Energy and transition economics 2026-04-26 11 minute read

Sustainable aviation fuel 2026: the mandate decade, CORSIA Phase 2, and the HEFA bottleneck

Production sits at roughly 1 million tonnes against a 360 million tonne jet fuel market, yet ReFuelEU, the UK SAF Mandate, US Section 45Z, and CORSIA Phase 2 have anchored a five year compliance window that pulls SAF from voluntary corporate procurement into binding national obligation. Refiners, airlines, OEMs, and policymakers must now triage between mature HEFA, fast scaling alcohol to jet, and structurally expensive power to liquid.

IATA pegged 2024 SAF production at approximately 1 million tonnes, roughly 0.3 percent of the 360 million tonnes of jet fuel consumed by commercial aviation, with HEFA via used cooking oil and animal fats accounting for around 85 percent of supply. The mandate stack is now binding: ReFuelEU Aviation requires 2 percent SAF blending in EU airports from January 2025, rising to 6 percent in 2030 and 70 percent in 2050; the UK SAF Mandate set 1.5 percent for 2025 and ramps to 22 percent by 2040; Singapore's 1 percent SAF levy applies from 2026; Japan, India, and Brazil have published 2030 targets at 5 to 10 percent. CORSIA Phase 1 ran 2024 to 2026 on voluntary participation by 126 ICAO member states, and Phase 2 becomes mandatory for nearly all international flights in 2027 to 2035. US incentives shifted from Section 40B at USD 1.25 to 1.75 per gallon to Section 45Z at USD 0.20 to 1.00 per gallon for 2025 to 2027, recalibrating the project economics for ATJ and HEFA producers. SAF still trades at two to five times conventional Jet A: HEFA delivered in Northwest Europe ran USD 1,500 to 2,500 per tonne in 2025, e SAF runs USD 4,000 to 6,000, and Jet A averaged USD 800 to 1,000. The binding constraint through 2030 is feedstock, particularly UCO, where Chinese export volumes and EU anti dumping investigations now drive the marginal molecule.

The 2024 baseline: 1 Mt of SAF in a 360 Mt jet fuel market #

IATA's December 2024 update placed actual SAF production at approximately 1 million tonnes, double the 0.5 Mt produced in 2023 but well below the 1.5 Mt target IATA had published in early 2024. Against jet fuel demand of approximately 360 Mt in 2024 reported by the IEA, that share runs to roughly 0.3 percent, leaving the industry's 5 percent 2030 target implying a near 17 fold scale up over six years. ICAO's SAF Tracker as of Q1 2025 lists 47 Mt of announced 2030 capacity across 359 projects, but only 5 to 7 Mt is at Final Investment Decision. A meaningful share of the announced ATJ and PtL pipeline slipped two to four years in 2024 after the slow ramp at LanzaJet Freedom Pines and pauses at Phillips 66 Rodeo, Shell Rotterdam, and BP Cherry Point.

The price gap is the proximate constraint on voluntary uptake. Argus Biofuels assessed Northwest Europe HEFA SAF at USD 2,100 per tonne in Q4 2024 versus Jet A at USD 850, a 2.5 times multiple that, after ETS costs and mandate compliance fees, settles a 2 to 6 percent passenger premium on intra European routes. Voluntary offtakes signed but not yet delivered total approximately 11 Mt cumulative through 2030, dominated by United, Delta, IAG, Lufthansa, and AF KLM, with Neste, World Energy, Gevo, and LanzaJet on the supply side. Roughly 40 percent of those agreements are book and claim certificates rather than physical delivery.

