My Lords, I am pleased to present the Sustainable Aviation Fuel Bill for Second Reading today. I welcome the right reverend Prelate the Bishop of Chester and congratulate him on his forthcoming maiden speech in your Lordships’ House today. I look forward to hearing his contribution to this important debate, and to his many contributions in the months and years ahead.
If we are to be an outward, confident trading nation that is connected to the world and leading the way on innovation, we must move as fast as we can towards a greener, cleaner future for flying. Domestic transport accounted for 29% of the UK’s greenhouse gas emissions in 2023. Aviation is currently the second largest contributor, and it faces unique barriers to decarbonisation. By 2040 it is set to overtake road vehicle use as transport’s largest emitter. SAF will be key to decarbonisation, a drop-in solution that can be used today in today’s aircraft with today’s infrastructure. SAF also has huge economic benefits for the wider low-carbon fuels industry, potentially supporting up to 15,000 jobs and contributing up to £5 billion to the economy by 2050.
SAF is not the only measure that we are supporting to address emissions in the aviation sector. The Government are supporting the development of more efficient and zero-emission aircraft technologies, and we have announced a further £1 billion of funding for the Aerospace Technology Institute to help to spur green aerospace innovation. The Civil Aviation Authority, supported by my department’s funding, is shaping regulations for zero-emission aircraft through its hydrogen challenge. Alongside that, we are advancing airspace modernisation to enable cleaner, quicker and quieter journeys. The Government are also establishing a UK airspace design service with the Civil Aviation Authority and the National Air Traffic Service, which are working together to launch this by the end of the year.
Turning to aviation fuel, the Government, alongside industry, are working collaboratively to ramp up the UK’s SAF industry. The UK stands at the forefront of global efforts to decarbonise aviation. When this Government came into power, we acted immediately by laying the statutory instrument for the SAF mandate, which came into force on 1 January this year. We have invested £63 million in 17 projects through the Advanced Fuels Fund, which will drive growth, support good jobs and deliver emissions reduction.
The revenue certainty mechanism introduced in the Bill is a scheme designed to support UK SAF production to drive growth and opportunity across the country. It addresses the lack of a clear and predictable market price for SAF, one of the biggest constraints on investment in UK SAF production. The RCM builds on the established precedent of contracts for difference in the renewables sector. Under the RCM, an SAF producer will enter into a private law contract with a government-owned counterparty that sets a guaranteed strike price for SAF. If SAF is sold for under that price, the counterparty will pay the difference to the producer. If SAF is sold above the price, the producer will pay the difference to the counterparty.
My Lords, it is a pleasure to contribute to this debate on the Second Reading of the Sustainable Aviation Fuel Bill. I declare an interest as vice-chair of the Aviation All-Party Parliamentary Group.
I do not intend to make a lengthy speech, but I shall touch on the essential ingredient of the Bill: the introduction of a revenue certainty mechanism to support the production of sustainable aviation fuel in the UK. We know that the Government currently impose an SAF mandate on the aviation industry whereby 2% of aviation fuel used in the UK must be SAF. That target is set to rise to 10% by 2030 and 22% by 2040—somewhat ambitious, I believe; nevertheless, that is the target.
I have met and spoken to representatives of all aspects of the industry, at their request, over the last year—airport owners, airline representatives and SAF producers, to name but a few. They all have one thing in common: a genuine desire to see the introduction of lower-carbon alternatives to conventional aviation fuel, which is very encouraging, particularly when you look at some other sectors.
Worthy of mention, perhaps, is that, on the domestic front, in 2022 the Royal Air Force and industry partners carried out the world’s first 100% SAF flight, in an RAF Voyager, an Airbus product with, I might add, wings constructed in Wales. We know that most of the SAF currently produced is HEFA-based: that is to say, made from hydro-processed esters and fatty acids—hence the acronym HEFA—that are derived from oils or fats such as cooking oil. A 2025 market report produced by companies in the sector stated that globally, 82% of current SAF capacity relies on HEFA technology, which is limited by available feedstocks. Moving forward, we look to second-generation and third-generation SAFs from solid waste and other materials.
The Climate Change Committee, the independent adviser to the UK Government on climate risk, said in its 2025 report to Parliament that SAF supply was sufficient to meet the Government’s current SAF mandate that 2% of aviation fuel must be SAF. However, it said that meeting the Government’s 10% target by 2030 was “uncertain” as production of different forms of SAF
My Lords, we too look forward to the maiden speech of the right reverend Prelate the Bishop of Chester, and we welcome him to the House. We are generally supportive of the measures in the Bill but have some concerns about areas of government policy that lie beyond its scope, and a few questions about the details.
