Europe’s push for sustainable aviation fuels needs more than mandates
In the context of Europe's aggressive push for Sustainable Aviation Fuels (SAF) amid rising climate pressures, the desk underscores that mere mandates will not suffice to stimulate production growth. Per the full note from ing-think, while Europe leads on legislation designed to enhance SAF adoption, true progress hinges on providing robust incentives to producers and a comprehensive feedstock strategy. The current trajectory forecasts a modest increase in global SAF blend rates from 0.6% to 0.8% by 2026, but costs remain a significant barrier, with bio-SAF priced at approximately $2,500 per tonne compared to conventional jet fuel at $950 per tonne.
What the desk is arguing
The desk posits that Europe's ambitious SAF mandates alone will not catalyze the necessary supply chain adjustments to achieve climate goals. Without additional incentives for fuel producers and a strategic approach to feedstock sourcing, Europe risks deepening its reliance on imports, thus defeating the purpose of its local sustainability efforts.
Supporting this view, S&P Global indicates that Europe might fall short of its SAF targets, underscoring the broader implications of slow adoption rates. The differentiation in cost structures, with bio-SAF being significantly more expensive than conventional alternatives, compounds the challenge of widespread SAF integration in aviation.
Where it sits in our coverage
Given the ongoing focus on this trend, our consensus targets for EUR/USD are set at 1.075, with a range between 1.04 to 1.12. Notably, jpmorgan projects a target of 1.10 for March 2026, aligning closely with our consensus. In contrast, bofa takes a more cautious stance with a lower target of 1.04 for the same period, suggesting a divergence in outlook regarding economic recovery in the Eurozone and its impact on currency values.
How other firms see it
Group-aligned firms like jpmorgan indicate a consensus on the need for supportive policies but remain optimistic about the eventual uptake of SAF, believing that improved technology could alter cost dynamics. On the other hand, bofa presents a contrary perspective, focusing on the economic strains that might delay SAF adoption.
Market behavior in EUR/USD will likely be influenced by the reconciliation of domestic economic policies with sustainability agendas, particularly as global energy prices fluctuate due to shifts in the climate policy landscape.
What the calendar says
No high-impact events are currently scheduled that would directly influence the FX landscape in relation to Europe’s SAF push; traders will need to monitor developments closely as industry dialogues and legislative frameworks evolve throughout the summer months.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Europe's SAF mandates are strong signals but lack necessary support mechanisms.
- 02The cost gap between conventional and sustainable fuels remains a critical hurdle.
- 03Global SAF blend rates projected to increase but still fall short of desired targets.
- 04Shifts in economic forecasts for Eurozone currencies are contingent on sustainability policy outcomes.
Market implications
Watch for EUR/USD movements around the 1.075 mark as traders assess the effectiveness of the European SAF initiatives versus broader economic indicators. Positioning signals could shift based on technological advancements or legislative changes affecting SAF production economics.
Risks to this view
Key risks to our outlook include any sudden drops in conventional fuel prices, which could exacerbate the price gap and deter SAF adoption. Additionally, widespread technological advancements that lower production costs could shift the narrative, potentially benefiting sustainable fuel adoption more rapidly than anticipated.
Opinions Opinion by Gerben Hieminga and Rico Luman Europe’s push for sustainable aviation fuels needs more than mandates 09:57 Transport & Logistics Sustainability Europe’s mandates for Sustainable Aviation Fuels send a strong demand signal, but won’t unlock new supply on their own. Scaling production requires incentives for producers and a broader feedstock strategy. Without these measures, Europe risks meeting its climate goals by becoming increasingly dependent on imported fuels Sustainable Aviation Fuel is aviation’s clearest route to decarbonise some of its emissions The good news: SAF is aviation’s clearest route to decarbonise some of its emissions As conference season for business leaders gives way to their summer travel period, aviation’s climate problem is back in focus.
Sustainable aviation fuel (SAF) remains the leading solution for cutting emissions, but adoption is still moving slowly. The global SAF blend rate is expected to rise from just 0.6% to 0.8% in 2026 . Europe is leading on mandates, but, according to S&P Global, it still risks falling short of its SAF targets in the coming years.
Air travel remains essential for business and consumers alike, but pressure to cut emissions is growing. Sustainable aviation fuel has therefore shifted from being a niche topic to a boardroom priority. Beyond fleet renewal, efficiency gains, and demand measures, they're a practical near-term way to cut aviation emissions.
Electric aircraft and hydrogen propulsion may play a role in niche markets, but they will not decarbonise long-haul aviation before 2050. That leaves SAF as the only scalable drop-in option for the coming decades. The bad news: the price gap is still a key bottleneck and won’t disappear anytime soon That doesn't make the economics easy.
In Europe, conventional jet fuel costs around $950 per tonne, while bio-SAF is closer to $2,500 per tonne. Synthetic SAF – often referred to as eSAF or Power-to-Liquid (PtL) – remains significantly more expensive, and pricing is much less transparent because most volumes are traded over the counter. For airlines already operating on thin margins (global net margins have been squeezed to 2.0%), that price gap is a serious hurdle.
SAF prices are expected to remain elevated in key aviation fuel hubs SAF prices in $ per tonne for most mature and cheapest products like HEVA Source: Bloomberg New Energy Finance "> Source: Bloomberg New Energy Finance Europe has sticks, but it also needs carrots The EU has chosen a mandate-led approach to close this gap. Under ReFuelEU Aviation, the SAF share must rise from 2% in 2025 to 6% in 2030 and 70% by 2050, with a growing sub-mandate for synthetic fuels. The obligation sits with fuel suppliers.
The EU guidelines for penalties are deliberately high: at least twice the price gap between a metric ton of SAF and conventional jet fuel. Importantly, paying the penalty doesn't remove the obligation to supply missing volumes later. That gives the mandate real force, at least on paper.
