.
The policy sets a precedent for other hard-to-abate sectors like shipping and heavy industry, where similar subsidy models are under consideration. Globally, the EU’s approach strengthens its leadership in SAF policy, harmonizing with ICAO’s CORSIA framework through credit recognition and cross-border fuel compatibility. For investors, the subsidies signal stable demand, potentially unlocking €72 billion needed for SAF production through 2050, as estimated by producers. Airlines must now integrate SAF into procurement strategies, leveraging lifecycle carbon data and diverse suppliers to comply with mandates.
Challenges persist, including the need for cost reductions through economies of scale and technological advances. The EU’s reliance on carbon market revenues ties the program’s success to ETS stability, while feedstock competition with other sectors could strain supply chains. Nevertheless, this initiative marks a pivotal shift, transforming SAF from a niche solution to a mainstream fuel, with implications for global aviation decarbonization.
Source: Biofuels International Magazine, “EU Offers Subsidies to Boost Sustainable Aviation Fuel Use,” June 17, 2025.