To put the Bill in its legitimate context, it will help reduce CO2emissions from aviation, but it is not a magic bullet. Alone, it is not a sustainable answer to the challenges we face. Aviation is, of course, one of the hardest sectors to abate and it is expected to show continued and rapid upward growth. Aviation is critical to our economy and our way of life. It moves some 240 million international passengers and 2.4 million tonnes of freight each year, adding £14 billion in GVA to UK GDP. The industry also supports 1 million associated jobs and £4.2 billion in associated passenger duty. Aviation accounts for 7% of UK carbon emissions, but this figure is due to rise significantly, to 11% in 2030 and 16% in 2035. Unless decisive action is taken on a broad range of fronts beyond the scope of the Bill, we will not meet our targets. Net zero 2050 is not optional; it is imperative.
We on these Benches do not wish to challenge any UK family’s right to a holiday. When we debate the Bill, we need to be clear that 15% of people in this country take 70% of the flights, and we need to change that. The Climate Change Committee was clear in 2023 when it said that SAF alone is a risky strategy. My party would reform air passenger duty to target the most frequent flyers. We would ensure that we have an escalating passenger duty so that those who fly the most frequently, pay more. We also oppose overexpansion of the airports, particularly in the south-east. This Government have chosen to take a different path, and it is for them to balance this path of increased airport expansion against their climate change commitments and targets. Therefore, we welcome the Bill but note our caveats.
My Lords, I declare my interests as a chief engineer working for AtkinsRéalis and co-chair of Legislators for Nuclear. I look forward to the maiden speech of the right reverend Prelate the Bishop of Chester. I support the Bill, with the caveat that costs to consumers of these measures must always be front and centre, with all the freedoms that cheap air travel has opened up to people from all backgrounds in recent decades. But I accept that there is a strategic need to invest in the long-term sustainability of aviation fuel for the UK and that we need a revenue certainty mechanism alongside the mandate.
I have three broad points. My first is around the definitions in the Bill of fuels that are eligible for the revenue certainty mechanism. Clause 16 defines “sustainable aviation fuel” as,
“aviation fuel that is renewable transport fuel”.
“Renewable transport fuel” is defined in the same clause as,
“anything that is (or is treated as) renewable transport fuel for the purposes of Chapter 5 of Part 2 of the Energy Act 2004”.
It then refers to Sections 131D and 132. I proposed the amendment to what is now the Energy Act 2023 that led to Section 131D, which treats recycled carbon fuels and nuclear-derived fuels as renewable transport fuels. That amendment was therefore a key enabler for this Bill in enabling support for second-generation and types of third-generation SAF.
However, this requires secondary legislation to take effect and treat these fuels as renewable transport fuels. This has not been completely done for the surface transport renewable transport fuel order; it has been done only for recycled carbon fuels. But it has been done for the sustainable aviation renewable transport fuel order, so we have quite a convoluted legislative route here between various Acts and secondary legislation. Can the Minister please confirm that recycled carbon fuels and nuclear-derived fuels are within the scope of the revenue certainty mechanism outlined in the Bill?
My Lords, I thank noble Lords for their warm welcome, although I confess that sustainable aviation fuel was not a subject that I imagined I would be addressing when various noble Lords have given me advice about maiden speeches. I am grateful for their wisdom, warmth and welcome, and especially that of the doorkeepers and staff of this House. It seems that I should have taken them rather more literally when they said I would be working with high-flyers, and rather less literally when they pointed out that not everything was rocket science.
I speak as one born almost two and a half thousand miles from where we sit. Indeed, the first serious journey of my life was by air, back here to the UK. I am also a father and, like the rest of this noble House, entrusted with passing on entire to the next generation this good earth. Sustainability matters: the good Lord provided us with many things, but a spare planet was not among them, at least in this age. It is this balance of pragmatisms which means that I speak largely in support of the Bill. We need to be real about air travel being vital to modern life. It builds community, enables encounter and crosses divides.