Fuel suppliers cannot simply pay their way out of compliance; any shortfall must still be made up later. Yet enforcement depends on member states. Germany has signalled it may go beyond the EU minimum penalties, but practical implementation remains uncertain.
The key question is not only how high penalties are, but how quickly and consistently they will be applied. “Whether enough projects reach final investment decision in 2026 and 2027 will be crucial to meeting the 6% SAF target in 2030 and the much steeper 20% target in 2035.” But sticks alone don’t finance new SAF production plants. More projects need to move to construction soon for both bio-SAF and eSAF. Ensuring enough projects reach final investment decision in 2026 and 2027 is crucial to meeting the 6% SAF target in 2030 and the much steeper 20% target in 2035.
Recent cancellations and delays by Shell, BP and UPM show how difficult market conditions have become. One obstacle is the use of change-of-law clauses in offtake agreements. Mandates are essential for project viability, but buyers are reluctant to bear regulatory risk in long-term contracts, especially when SAF prices are expected to remain structurally above those of conventional jet fuel.
The UK is developing contracts for difference , a support scheme that guarantees producers a fixed price by paying the difference when market prices fall below an agreed level. The US has taken a different route, relying more on tax credits to stimulate production. But the objective is similar: reducing revenue risk so projects can reach final investment decisions.
In continental Europe, airlines already have an incentive to blend SAF because it reduces the number of allowances they need under the EU Emissions Trading System. But much of today’s supply is still imported from Asia. If the European Commission and member states want to build a domestic SAF industry, mandates will need to be matched with stronger producer-side incentives.
Otherwise, Europe risks creating a compliance market that meets blending targets but increasingly relies on imports rather than local investment. The tenure mismatch is where projects get stuck Offtake tenure is another point where SAF projects get stuck. Producers often need 10 to 15 years of contracted demand to make new plants bankable.
Without that, projects remain exposed to a thin and volatile spot market. Airlines, however, face real uncertainty around future prices, technologies and regulation. So, they tend to limit offtake commitments to just two or three years.
That leaves a clear mismatch between the long-term certainty producers need, and the shorter-term flexibility airlines want – a gap the market is unlikely to close on its own. The low-carbon hydrogen market offers a useful template. In Germany, H2Global uses a publicly backed intermediary to buy clean hydrogen products under long-term contracts and resell them under shorter-term contracts, with public funding covering the risk.
A similar SAF market-maker could bridge the gap between what producers need and what airlines can reasonably sign today. Early proposals exist, but they’re still far from implemented. Without such instruments, Europe risks having more SAF conferences than SAF investment decisions.
This is not only a climate-policy challenge, but also an industrial-policy one. Building a new SAF industry is likely to require temporary public support until the market reaches sufficient scale and bankable offtake structures emerge. The sensitive issue: SAF scale depends on feedstock choices Scaling SAF also means scaling sustainable feedstock, which has a different flavour in every region .
Today’s cheapest and most mature route is Hydroprocessed Esters and Fatty Acids (HEFA), based mainly on used cooking oil and animal fats. That explains why the EU has not introduced a hard UK-style HEFA cap. For now, HEFA is the only SAF pathway available at a commercial scale, and it's needed to get the early mandate off the ground.
That also creates a risk. If the market leans too heavily on HEFA, it may crowd out investment in advanced biofuels and eSAF, while increasing pressure on limited waste-based feedstocks. This is why the UK caps HEFA in its mandate.
Europe may need a similar guardrail over time to help build a more diversified SAF market. The “no food for fuel” principle remains politically powerful and broadly sensible. Europe should avoid a SAF market that competes with food production or drives biodiversity loss through monocultures.
But the debate should not stop at today’s definitions of feedstock. Some cropping systems may allow food and fuel production to coexist, for example through intermediate crops such as camelina or sunflowers. And there are ways to combine agriculture with energy production and biodiversity goals.
Not every new crop needs to qualify for SAF support. Still, European policy should leave room for sustainable land-use models that can scale up new feedstocks without undermining food production or nature. That will require policymakers to keep feedstock rules open to credible new options. “If Europe wants SAF to move from conference panels to final investment decisions, it needs more than obligations.” Conclusion: mandates start markets, design scales them European policymakers are right to push aviation towards SAF, but current efforts to scale production capacity are not yet enough.
The mandates are ambitious: 6% SAF blending in 2030 and 34% in 2040, including 10% eSAF. That will require a sharp increase in production volumes. Early mandates create momentum, but the next phase must be about market design that unlocks supply.
If Europe wants SAF to move from conference panels to final investment decisions, this issue requires more than obligations. It needs price support, bankable offtake structures and a credible feedstock strategy. Otherwise, Europe may succeed in creating demand but fail to build domestic supply.
It would result in a SAF market that meets mandates but leaves investment and supply security increasingly outside Europe. Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Sustainable aviation fuel SAF Energy transition Aviation Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In this opinion The good news: SAF is aviation’s clearest route to decarbonise some of its emissions The bad news: the price gap is still a key bottleneck and won’t disappear anytime soon Europe has sticks, but it also needs carrots The tenure mismatch is where projects get stuck The sensitive issue: SAF scale depends on feedstock choices Conclusion: mandates start markets, design scales them Authors Gerben Hieminga Senior Sector Economist, Energy Gerben Hieminga is a Senior Sector Economist. He joined the firm in 2004 and previously used to work for the real estate team. He holds an undergraduate degree in economics and building engineering… Rico Luman Senior Sector Economist, Transport and Logistics Rico Luman is a senior sector economist with a focus on transport, logistics and the automotive industry.
He also looks at ports economics and mobility in general. Formerly he worked as a credit…
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