Metric	2024 actual	2030 target	Source
Global SAF production (Mt)	1.0	27.0	IATA Fact Sheet, Dec 2024
Share of jet fuel demand	0.3%	5.5%	IATA, IEA Renewables 2024
Total jet fuel demand (Mt)	360	approx 490	IEA Oil 2024
Announced SAF capacity by 2030 (Mt)	n a	47	ICAO SAF Tracker, Q1 2025
Voluntary corporate offtake signed (Mt)	approx 11	n a	BloombergNEF, Mar 2025
HEFA share of supply	85%	approx 60%	ICAO SAF Tracker
Average SAF price, NW Europe (USD per t)	2,100	n a	Argus Biofuels, Q4 2024

SAF supply, demand, and price baseline, 2024

ReFuelEU, UK SAF Mandate, and the European compliance stack #

ReFuelEU Aviation, in force since January 2024 with blending obligations from January 2025, sets the most aggressive trajectory in the global mandate landscape: 2 percent SAF in 2025, 6 percent in 2030, 20 percent in 2035, 34 percent in 2040, and 70 percent in 2050, with e SAF sub mandates starting at 1.2 percent in 2030 and rising to 35 percent by 2050. The regulation applies at all EU airports above one million passengers, with anti tankering provisions requiring carriers to lift at least 90 percent of the fuel needed for departing flights at the EU airport. Penalties run at minimum twice the SAF Jet A price gap per tonne of shortfall.

The UK SAF Mandate, operational since January 2025, takes a parallel but distinct path: 1.5 percent SAF in 2025, rising linearly to 10 percent in 2030, 16 percent in 2035, and 22 percent by 2040, with a power to liquid sub mandate reaching 0.2 percent in 2030 and 3.5 percent by 2040. The UK regime layers a Revenue Certainty Mechanism backed by a levy on aviation fuel suppliers, designed to derisk PtL projects through a contracts for difference structure modelled on offshore wind CfDs. Buyout prices for 2025 are set at GBP 4.70 per litre for the main obligation and GBP 5.00 per litre for the PtL sub obligation, calibrated above the prevailing cost gap to force physical delivery rather than buyout payment.

EU ETS aviation has run in parallel since 2024 with free allowances fully phased out in 2026. EUA prices through Q1 2026 in the EUR 65 to 80 per tonne range translate to roughly USD 230 to 280 per tonne of jet fuel combusted, materially raising the implicit carbon premium on flights and tilting the airline cost stack toward SAF substitution where feasible. CORSIA offsets remain admissible only for extra EEA flights under EU rules, narrowing the effective compliance toolkit for intra European operators.

CORSIA Phase 2: from voluntary to mandatory in 2027 #

ICAO's Carbon Offsetting and Reduction Scheme for International Aviation enters its mandatory phase on January 1, 2027. Phase 1 began January 1, 2024 and runs through end 2026 on a voluntary basis, with 126 ICAO member states opted in as of October 2024, including all major aviation markets except China, India, Russia, and a handful of smaller jurisdictions. Phase 2 expands obligation coverage to nearly all international flights between ICAO member states, with exemptions limited to LDCs, SIDS, and LLDCs unless their share of international RTK exceeds 0.5 percent of the global total.

The CORSIA baseline was reset in 2022 to 85 percent of 2019 CO2 emissions from international aviation, a tightening from the pre pandemic baseline that effectively pulls forward offset obligations. Eligible emissions units for Phase 1 compliance are limited to first phase eligible programs (Verra, Gold Standard, ART TREES, ACR, CAR) with vintages from 2021 onward. CORSIA Aeronautical Environmental Protection Committee work places cumulative Phase 2 demand at 1.5 to 2.5 Gt CO2e depending on traffic recovery and SAF deployment. CORSIA Eligible Fuels (CEF) credit life cycle emissions reductions at the volume of SAF physically uplifted, providing a compliance alternative to offsets.

The strategic implication for non EU carriers is significant. Singapore Airlines, Cathay Pacific, ANA, JAL, Emirates, Qatar, Turkish, and the major Latin American flag carriers face their first binding aviation carbon cost in 2027. Phase 2 compliance cost should run USD 2 to 6 per tonne of CO2 in early years, based on CORSIA eligible offset prices in the USD 5 to 25 per tonne range.