My diocese of Chester serves communities in two nations and 23 local authorities. It spans urban and rural, wealth and extreme poverty. We gaze at the universe from Jodrell Bank. We support half of the Mersey’s industrial life. We rejoice in our schools and in Chester University, and we cherish our world-renowned zoo. Indeed, we also have Warrington, which, according to the i Paper, may be Britain’s hardest-working town—who knew? All are part of the life of the diocese, from the newish migrant to the most established among the Cheshire set, from those who take penalties on the sporting field to those who serve a very different type of penalty. We are linked to the world both by Liverpool John Lennon Airport, which is in the diocese of Liverpool just across the River Mersey, and Manchester Airport, where one actually lands in the diocese of Chester but disembarks in the diocese of Manchester.
My Lords, I welcome the Bill and commend the Government on bringing forward a serious and long-awaited framework to decarbonise a sector that accounts, as the Minister said, for its ever-rising share of our national emissions.
Before I turn to aviation fuel, an altogether more uplifting and sustaining subject commands our attention. It is an extraordinary privilege and an honour to congratulate the right reverend Prelate the Bishop of Chester on his outstanding maiden speech. His contribution displayed the wisdom, moral seriousness, humour and quiet authority with which he will flourish in the work of this House.
If I may declare a personal interest, long before he was a Bishop, the right reverend Prelate joined a Senior Faith in Leadership programme which I directed. Across residencies with rabbis, imams, priests, business leaders, medics and public servants, I observed at first hand the depth of his character. He remained firmly rooted in his own tradition while offering genuine friendship across boundaries. In our digitally recorded conflict simulations—designed to test even the most devout—he kept his cool, listened with generosity and mediated with a humility that enabled others to shine. As I recall, he won.
I learned then that, although the right reverend Prelate had read mathematics at Cambridge, with every conventional avenue of worldly success open to him, he could not escape a deeper calling to ministry. As warden of Cranmer Hall, and vice-principal of St John’s College, Durham, he nurtured generations of leaders and equipped them to grapple with exactly the kinds of questions he raised a few moments ago—questions about community, purpose, presence and belonging.
The right reverend Prelate’s recent doctoral thesis offers a further window into his nature: a pastor-scholar attentive not to abstractions but to how real people grow, collaborate and serve. In it, he explores the call to integrate a leadership that is rooted ultimately in love—in the words of the right reverend Prelate himself,
My Lords, it is a particular pleasure to follow a very well-articulated tribute to the right reverend Prelate, to whom I also offer my congratulations on a very well-made, thoughtful and appropriate maiden speech. He will undoubtedly make a major contribution in this House, and I think all of us welcome him to this place.
I start, ironically, by referring to my entry in the register as an advisor to AtkinsRéalis as well as to Hutchison Ports. It is a particular pleasure for me to speak in this Second Reading debate. Two years ago, I was responsible for an amendment to the then Energy Bill which mandated the Government to set up a revenue support mechanism for sustainable aviation fuel in the UK. I stopped after getting 56 Conservative signatures to the amendment, which proved enough, just about, to finally jolt the Government, particularly the Treasury, into action and starting a process which has brought us to this point today. I am glad that I will be speaking alongside my noble friend Lord Harper, who followed that by playing a significant part in delivering us to the point we are at today. My noble friend is another example of why this is a genuinely bipartisan Bill. There are debates, differences and discussions about the detail, but there has been strong support across all sides for the principles that underlie the Bill today.
I was very pleased at the time that Ministers then recognised that they needed to do something and I am very pleased that Ministers in the current Government have continued the work that we started and have delivered this piece of legislation, which I strongly support, albeit with some caveats and questions which I want to push the Minister on today, in Committee and subsequently. I think there are some things that need to be tightened up and some questions that need to be answered, but the principle is absolutely right.
For me, the reason this all matters is very simple. The aviation industry is under growing pressure over its carbon footprint. Whether you are an opponent or a supporter of net zero is, to my mind, completely irrelevant to this debate. This is actually about the market pressures on the airlines themselves, particularly from a younger generation of potential customer among whom flight shaming has become more visible. The industry has to address those concerns, and we have to help it address those concerns and its impact on the environment.
My Lords, I support the Bill. I am not often known to be supporting aviation, but this is the first time there has been a serious attempt to reduce its carbon emissions. At the same time, it can be used also to help the millions of households across Britain that actually do not have access to gas. I spoke about this in a debate on the energy Bill earlier this year and I declare an interest as the owner of a house that does not have gas, so we have to use oil.
There are 1.7 million homes in the UK, serving about 4 million people, that are off the gas grid and rely only on heating oil. They will be suffering at the present time, when it is really cold. They are mostly in rural community areas, where alternatives such as heat pumps work sometimes but not always.
