As climate change challenges intensify, the aviation industry's transition to sustainable operations has become increasingly urgent. Sustainable Aviation Fuel (SAF) has been identified as a key solution for reducing aviation emissions. However, a new report from the International Air Transport Association (IATA) reveals alarming shortcomings in SAF production growth and warns that current policy frameworks may be hindering rather than helping the industry's decarbonization efforts.
SAF Production Falling Short of Targets
IATA projects global SAF production will reach 1.9 million metric tons (approximately 2.4 billion liters) in 2025, showing significant growth from 1 million tons in 2024. However, this growth is expected to slow in 2026, with production estimated at just 2.4 million tons. These figures represent only 0.6% of total aviation fuel consumption in 2025 and a mere 0.8% in 2026.
Notably, IATA's 2025 SAF production forecast remains unchanged from previous estimates, but inadequate policy support has resulted in underutilized production capacity, potentially leading to actual output falling below projections.
Price Premiums Create Financial Burden
SAF currently costs twice as much as conventional jet fuel, with prices reaching up to five times higher in some regulated markets. This substantial price difference is creating significant financial pressure for airlines. IATA estimates SAF premiums will add $3.6 billion to the industry's fuel costs in 2025 alone.
Policy Missteps and Market Distortions
Willie Walsh, IATA's Director General, criticized poorly designed regulatory measures for stifling SAF development. "If policymakers are serious about increasing SAF production and aviation decarbonization, they need to learn from failures and work with the industry to implement effective incentive mechanisms," Walsh stated.
The European Union and United Kingdom serve as cautionary examples where SAF mandates have backfired:
- EU's ReFuelEU Aviation Initiative: Limited SAF production capacity and supply chain oligopolies have driven costs significantly higher. Fuel suppliers have expanded profit margins, forcing airlines to pay up to five times conventional fuel prices—double typical SAF market rates—while still facing supply and documentation inconsistencies.
- UK SAF Mandates: Similar price surges have occurred, with airlines bearing the full financial burden.
Due to flawed policy frameworks, airlines will pay $2.9 billion in SAF premiums in 2025 for just 1.9 million tons of available fuel. $1.4 billion of this represents the standard price premium over conventional jet fuel.
Fragmented Policies Slow Investment
Europe's disjointed regulatory environment has distorted markets, delayed investments, and undermined efforts to expand SAF production capacity. European regulators must acknowledge their current approach isn't working and urgently course-correct. While the European Commission's recent innovation policy announcement represents progress, the lack of clear timelines remains problematic.
The slow pace of SAF production growth is forcing airlines to reconsider their sustainability targets. Many carriers committed to 10% SAF usage by 2030 may need to revise these goals, as current production levels cannot support such ambitions.
Emerging Challenges with e-SAF Mandates
With the UK (2028) and EU (2030) preparing to implement mandates for e-SAF (electrosynthetic sustainable aviation fuel), policymakers must avoid repeating past mistakes. e-SAF's cost basis already exceeds conventional jet fuel by up to twelve times. Without robust production incentives—rather than ineffective volume mandates—supply will fall short of targets.
Failure to meet production goals could drive compliance costs to €29 billion by 2032, a likely outcome under current policy frameworks.
Urgent Need for Policy Reform
Marie Owens Thomsen, IATA's Senior Vice President of Sustainability and Chief Economist, emphasized that current policies clearly aren't delivering expected results given persistently low SAF production. "Regulators must adjust course to ensure sustainable, scaled SAF production that drives costs down," she stated. "Mandates have produced the opposite effect. Repeating these mistakes with e-SAF would be outrageous."
While SAF remains critical for aviation decarbonization, current regulatory approaches are failing to accelerate its adoption. Effective policy reforms and industry collaboration are urgently needed to develop practical incentive mechanisms that can scale SAF production and support the industry's sustainability transition.