UK launches £219 million SAF fund as supply fears test aviation decarbonisation strategy

• The UK government has announced a £219 million low carbon fuels fund, with £93 million available over the next two years for companies developing and scaling sustainable aviation fuel production in the UK.
• The fund is designed to move projects closer to construction and final investment decision, building on £198 million already committed through the Advanced Fuels Fund since 2022.
• Ministers are pairing the funding with a new call for evidence on whether parts of the UK SAF Mandate need more flexibility, amid industry concerns that advanced non-HEFA and power-to-liquid fuels may not be available at sufficient scale.

The UK government has launched a new £219 million fund to accelerate domestic sustainable aviation fuel (SAF) production, as ministers seek to close the gap between increasingly ambitious aviation decarbonisation mandates and an underdeveloped supply base.

The Department for Transport (DfT) said the new low carbon fuels fund (LCFF) will open later this summer, with £93 million available over the next two years for companies developing low-carbon fuel projects in the UK. Applications are expected to open in mid-July, with support targeted at the “most promising projects” closest to production rather than earlier-stage concepts.

The wider £219 million fund is intended to position the UK as a global SAF hub, supporting up to 15,000 jobs and adding £5 billion to the economy by 2050, according to the government.

Aviation, Maritime and Decarbonisation Minister Keir Mather described the funding as “the next chapter in Britain’s green aviation revolution”, arguing it would back UK innovation, support high-skilled jobs and help develop the fuels needed for lower-carbon flight.

The government said SAF can reduce greenhouse gas emissions by an average of 70% on a lifecycle basis compared with fossil jet fuel, making it one of the few near-term tools available for cutting aviation emissions without replacing existing aircraft.

Playing catchup

The fund builds on the existing Advanced Fuels Fund, through which the government has already committed £198 million since 2022 to first-of-a-kind commercial and demonstration-scale SAF projects. That previous scheme has supported work including feasibility studies, pre-FEED, FEED and early engineering activity for UK SAF plants, all with the stated objective of moving projects closer to construction.

Details published by the Competition and Markets Authority’s Subsidy Advice Unit show the LCFF will provide capital grants to SAF producers through competitions between 2026-27 and 2029-30.

The fund is aimed at projects ranging from early development to those approaching final investment decision, with eligible applicants including commercial organisations, academic institutions, SMEs and consortia. Lead applicants must be registered in the UK, and funded projects must be located in the UK.

The announcement is not just an industrial funding story. It is also an admission, albeit politely phrased, that the SAF market is not yet where policymakers need it to be. Alongside the fund, the government has launched a call for evidence on the SAF Mandate, which requires SAF to account for 2% of UK jet fuel demand in 2025, rising to 10% in 2030 and 22% in 2040.

Ministers insist they are not proposing to reduce the headline targets, but they are seeking evidence on future supply, costs, industry certainty and possible flexibility around the mandate’s design.

The most sensitive issue is the balance between near-term SAF supply and the need to avoid over-reliance on HEFA fuels, which are typically produced from used cooking oil and waste fats. HEFA dominates today’s SAF market, but feedstocks are limited and increasingly contested by road fuels, shipping and other sectors.

The UK mandate introduces a HEFA cap from 2027 to encourage more advanced fuels, including power-to-liquid SAF, but the government says industry has raised concerns that advanced non-HEFA and PtL fuel may not be available in sufficient quantities.

There is tension at the heart of the policy: if the UK weakens the HEFA cap too quickly, it risks undermining the investment signal for advanced SAF technologies. If it holds the line too rigidly, fuel suppliers may struggle to comply, potentially relying on buyout payments rather than physical fuel supply.

The government itself acknowledges that buyout can cap costs and signal unmet demand, but “does not deliver the carbon savings” the mandate is designed to achieve.

Translating mandates

The global picture explains the tensions. IATA said this month that global SAF production is expected to reach around 2.4 million tonnes in 2026, representing just 0.8% of aviation fuel use, at an additional cost to airlines of $4.3 billion. That is far below the trajectory needed for aviation’s long-term decarbonisation plans, which depend heavily on SAF doing much of the decarbonisation work for long-haul flights.

The UK has already experienced the early difficulty in translating mandates into physical supply. Provisional DfT data reported by the Guardian late last year suggested SAF accounted for only 1.6% of UK aviation fuel use by early October 2025, below the 2% annual mandate, with supply largely derived from used cooking oil sourced from Asia.

The DfT said at the time that the figures were provisional and incomplete, but the data underlined the challenge of scaling a domestic supply chain quickly enough.

Industry figures welcomed the new funding. British Sugar said its British BioJet project at Wissington is exploring an ethanol-to-jet demonstration plant using existing waste feedstocks, with potential output of 1,500 tonnes of SAF. LanzaTech said the funding could help projects such as its Humberside development, which it says could supply around 1% of UK jet fuel demand.

The fund therefore represents a supply-side correction to a policy that has so far leaned heavily on demand creation. The SAF Mandate tells fuel suppliers they must use more SAF; the forthcoming revenue certainty mechanism is intended to give producers longer-term price confidence; and the LCFF is designed to bridge the capital and development gap before projects reach construction.

Whether that is enough remains to be seen. SAF plants face familiar clean energy barriers: high capital costs, uncertain feedstock access, planning and grid constraints, technology risk, weak offtake appetite from cost-sensitive airlines and the need for bankable long-term price support.

The £219 million fund helps, but it will not singlehandedly create a domestic SAF industry at the scale implied by the mandate.