It has come out of the recent debate that HVO, hydrotreated vegetable oil, is a renewable fuel that can cut emissions from home heating by up to 88% compared with kerosene, which is used at the moment. It works as a drop-in replacement—you just tip it in the tank. I do not know, because I have not tried it. The reason I bring it up again this morning is that HVO is a by-product. It is only about 30% of the output from SAF and, as SAF production goes up, we can increase the domestic supply of HVO.
Ministers have rightly said that HVO will play a vital role in our aviation decarbonisation journey, and I certainly agree with that. But it looks as if the SAF mandate will accelerate that growth from what I think is about 2% of jet fuel demand today, rising to 10% in 2030 and 22% in 2040. That is enough HVO to provide a 66% or so blend of heating oil, which will sort out the decarbonisation needs of most off-grid homes. Especially at this time of year when it is really cold, this is a benefit not only for the aviation industry but for people who live in the countryside or cannot connect to alternatives.
We need the right mechanism, as other noble Lords have spoken about. Section 159 of the Energy Act 2023 gives the Government power to create a renewable liquid heating fuel obligation, which mirrors what the Labour Government did with the transport fuel obligation last time. I was really pleased, therefore, to read an announcement from the Government on Tuesday this week about a consultation on this. The industry that provides SAF and other similar material, working with their off-grid customers, has built up a considerable bank of evidence and data to show that this policy will actually benefit both consumers and the environment. I hope now that the consultation will allow things to move forward at pace.
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It is important to emphasise that no final decisions have been taken on how the strike price will be determined. The RCM contracts must set a strike price that finds a balance between securing the appropriate protection for the producer and its investors and providing value for money for the scheme and the wider sector. This is a new and emerging market. This will be the world’s first SAF RCM, and it will derisk SAF projects by addressing barriers to investment in a nascent market that is using innovative technologies. Like similar schemes in the low-carbon electricity sector, this will help to provide greater certainty of future revenue, help to attract investment in first-of-a-kind SAF plants, and support growth and opportunity across the country.
Turning to the SAF Bill, it has four key areas. First, it will enable the Secretary of State to designate a counterparty that is wholly owned by government. Secondly, the Secretary of State can direct the counterparty to enter into private law contracts with SAF producers, guaranteeing a price for the sale of eligible SAF over a period of time. The mechanism is there to support the development of a first-of-a-kind plant by increasing investor confidence. While first-of-a-kind plants are likely to be more expensive than future plants, supporting them allows future, cheaper plants to get constructed and start producing SAF. The contract allocation process will be designed to maximise competition, with all contracts to be underpinned by robust technical and commercial due diligence to ensure that successful projects represent value for money.
Thirdly, the Bill will enable the Secretary of State to make regulations imposing a levy on suppliers of aviation fuel in the UK, in order to fund the RCM. That will allow the counterparty to collect the levy to cover the costs of issuing payments under contracts that are administering the scheme. It is right that the costs of decarbonising air travel should at least be partially borne by the aviation sector rather than the taxpayer. We are levying aviation fuel suppliers because placing the levy higher up the supply chain spreads costs across the sector, and because aviation fuel suppliers will benefit from the greater volumes and lower prices for SAF that the RCM will create. The RCM will provide support only if SAF is actually being produced. If a project fails, there is no obligation on the Government to provide support. While novel technologies can have high failure rates, we can support multiple technology pathways to minimise risk and strengthen the UK’s project pipeline.
Fourthly, the Bill will enable the Secretary of State to enforce certain provisions imposing financial penalties. The Secretary of State may impose a financial penalty on a person who fails to comply with levy regulations, or with requirements under regulations made to ensure that any paid-out surplus is used to benefit fuel suppliers’ customers.
This is a comprehensive and focused Bill that lays the foundations for a thriving UK SAF industry by delivering investment certainty, cutting emissions and securing the long-term sustainability of the aviation industry. More SAF supply and lower prices are good for the aviation sector and, ultimately, for those who wish to fly. The Bill is an essential part of securing our world-class aviation sector’s future, and we want it to do that sustainably. I look forward to engaging with noble Lords on this legislation. I beg to move.
“will need to scale up”.
The committee said that SAF producers must now start to diversify away from HEFA-based forms of SAF if the 2030 target is to be achieved.
That brings me to the main points that I wish to raise with the Government today. I believe that the Bill will be successful if it includes the necessary provisions to protect existing SAF production in the UK and maintain its competitiveness in the international market. A number of global renewables companies are in the process of developing techniques to produce low-cost, low-carbon SAF, and they have chosen to conduct business here in the UK. I know this to be true because I have met them. They see the UK as a convenient climate in which to operate. Coupled with the SAF mandate already in force, this could make the UK a leader in green aviation fuel production.
