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.
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