US incentive recalibration: from Section 40B to Section 45Z #

The Inflation Reduction Act's Section 40B SAF Credit, which paid USD 1.25 to 1.75 per gallon based on lifecycle GHG reductions above 50 percent versus an 89 g CO2e per MJ Jet A baseline, expired on December 31, 2024 and transitioned to the broader Section 45Z Clean Fuel Production Credit. Section 45Z runs from January 2025 through December 2027 (with possible extension under the 2025 reconciliation package) and applies a sliding scale of up to USD 1.00 per gallon for SAF and USD 0.20 per gallon for non SAF clean fuels, calibrated against a 50 kg CO2e per MMBtu reference. Treasury and IRS Notice 2025 27 allows use of the 45ZCF GREET 2025 model and provides safe harbour for climate smart agriculture practices.

The shift has redistributed value across pathways. HEFA from used cooking oil retains the highest 45Z value per gallon given its low carbon intensity, but the value drops from approximately USD 1.75 per gallon under 40B to USD 0.85 to 1.00 per gallon under 45Z, a 40 to 50 percent reduction. Corn ethanol ATJ producers benefit from climate smart agriculture stacking and can reach the full USD 1.00 per gallon, restoring project economics for LanzaJet, Gevo, and the Marathon Petroleum Calumet Montana Renewables ATJ projects. Power to liquid e SAF receives the maximum 45Z value but remains uncompetitive at USD 4,000 to 6,000 per tonne even after credits, requiring complementary state LCFS revenues or premium offtake to clear hurdle rates.

Incentive	Period	Value	Eligibility	Status
Section 40B SAF Credit	Jan 2023 to Dec 2024	USD 1.25 to 1.75 per gallon	Min 50% lifecycle reduction vs Jet A baseline	Expired Dec 31, 2024
Section 45Z Clean Fuel Production Credit	Jan 2025 to Dec 2027	USD 0.20 to 1.00 per gallon (SAF)	Sliding scale by emissions intensity, US production only	In force, Treasury rules Mar 2025
USDA Climate Smart Ag bonus	2025 to 2027	Up to USD 0.30 per gallon (corn ATJ)	Conservation tillage, cover crops, fertilizer reduction	Final guidance Q1 2025
California LCFS credit	Continuous	Approx USD 1.00 to 1.50 per gallon	CA airports and qualifying flights	Active
Washington State Clean Fuel Standard	Continuous	Approx USD 0.40 to 0.80 per gallon	WA airport uplift	Active
Oregon Clean Fuels Program	Continuous	Approx USD 0.30 to 0.60 per gallon	OR airport uplift	Active

US SAF policy stack, federal and state, 2025 to 2027

Pathways and feedstock: HEFA scale, ATJ ramp, e SAF wait #

HEFA, the hydroprocessed esters and fatty acids pathway, accounts for roughly 85 percent of 2024 SAF supply and the bulk of capacity coming online through 2027. Neste's Singapore expansion (1.0 Mtpa SAF capacity), Rotterdam expansion (0.5 Mtpa), Marathon Petroleum's Martinez Renewables, Phillips 66 Rodeo (post 2024 reset, 0.3 Mtpa SAF), and Diamond Green Diesel's Port Arthur conversion define the 2025 to 2027 supply curve. The binding constraint is feedstock: global UCO trade in 2024 ran to approximately 5 Mt, with China supplying close to 60 percent of internationally traded volumes. The European Commission opened an anti dumping investigation into Chinese biodiesel and UCO derived feedstock in December 2023, with provisional duties imposed in August 2024, creating real regulatory tail risk for HEFA project economics.

Alcohol to jet (ATJ) is the next scaling pathway. LanzaJet's Freedom Pines facility in Georgia (10 Mgal capacity) achieved first commercial production in early 2024; Gevo's Net Zero 1 in South Dakota (60 Mgal corn ethanol ATJ) is targeted for 2027 startup. ATJ unit economics at scale converge to approximately USD 1,800 to 2,500 per tonne pre subsidy, comparable to HEFA but with a much larger feedstock pool given the global sugar and ethanol supply base. The pathway's strategic advantage is feedstock fungibility, decoupling SAF supply from the constrained UCO and tallow markets.