However, if the Government are serious about building a UK SAF industry and capturing the green jobs and fuel security benefits of doing so, the revenue certainty mechanism needs to be introduced at pace. Other major economies are moving ahead with their own plans to support domestic SAF production, particularly in Europe through the EU’s green deal industrial plan, which provides billions of euros in incentives. If UK policy incentives do not keep pace with these markets, this will at best delay production and at worst mean that companies move their global hub and associated production facilities overseas.
I ask the Minister: how seriously do the Government take the need to move at pace to retain companies developing SAF in the UK? Does he agree that if SAF production is to be viable for developers, they will require early access to the designated counterparty for revenue certainty mechanism negotiations ahead of the Bill’s ratification? Also, while they are keen to attract foreign investment, can the Minister say what steps the Government are taking to ensure that grants from the advanced fuels fund are directed to support British technology?
Finally, what assurances can the Minister give to the travelling public that the Government’s estimated impact on ticket prices, of between minus £1.50 and plus £1.50, is accurate? In Committee in the other place, the International Airlines Group commented that some elements have not been included in the calculation, noting that the cost
“will be nearer to £10””.—[Official Report, Commons, Sustainable Aviation Fuel Bill Committee, 15/7/25; col. 17.]
I look forward to the Minister’s response.
SAF is widely considered as the main available pathway to decarbonise aviation. It can cut lifecycle emissions by up to 70% compared with conventional jet fuel. As we have heard, it is a drop-in fuel that can be used alongside existing aircraft and infrastructure. The SAF mandate passed last year starts at 2% and rises to 10% by 2030, and then to 22% in 2040. From 2040, the obligation will remain at 22% unless there is greater certainty of supply. The SAF mandate could, it is claimed, deliver up to 6.3 megatons of carbon savings each year by 2040.
We on these Benches welcome the revenue certainty mechanism. It will serve to strengthen investor confidence and unlock significant capital investment in the production facilities that need to be based here in the UK. It will allow for long-term stability and contracts through the guaranteed strike price. As the Minister said, this mechanism has been widely used in the renewables sector, and we know that it works. It will provide certainty to these suppliers. The approach is logical. The industry stands to benefit from cheaper staff, and the cost will be spread widely throughout the industry.
We recognise the UK’s approach, the long-term mandate, the proposed revenue support and the degree of certainty it will provide to help with this transition. Indeed, the UK is seen as an example of best practice, with ambitious targets and support mechanisms. Establishing a homegrown low-carbon fuel sector will bring significant jobs and benefits to the UK industry and wider society. Will the Minister update the House on the progress of ongoing negotiations with industry, running parallel with the Bill? Further, when will the Government be able to provide details on how the strike price will be set and what mechanisms will exist for adjustments? When do the Government anticipate that the first contracts will be signed?
While we welcome the Bill, we stress that SAF is only a first step. This is about not merely blending fuels but seeking alternative, more sustainable climate-friendly options for the longer term. That needs continuous investment and innovation in the next generations of technologies, including the battery/electric and hydrogen-fuelled. The Bill sets the policy framework, but crucial details are left to subsequent negotiations.
We have several key questions regarding the Bill’s ambition, scope and technical design. The SAF mandate requires 22% of jet fuel to be sustainable by 2040. This means that 78% of fuels will still be polluting just a decade before our net-zero deadline, so how will the Government achieve this target? In addition, the European Union has a higher target of 70% by 2050. What action will the Government take to bring further alignment not just with our EU partners but internationally?
We also have concerns about SAF feedstocks and the amount of cooking oil that is imported. It is important that we have a reliable domestic supply. We also note concerns about bioethanol and the closure of plants, particularly the Vivergo plant in Hull, and the impact of the US trade deal and subsidies on US ethanol. We are concerned about the potential for future bioethanol plant closures.
What consideration have the Government given to the inclusion of intermediate cover crops, such as catch and cover, as a scalable feedstock outside the HEFA cap to expand the resource base without competing with food markets? We believe that the transition to a sustainable aviation industry must be strategically linked to our existing industrial base. What actions are the Government taking to see that existing industrial plants are brought back into use, make sure that the planning system is fit for purpose and ensure that these plants can be brought online quickly?
