UK plans to impose tax on aviation fuel suppliers to fund sustainable aviation fuel support mechanism
August 10, 3, UK Department for Transport has announced a consultation on the initiative. Supporting Sustainable Aviation Fuel (SAF) Producers through the setting up “Revenue Certainty Mechanism” (RCM)This mechanism will be sponsored by aviation fuel suppliers.
SAF – Emission Reduction Solution for the Aviation Industry
Aviation fuel contributes a large part to aviation emissions. SAF, usually produced from waste oil, agricultural residues and other renewable materials, is seen as an important tool to help reduce emissions in the medium and long term. SAF manufacturers estimate that this fuel can help Reduces lifecycle greenhouse gas (GHG) emissions by up to 85% compared to traditional fossil fuels.
New SAF regulations in the UK
The British Government has issued SAF Mandate in January 1, request Integrating sustainable aviation fuels into the jet fuel mix with ratio 2% by 2025, increase 22% by 2040.
However, the expansion of SAF use is facing two main challenges:
- Limited supply because SAF production in the market is still low.
- High cost, making SAF prices much higher than traditional fossil fuels.
Revenue Guarantee Mechanism – Solution to Remove Investment Barriers
One of the main barriers to expanding SAF production is high initial investment cost. The UK government estimates that building commercial plants to produce SAF would require around £600 million – £2 billion to achieve economies of scale. However, new projects have difficulty raising capital due to Risk of unstable revenue and fuel price fluctuations.
According to the Ministry of Transport, RCM will help reduce risk by establishing an industry-funded price guarantee mechanism, ensuring a steady income stream for producers even when SAF prices fluctuate. This will help investors more confident in investing in SAF manufacturing plants in the UK.
Who will fund this mechanism?
The British government proposes that The RCM will be funded by industry, through a variable levy imposed on aviation fuel suppliers..
This mechanism follows the "polluter pays" principle for sectors that are difficult to reduce emissions and are compatible with existing policies on renewable electricity and hydrogenThe government said the cost would be Supply chain allocation, ensuring that those who benefit from fossil fuel use will be financially responsible for the transition to SAF.
Commitment from the UK government
Minister of Aviation Mike Kane stated:
“We are committed to building the technology and fuel supply to make the dream of green flying a reality, while protecting the interests of consumers. As part of our Plan for Change, this proposal will boost SAF production in the UK, create thousands of green jobs and support plans to expand the industry.”
Next route
The consultation will last until end of march 3, with plans to submit a bill to Congress Sustainable Aviation Fuel Revenue Support Mechanism Bill (SAF) this spring
This proposal marks a major step forward in the UK aviation industry's emissions reduction strategy, encourage investment in SAF and ensure the sustainable development of the industry in the future.