UK government starts new consultation on SAF revenue certainty mechanism

The UK government has opened another public consultation on the levy to fund the revenue certainty mechanism (RCM) it is setting up to help sustainable aviation fuel producers secure final investment decisions on their projects. The government’s preferred approach is to introduce a levy on suppliers of aviation fuel, and the latest Department for Transport (DfT) consultation sets out options and considerations regarding the levy’s detailed design. SAF plants at commercial scale can cost £600 million ($800m) to £2 billion ($2.6bn) to reach a profitable size, says DfT, and usually run at a loss during their early years of deployment. Investors have so far been risk averse towards first-of-a-kind production plants, with no reliable UK or global SAF market price for advanced SAF in place and projects competing for finance with other low carbon technologies.

The government believes the provision of a RCM will mitigate some of the risks to finance providers, enabling a lower cost of capital and helping SAF projects reach final investment decisions in the UK. Having carried out an earlier consultation in 2024 on the best approach to support early SAF producers, it confirmed the RCM would be based on a guaranteed strike price mechanism and the first tranche of signed contracts would be with UK projects using next-generation non-HEFA technology and feedstocks.

A further consultation was carried out earlier this year on funding the RCM through a proposed variable levy on aviation fuel suppliers, which was later confirmed, and the SAF Bill was introduced in Parliament to introduce the necessary primary powers to implement the RCM and support UK SAF production.

This latest consultation presents options for the levy’s detailed design. “Government remains fully committed to working with industry on the design of the RCM, including how the Aviation Fuel Supplier Levy (AFSL) will work in practice,” says DfT, which reiterates that costs of the scheme should be borne by aviation fuel suppliers, alongside their existing obligations under the UK SAF mandate.

Revenues from the levy would include payments to producers, the provision of reserves and collateral, and costs to administer the scheme.

The consultation document says it will be a commercial decision for aviation fuel suppliers whether they choose to pass on some or all costs of the levy to airlines, but assumes 100% of the costs will be passed on. DfT modelling expects a 75% pass-through rate of costs and benefits from airlines onto customers, although this is likely to have only a small impact on passenger ticket prices, “less than the average annual variation in ticket prices.”

Contributions by fuel suppliers will be relative to their market share by volume of fossil aviation fuel that is supplied – and independently verified – in the UK over a defined period. A minimum threshold of 468,000 litres of fossil jet fuel for the levy will be applied and aligned with the SAF mandate.

The Secretary of State for Transport will designate a counterparty for the RCM to administer revenue certainty contracts with SAF producers and the AFSL that funds it. The counterparty will calculate, manage and enforce the collection of the levy payments from suppliers.

In the event of a supplier defaulting on its financial obligation under the scheme, the consultation proposes two mechanisms to collect alternative funding and avoid insufficient funds to make payments out to SAF producers. The first is credit cover through collateral, guarantees or insurance, the other being ‘mutualisation’, in which the cost of a supplier default is spread across the remaining participants in the scheme.

The government says that in order to secure a consistent and durable funding stream to deliver the RCM, “it is critical that the design of the levy promotes a high level of compliance and responds to instances of non-compliance effectively.”

The counterparty will have powers to issue notices of non-compliance, add interest to outstanding payments and pursue debts through the civil courts when other resolution means have been exhausted or are unavailable. The counterparty must report non-compliance to the Secretary of State, who has the power under the SAF Bill to issue a supplier with a financial penalty of an amount up to the lesser of £100,000 or 10% of annual turnover. The scheme will have an appeals process.

The consultation closes on 8 January 2026, with a government response published in 2026. It expects all the necessary legislation for the RCM will be in place by the end of 2026.

Photo (Alfanar): Alfanar’s Lighthouse Green Fuels refinery project in Teesside, UK, is expected to produce 135,000 tonnes of SAF per year when operational

Christopher Surgenor
Editor