While the Government are committed to undertaking a comprehensive assessment of these industrial sites to see that they are brought back online, transparency is paramount given the importance of public trust and accountability. The funding levy should also not place undue financial burden on air travellers, so how will the Government review the impacts to ensure that the levy does not include further burdens on those travellers? For the sake of public accountability, are the Government amenable to ensuring that the airlines report publicly on their use of SAF and the amount of it that they supply? We broadly welcome this Bill, but the Bill alone is not a sustainable long-term solution, and we call for greater monetary transparency and openness.
Clearly, recycled carbon fuels will be very important in the near term. Over the medium to long term, nuclear could well be a significant source of synthetic fuels due to the potential economic efficiency it brings to hydrogen production, whether that is high-temperature electrolysis, with the current pressurised water reactor plants, or, looking further ahead, the sulphur-iodine cycle in advanced high-temperature nuclear plant.
My second point is around the powers that the Government are taking in the Bill. They have clearly stated that they do not intend to offer contracts for first-generation SAF based on hydrogenated esters and fatty acids—HEFA. Should this therefore be stated in the Bill? The Government should take only the powers they need, given that this Bill is a framework for the long term. There is a case that the powers in the Bill should be limited to second-generation and third-generation sustainable aviation fuels. I do not foresee any good reason why HEFA fuels would need such support, so I believe that this could be clearly stated in the Bill.
My third point is around value for money and competition. We rightly heard a lot of discussion in the other place around costs to consumers and analysis on the £1.50 impacts on airfares. The Minister clearly stated that we need to get the right balance between investors and consumers with the prices that are negotiated, but another way of looking at this relates to the competitive structure within the Bill. Of course, the way the Bill is structured around bilateral negotiations, rather than a competitive process, is what is needed for the SAF market at this stage, noting its immaturity. An auction process, such as that which we have for offshore wind, is not perhaps appropriate at this stage.
However, this Bill needs to be fit for the longer term. Competition is the way to drive down costs for consumers in the long term, as has been demonstrated in more mature markets such as offshore wind. So, in the longer term, we need that mechanism for auctions and competitions within the Bill but, looking through it, I cannot see a mechanism for setting up such a competitive process.
Other government legislation, such as the Energy Act 2013 for CfDs for renewable energy generation, clearly states that regulations made may include provision for,
“the determination of a matter on a competitive basis”.
We also have that in the Energy Act 2023 for low-carbon hydrogen, which clearly states:
“Provision falling within subsection (2) may include provision for … the determination of a matter on a competitive basis”.
This Bill makes no provision for regulations to cover the determination of a matter on a competitive basis, or indeed for allocation frameworks. I would be grateful if the Minister could state whether, in his view, a competitive framework is covered by the Bill as written and, if not, whether it should be. The Bill should be fit for the future to avoid the need for future legislation in this area, and it should be structured to minimise costs to consumers, which in the end will be enabled through competition.
Finally, this Bill will go a long way to realising second-generation and third-generation SAF production in the UK, but the Government need urgently to address broader challenges as well, not least our high industrial electricity prices. I have spoken to a number of companies that want to set up SAF plants and related infrastructure in the UK, but they simply cannot make the numbers stack up when our electricity is four times as expensive as competitors such as the USA. This is a very energy-intensive industry. Alongside the measures in this Bill, we need to address the fundamentals to ensure that we are being fair to consumers and minimising required subsidies. I hope the Government will think about the broader framework as well and not just see this as a problem to be addressed through subsidies.
To repeat myself, the diocese of Chester touches two nations. I serve a border people, just as I did in my former see of Berwick-upon-Tweed. In Chester, we have several parishes which are all or partly in Wales. My Lords—or, as I should say, “fy Arglwyddi”—“Esgob Caer ydw i a ’dw i’n dysgu tipyn bach o Cymraeg”. I apologise for my lamentable Welsh accent. I am learning a little Welsh, partly because I carried on with Duolingo long after lockdown but, much more importantly, because communication is a vital gift for those of us who nurture and curate community. In communication, we need to learn to speak and to listen. This is almost always done in person and directly. Indeed, I argue that one of our primary vocations in this noble House is to be with and to listen, for few disciplines are more vital in the search for wisdom—the search I so often witness in your Lordships’ House. The question for me is not so much how we can be great again, but how we can be kindly present. Greatness is great, but grace is greater.
