NEW DELHI, INDIA — As the aviation industry strives for net-zero carbon emissions by 2050, Sustainable Aviation Fuel (SAF) remains the cornerstone of decarbonization, offering up to 80% lifecycle emissions reductions. Yet, a new International Air Transport Association (IATA) report highlights that policy missteps, particularly in Europe, threaten to derail SAF’s scale-up. With global SAF production expected to hit 2 million tonnes (2.5 billion liters) in 2025—merely 0.7% of aviation’s fuel demand—the industry faces a steep climb to meet the International Civil Aviation Organization’s (ICAO) 5% SAF target by 2030.

SAF Production and Cost Challenges

IATA’s forecast underscores SAF’s slow progress. Despite doubling from 2024’s 1.3 billion liters, 2025’s projected output will add $4.4 billion to global fuel costs due to SAF’s premium over conventional jet fuel, which remains 2–5 times cheaper. In Europe, where EU and UK mandates require SAF blending from January 2025, costs have spiraled. Compliance fees charged by SAF producers and suppliers have doubled prices, inflating the cost of 1 million tonnes of mandated SAF from $1.2 billion to $2.9 billion. Willie Walsh, IATA’s Director General, warns, “Raising the cost of the energy transition that is already estimated to be a staggering $4.7 trillion should not be the aim or the result of decarbonization policies.”

These fees, which could have abated 3.5 million tonnes of CO2 if redirected to emissions reduction, highlight a critical flaw: mandates implemented without sufficient SAF supply or market safeguards distort pricing and stifle progress. Europe’s approach, IATA argues, risks diverting SAF to regions with stronger incentives while burdening airlines with unsustainable costs.

Policy Barriers to SAF Scale-Up

The report identifies three core policy shortcomings:

1. Misaligned Incentives: Globally, governments allocate $1 trillion annually to fossil fuel subsidies, dwarfing support for renewable energy and SAF. Redirecting even a fraction of these funds could level the playing field for SAF producers competing with entrenched oil industries.

2. Fragmented Energy Policies: SAF production relies on renewable energy, yet most energy policies fail to prioritize aviation’s needs. Scaling SAF requires co-production models, shared infrastructure, and policies ensuring SAF secures a fair share of renewable feedstocks amidst competition from other sectors.

3. Weak Market Mechanisms: The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is underutilized due to limited availability of Eligible Emissions Units (EEUs). Only Guyana has made carbon credits accessible for CORSIA compliance, leaving airlines with few options to offset emissions cost-effectively.

Dr. Hemant Mistry, IATA’s Director of Net Zero Transition, emphasizes the need for holistic reform: “Policies must integrate SAF into the broader energy ecosystem, ensuring aviation isn’t sidelined in the race for renewable resources.”

IATA’s Initiatives to Support SAF

IATA is addressing these challenges through two key programs:

• SAF Registry: Managed by the Civil Aviation Decarbonization Organization (CADO), this platform standardizes tracking of SAF purchases, usage, and emissions reductions, ensuring compliance with CORSIA and the EU Emissions Trading Scheme. It enhances transparency, enabling airlines to claim accurate carbon credits.

• SAF Matchmaker: This tool connects airlines with SAF suppliers, streamlining procurement and fostering a competitive global market. By matching demand with supply, it aims to stabilize prices and encourage production.

These initiatives aim to create a robust SAF ecosystem, but their success hinges on supportive government action.

“Raising the cost of the energy transition that is already estimated to be a staggering $4.7 trillion should not be the aim or the result of decarbonization policies.” — Willie Walsh, IATA Director General

India: A Model for Progressive SAF Policy

India, the world’s third-largest civil aviation market, offers a counterpoint to Europe’s struggles. Through the Global Biofuels Alliance, India targets 2% SAF blending for international flights by 2028, backed by guaranteed pricing, capital support, and technical standards. IATA is collaborating with the Indian Sugar & Bio-Energy Manufacturers Association (ISMA) and Praj Industries Limited to align India’s feedstock lifecycle assessments with global best practices. Praj’s expertise in bioenergy, led by CEO Dr. Pramod Chaudhari, positions India to leverage waste-based feedstocks like agricultural residues, which could minimize competition with food production.

India’s policies demonstrate how targeted incentives can accelerate SAF adoption, offering a blueprint for other emerging economies. However, scaling to meet global demand requires replicating such models worldwide.

Recommendations for Governments

IATA urges immediate action in three areas:

1. Reform Subsidies: Redirect fossil fuel subsidies to renewable energy and SAF production to lower costs and boost supply.

2. Integrate SAF into Energy Policy: Develop co-production models and infrastructure to secure SAF’s share of renewable feedstocks, ensuring aviation competes equitably with other sectors.

3. Strengthen CORSIA: Increase EEU availability to make CORSIA a viable market-based mechanism, reducing reliance on costly mandates.

Walsh stresses urgency: “Europe needs to realize that its approach is not working and find another way.” Without coordinated global policies, SAF’s potential to decarbonize aviation will remain out of reach.

Looking Ahead

The SAF market’s trajectory depends on closing the policy gap. While Europe grapples with mandate-driven cost spikes, India’s proactive approach highlights the value of incentives and partnerships. For SAF to reach 5% of global fuel by 2030 and two-thirds by 2050, governments must act decisively to align energy, aviation, and climate policies. IATA’s tools, like the SAF Registry and Matchmaker, provide a foundation, but systemic change is critical to unlock SAF’s full potential.

Source

• International Air Transport Association (IATA), “Policy Shortcomings Puts SAF Production at Risk,” Press Release, June 2025, iata.org.

• IATA Sustainability Reports, iata.org, accessed June 20, 2025.