Compliance Fee Jacks Up SAF Market Price in Europe

Airlines operating in Europe are facing mounting challenges stemming from compliance fees imposed by Sustainable Aviation Fuel (SAF) producers and suppliers.

While these fees are designed to support regulatory and sustainability goals, they are adding significant financial, operational, and strategic burdens to an industry already navigating tight margins and a highly competitive landscape.

“While it is encouraging that SAF production is expected to double to 2mn tonnes in 2025, which is just 0.7% of aviation’s total fuel needs. 

And even that relatively small amount will add $4.4bn globally to the fuel bill. The pace of progress in ramping up production and gaining efficiencies to reduce costs must accelerate,” said IATA’s Director General Willie Walsh.

The problem with mandates: Most SAF is now heading towards Europe, where the European Union and United Kingdom mandates kicked in on January 1.

“Unacceptably, the cost of SAF to airlines has now doubled in Europe because of compliance fees that SAF producers or suppliers are charging,” IATA says.

For the expected 1mn tonnes of SAF that will be purchased to meet the European mandates in 2025, the expected cost at current market prices is $1.2bn.

Compliance fees are estimated to add an additional $1.7bn on top of market prices—an amount that could have abated an additional 3.5mn tonnes of carbon emissions.

Instead of promoting the use of SAF, Europe’s SAF mandates have made SAF five times more costly than conventional jet fuel.

“This highlights the problem with the implementation of mandates before there are sufficient market conditions and before safeguards are in place against unreasonable market practices that raise the cost of decarbonisation.

“Raising the cost of the energy transition that is already estimated to be a staggering $4.7tn should not be the aim or the result of decarbonisation policies.

 Europe needs to realise that its approach is not working and find another way,” Walsh said on the sidelines of IATA’s annual general meeting in New Delhi last month.

Global SAF market: To support the development of a global SAF market, IATA has worked on two initiatives:

A SAF registry managed by the Civil Aviation Decarbonisation Organisation (CADO) that brings a transparent and standardised system for tracking SAF purchases, usage and associated emissions reductions in compliance with international regulations such as Carbon Offsetting Scheme for International Aviation (CORSIA) and the EU Emissions Trading Scheme.

The SAF Matchmaker that will facilitate SAF procurement by matching airline requests for SAF with supply offers.

IATA urges governments to focus on three areas:

Creating more effective policies. Eliminating the disadvantage that renewable energy producers face compared with big oil is necessary to scale renewable energy production in general and SAF production in particular. This includes redirecting a portion of the $1tn in subsidies that governments globally grant for fossil fuel.

Develop a comprehensive approach to energy policy that includes SAF. Firstly, advancing SAF production requires an increase in renewable energy production from which SAF is derived.

Secondly, it also requires policies to ensure SAF is allocated an appropriate portion of renewable energy production. A holistic approach should support joint use of infrastructure, co-production and other measures that will benefit the energy transition for aviation and for all other economic sectors.

Ensure the success of CORSIA as the sole market-based mechanism to address international aviation’s CO2 emissions. IATA urges governments to make Eligible Emissions Units (EEUs) available to airlines. To date Guyana is the only state to have made their carbon credits available for airlines to purchase and claim against their CORSIA obligations.

Focus on India: India, one of the emerging economies on the world stage today, is the third-largest oil user after the US and China. India launched the Global Biofuels Alliance to position biofuels as a key to energy transition and economic growth.

This includes a target for 2% SAF blending for international flights by 2028 with enabling policies such as guaranteed pricing, capital support for new projects, and technical standards.

 IATA will be working with the Indian Sugar & Bio-Energy Manufacturers Association (ISMA) and Praj Industries, to provide guidance on global best practices for life cycle assessment of the use of feedstocks in the country.

As the third-largest global civil aviation market, India can strengthen its leadership in biofuels with the accelerated adoption of SAF through progressive policies.

IATA SAF Matchmaker platform: Recently, IATA announced the release of the Sustainable Aviation Fuel (SAF) Matchmaker platform, to facilitate SAF procurement between airlines and SAF producers by matching requests for SAF supply with offers.

When there is a match, airlines and suppliers can connect and take their negotiation offline to agree on specific terms including price and payment terms.

The growing use of SAF is essential to decarbonising aviation. However, excessive compliance fees in Europe risk undermining adoption by inflating costs and reducing efficiency.

Airlines must balance regulatory obligations with economic realities—something only achievable through smarter, more supportive policy frameworks.

Europe’s current approach serves as a cautionary example- without synchronised market development, SAF mandates can do more harm than good!