Air travel does more than build community; it enables partnership and commerce. It is a vital part of the defence of our nation, as I witnessed when offering chaplaincy to our Armed Forces. It is the backbone of much international aid provision, and it enables care for people and the planet. Chester Zoo, for example, serves ecosystems around this world. The relative ease of transport is one factor in this. My experience working in the university sector showed just how much journeys matter in the service of education.
Air travel is vital and is here to stay, but its environmental impact must be addressed. This means that net zero matters, but it is not the only sustainability consideration. Mike Berners-Lee points out, when ostensibly discussing the environmental impact of bananas, that the problem is not only emissions but where they are released. Sustainable fuel is far from carbon neutral. Although it shortens the life cycle of released carbon in the sense that it releases carbon which has only recently been captured, it also moves that carbon into the upper parts of the atmosphere, where it is most harmful.
I welcome the Bill’s creation of an economic framework in which SAF becomes a viable investment. I welcome the balancing of the use between investment by directing costs towards those who make use of the service—in effect, taxing flying to enable more sustainable flight seems very sensible. By itself, though, the Bill does not do nearly enough. The move it encourages from first- to second- and then, vitally, to third-generation SAF is essential. HyNet, in which the University of Chester is a partner, and which makes use of the geology and industrial infrastructure in the north-west, is one other expression of this kind of investment. The production of green hydrogen, which combines captured carbon with sustainably electrolysed hydrogen, really is the holy grail here—let any budding and noble theologians note that I do not use that term in a technical sense
Alongside the Bill, we must invest in rail and in environmental road transport if we are to progress to sustainability. It cannot be right that more than half my return trains from this place to my home in Chester seem to be delayed or cancelled. What are the projected timescales for substantive provision of third-generation SAF? Is consideration being given to roll out this technology beyond aviation?
The Bill helps us play our part in global well-being in every sense. The question with which I come to this House is—as I mentioned earlier—not so much how we make Britain great again, but rather how we make Britain kind again. Such kindness and responsibility are what leads to greatness in a manner which actually lasts and embraces all. In this, this Bill matters. Our infrastructure must line up with our fundamental identity and core vocation if we are to thrive. The Bill represents one structural step, but it is a step in the right direction and I support it.
“a combination of spiritual, emotional, rational, and pragmatic intelligence”,
reflecting a “relational understanding of humanity”. As was underscored by this and the preceding debate, we meet in a time marked by polarisation, disaffection, a growing distance from once-trusted institutions and the unsettling acceleration of trends intensified by digital habits, including, regrettably, the amplification of hatred that distorts our public square. The right reverend Prelate brings precisely the countervailing gifts this moment requires: not only the intellect, analytical clarity, logic and tech-savviness to address these forces—he is really brainy—but the pastoral breadth to speak, as he reminded us only moments ago, with the communication and genuine connection needed both for those who share his convictions and for those who feel unheard or left behind.
It is often communities whose social anchors have shifted that can be drawn towards simpler, louder narratives. The right reverend Prelate offers instead an approach that sees diversity not as a difficulty to be managed but as constituting a tapestry of human intelligences to be woven for the common good. Such leadership is not merely timely, it is essential. We look forward to, and indeed need, the right reverend Prelate’s statesmanship in this House.
I turn briefly to the Bill before us. The Sustainable Aviation Fuel Bill, working alongside the SAF mandate, provides the clarity and confidence that industry has long sought. With first-of-a-kind plants costing between £600 million and £2 billion, and typically running at a loss in their early years, the revenue certainty mechanism is a critical enabler of the investment this industry requires. This is precisely the sort of pragmatic investment-led policy that creates jobs, strengthens supply chains and positions the United Kingdom to lead in clean aviation technology—but ambition must meet delivery.
Industry modelling suggests that announced UK SAF projects may deliver only around half the volume required under the 2030 mandate unless further policy and investment steps are taken. Meanwhile, total UK greenhouse gas emissions, including aviation and shipping, amount to approximately 414 million tonnes of CO2 equivalent. Aviation will not decarbonise itself, and the Bill helps ensure that the UK does not fall behind while others race ahead. I therefore strongly support its direction of travel.
My question to the Minister concerns the feedstocks that will power this transition. As has been said, many early SAF pathways rely on used cooking oils, industrial residues and, critically, black bin bag and other residual wastes. As we rightly reduce such waste and increase recycling, how does the Government’s modelling ensure a stable, sustainable and ethically sourced supply? How will Ministers balance emerging SAF demand with existing waste-to-energy plants and local authority waste reduction targets so that one green ambition does not inadvertently undermine another?