Power to liquid e SAF, produced via electrolytic hydrogen and captured CO2, remains pre commercial in 2026. Norsk e Fuel, HIF Global, Infinium, Twelve, and Topsoe with European Energy have FID or near FID projects targeting 2026 to 2028 startup, with capacities under 0.1 Mtpa each. Levelised costs run USD 4,000 to 6,000 per tonne, three to four times HEFA. The ReFuelEU and UK PtL sub mandates are the principal demand pull, and the UK Revenue Certainty Mechanism is the only policy framework currently calibrated to bridge the cost gap. Until the US adds a PtL specific incentive above 45Z, e SAF capacity will concentrate in Europe.

Recommendations: refiners, airlines, OEMs, policymakers #

For refiners, the 2025 to 2028 window favours optimised HEFA capacity additions tied to long term UCO and tallow supply contracts (10 year minimum, indexed to feedstock cost plus a margin floor), paired with selective ATJ joint ventures for post 2028 capacity. The strategic priority is feedstock control, not throughput maximisation: a 0.5 Mtpa HEFA project with secured UCO at fixed terms is structurally more valuable than a 1.0 Mtpa project bidding into a tightening spot market. Refiners with idle hydrocracker capacity should prioritise co processing approval under ASTM D7566 Annex A1, which allows up to 5 percent biocrude blending at existing refineries with minimal capex.

For airlines, three actions stack the compliance position. First, lock in physical SAF offtake at 30 to 50 percent of forecast 2026 to 2030 EU and UK uplift through fixed price contracts with Neste, World Energy, Marathon, and Diamond Green Diesel, with book and claim certificates for the residual. Second, build CORSIA Phase 2 compliance teams now: by Q4 2026 every international carrier needs MRV systems capable of producing CORSIA Eligible Fuel attestations and offset retirement documentation. Third, model cost pass through: at 6 percent blending in 2030 with HEFA at USD 2,000 per tonne and Jet A at USD 850, the full premium runs USD 7 to 10 per economy seat on a four hour intra European flight, within current ETS pass through bandwidth.

For OEMs, Boeing, Airbus, GE Aerospace, Pratt and Whitney, Rolls Royce, and Safran have certified 50 percent SAF blending across major fleet platforms, with 100 percent compatibility committed by 2030. Commercial teams should anchor SAF compatible fleet replacement narratives in 2026 to 2028 sales cycles for fleets in mandate jurisdictions, where compliance cost will be capitalised into aircraft economics.

For policymakers, the unfinished business is feedstock coordination and PtL bridge financing. EU UCO anti dumping enforcement and US 45Z indirect land use accounting need harmonised methodologies to prevent regulatory arbitrage. The UK Revenue Certainty Mechanism is the global template for PtL CfDs.

Sources #

Cite this brief

@misc{hossen2026safaviation2026,
  author = {Hossen, Md Deluair},
  title  = {Sustainable aviation fuel 2026: the mandate decade, CORSIA Phase 2, and the HEFA bottleneck},
  year   = {2026},
  url    = {https://deluair.com/consultancy/insights/saf-aviation-2026},
  note   = {Deluair Consultancy briefs}
}

Hossen, M. D. (2026). Sustainable aviation fuel 2026: the mandate decade, CORSIA Phase 2, and the HEFA bottleneck. Deluair Consultancy briefs. https://deluair.com/consultancy/insights/saf-aviation-2026

Hossen, Md Deluair. "Sustainable aviation fuel 2026: the mandate decade, CORSIA Phase 2, and the HEFA bottleneck." Deluair Consultancy briefs, 2026-04-26. https://deluair.com/consultancy/insights/saf-aviation-2026.

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