SAF Demand-Supply Imbalance Keeps Prices High

Sustainable Aviation Fuel (SAF) is still costlier than conventional jet fuel due to technological, economic, and supply chain factors.

SAF is still in its early stages, produced in relatively small volumes around the world. Clearly, economies of scale haven't kicked in yet — lower volumes mean higher costs per unit of sustainable aviation fuel.

SAF production is expected to grow to 2mn tonnes (Mt) in 2025, accounting for just 0.7% of airline fuel use, according to Willie Walsh, IATA’s Director General.

SAF production will double from the 1Mt produced in 2024 (all of which was purchased by airlines), but production needs an exponential expansion to meet the demands of the industry’s commitment to net zero carbon emissions by 2050, Walsh said at the recent International Air Transport Association (IATA) Annual General Meeting in New Delhi.

IATA estimates that the average cost of SAF in 2024 was 3.1 times that of jet fuel, for a total additional cost of $1.6bn. In 2025, the global average cost for SAF is expected to be 4.2 times that of jet fuel.

This extra cost is largely the result of SAF 'compliance fees’ being levied by European fuel suppliers to hedge their potential costs as a result of European SAF mandates to include 2% SAF in the jet fuel supply.

“The behaviour of fuel suppliers in fulfilling the SAF mandates is an outrage. 

The cost of achieving net zero carbon emissions by 2050 is estimated to be an enormous $4.7tn. Fuel suppliers must stop profiteering on the limited SAF supplies available and ramp up production to meet the legitimate needs of their customers,” Walsh noted.

The cost of the Carbon Offsetting Reduction Scheme for International Airlines (CORSIA) to airlines is expected to reach $1bn in 2025.

The market for CORSIA credits will grow, but Guyana is the only country to have issued certificates for the high-quality credits that the scheme requires.

Since SAF is one of the key enablers for air transport’s net zero commitments, its production must be accelerated, IATA says.

Net zero in every industry requires replacing the energy source – not the activity that relies on it.

With the world relying on fossil fuels for over 80% of its energy consumption, IATA insists that this is a whole-economy issue, and that no single industry can achieve this on their own.

All governments must maximise renewable energy, and renewable fuel production, for all.

This, in turn, will maximise also air transportation’s contribution to the global economy, and its ability to accelerate growth in most other industries, to achieve better economic and environmental outcomes for all.

The top priority is to increase renewable energy and fuel production. In doing so, governments must be mindful of unintended consequences that often afflict new and immature markets, and take action to eliminate oligopolistic pricing behaviour.

Governments must eliminate legacy policies as well, that were warranted maybe 100 years ago, but that today stand in the way of the energy transition.

“Looking at oil company profits, it is wholly unjustified to support their bottom lines with tax credits and handouts, and inexplicable why such support is not provided to renewable energy companies.

“If redirected, the $1tn annually of favours to big oil could fund the energy transition in air transportation in less than five years. Air transportation is a uniquely global network and each uncoordinated action taken by an individual government will cause damage to it.” Global standards have made air transportation what it is today: the safest, most secure, and the by far the fastest mode of transportation in the world, providing unparalleled connectivity to more people and businesses than ever before, at an increasingly accessible price.

IATA says it is providing essential market infrastructure to help create a global SAF market that is necessarily global, transparent, liquid, and accessible to all.

It has launched a new international mechanism, the Civil Aviation Decarbonisation Organisation (CADO) to ensure immutable tracking of the environmental benefits of SAF purchases and their orderly claiming against regulatory obligations.

Despite its environmental benefits, sustainable aviation fuel remains more expensive than conventional jet fuel mainly due to the scale of production and demand – supply imbalance.

Traditional jet fuel is produced in massive volumes using decades-old infrastructure. SAF, by contrast, is still in its early stages, produced in limited quantities without the benefit of economies of scale.

The demand for SAF is growing rapidly, but global supply is still very limited. That imbalance keeps prices elevated.

Industry analysts, however, expect costs to fall — driven by innovation, scale, and policy support.

But for now, SAF’s higher cost reflects the true environmental and technological investments required to decarbonise aviation.