The International Air Transport Association (IATA) has released revised estimates projecting global Sustainable Aviation Fuel (SAF) production will reach 1.9 million tonnes (Mt) in 2025, a figure that falls short of previous forecasts due to “poorly designed” mandates in the UK and European Union.
Key Takeaways:
- Production Gap: SAF output will double to 1.9 Mt (2.4 billion liters) in 2025 but remains just 0.6% of total jet fuel demand.
- Cost Surge: The industry faces a USD 3.6 billion additional fuel bill in 2025 due to SAF premiums.
- Policy Warning: IATA claims EU and UK mandates have failed to accelerate capacity, leading to prices up to 5x higher than fossil jet fuel.
- 2030 Risk: Airlines may be forced to retract commitments to use 10% SAF by 2030 due to insufficient supply.
Growth Slowing Amidst Mandate Struggles: While production is set to double from 1 Mt in 2024 to 1.9 Mt in 2025, the momentum is slowing. IATA projects that growth will decelerate in 2026, reaching only 2.4 Mt (0.8% of total consumption). This slowdown is attributed to a lack of policy support to maximize existing capacity.
The financial impact is severe. In mandate-heavy markets like the EU and UK, oligopolistic supply chains have widened margins, forcing airlines to pay premiums up to five times the cost of conventional jet fuel. IATA notes that this cost burden—USD 2.9 billion of which is paid for just the limited 1.9 Mt available—comes without guarantees of supply or consistent documentation.
Industry Leadership Speaks Out: IATA’s leadership issued a stark rebuke of the current regulatory approach, arguing that mandates without production incentives are stifling the market.
“SAF production growth fell short of expectations as poorly designed mandates stalled momentum in the fledgling SAF industry,” said Willie Walsh, IATA’s Director General. “If the goal of SAF mandates was to slow progress and increase prices, policymakers knocked it out of the park.”
Walsh further warned of the long-term consequences: “Regrettably, many airlines that have committed to use 10% SAF by 2030 will be forced to reevaluate these commitments. SAF is not being produced in sufficient amounts to enable these airlines to achieve their ambition.”
The Imminent Threat of e-SAF Costs The report also highlighted risks associated with upcoming e-SAF mandates in the UK (2028) and EU (2030). With e-SAF costs potentially reaching 12 times that of conventional fuel, the industry risks non-compliance costs of EUR 29 billion by 2032 if policies are not corrected.
“Mandates have done just the opposite, and it is outrageous to repeat the same mistakes with e-SAF mandates,” added Marie Owens Thomsen, IATA’s SVP for Sustainability and Chief Economist.
Bioenergy Business Analysis: For investors and plant developers, IATA’s revision signals a critical pivot point in the bioenergy market. The data suggests that the “stick” approach (mandates) used by the EU and UK is insufficient to drive the CAPEX required for large-scale refinery expansion. The market opportunity lies in jurisdictions that shift toward production-linked incentives (“carrots”), similar to the U.S. model. Without this shift, the forecasted 0.6% penetration rate in 2025 indicates that the bioenergy sector will remain a niche, high-cost luxury rather than a scalable commodity, potentially stranding assets in regions with aggressive but unsupported mandates.
Also read: Ethiopia SAF Production confirmed viable in national feasibility study