It is not just about politics, it is actually about what is commercially necessary for what is one of our most important economic sectors. Of course, that is why Virgin Atlantic, Boeing and Rolls-Royce collaborated on the ground-breaking transatlantic pioneering flight using sustainable aviation fuel two years ago. We were on that flight and it was a very unique experience. It is why I know that most of the industry strongly supports this legislation. It is why the last Government brought forward plans for the SAF mandate and why this Government continued to introduce the mandate at the start of this year.
Why then do we need a revenue certainty mechanism of the kind set out in the Bill? Our airlines could just buy SAF from overseas. The initial product being used in this country will almost certainly come principally from the United States. There are two very good reasons why the Bill remains necessary. First, our aviation sector is, as I say, a key part of our economy; it is the strongest sector in Europe, it is fundamental to our regions and to the economy of so many different parts of the country. Do we really just want to import the fuel it needs for the future, or is it better to encourage serious investment here, of the kind that companies such as alfanar are planning for Teesside—a part of the country that clearly wants and needs investment?
Even in a world of free markets, sometimes I really think we need to make sure that we do some important things for ourselves. I think we can have a successful SAF sector in the UK that brings investment and creates jobs, but SAF plants require a very large amount of capital, and investors are always cautious about new markets and developing technologies. The truth is that the first SAF plants in the United States, of which there are just a handful, received investment support from the Biden Administration. The EU is poised to introduce its own revenue certainty mechanism. The Minister was right to say that ours is the first in the world, but it is not going to be the last, so for me it comes down to a straightforward choice: do we want a SAF industry in the UK or do we just have to depend on imports? I do not think we have to. My view is that we need that industry in the UK and I strongly support the Bill as a result.
There is another reason for caution about buying SAF from elsewhere: I think the UK approach is much smarter and much better. In the United States, SAF is being produced primarily from corn. In the EU, SAF will be produced, as we have heard, from what is called HEFA—basically, used cooking oil. I absolutely do not support growing fuel in fields that could be used for growing food. I have long been uneasy about the practice of growing crops for purposes other than food, but I think it is mad to use the space that the world needs to feed itself to grow aviation fuel. The UK is right also to accept for now, I think, that HEFA will be needed for the time being, but we need to understand that it is not going to be there for ever, and it is right that its future use is capped.
There are serious question marks about the availability of HEFA and there is also the suggestion that it is often not really used cooking oil at all but near-virgin oil that has been doctored to create the semblance that it has been used in a kitchen. Of course, much of it comes from the Far East, and SAF mandates are going to spread there too, so there is absolutely no certainty of supply going forward. The UK’s approach, which has been to push quickly towards SAF produced from biowaste, of which we have quite a lot here already, and then in due course from municipal waste, has to be the right one. To me, this really is the nirvana of sustainable aviation fuel: if we can turn our waste—what we put in our black bins each week—into fuel oil, removing the impact of landfill, incineration and the rest, that has to be a good thing.
I have a question for the Minister, and this is the first of the points I want to put to him. There are rumours around that the Government want to allow first-generation SAF from crops here. I really hope that is not true and I ask the Minister to set that to rest by confirming that there are no such plans. We should not be growing agricultural crops to turn into fuel. We have taken a much smarter approach in this country to delivering aviation fuel that has a positive environmental impact. We must not see that compromised in any way.
There are a number of other issues I have with the Bill that I want to put to the Minister. I want to see these issues addressed in the debates ahead, and there is at least one that I am very committed to asking the Government or this House to put in the Bill.
My first concern is about how the levy is applied on conventional aviation fuel manufacturers. I know that the Government’s initial intent was to assign the levy based on the previous year’s market share. I genuinely do not think that approach is viable. It misses out the impact of changes in the composition of the market, which could mean that a new player faces a period without charges and is able to undercut the existing market. The levelling-up process would then come way down the track, after a long period of time when there had been a real price discrepancy between the two and a competitive advantage to the newcomer.
Also, if someone disappears from the market—and we have seen two refineries close in recent times—such a delay will also cause complications for the counterparty. So, the mechanism to apply the levy has got to be immediate. I do not understand why it cannot just be done per barrel of fuel as it leaves the refinery or the terminal. I think the Minister needs to explain to all of us why that cannot happen. I appreciate that that is going to come in the secondary legislation, but we need to understand how it is going to be applied, and it has got to be done in a timely way. It cannot happen way after the event.
I was grateful to the Minister for spending some time with me and allowing his officials to spend some time with me. I know they have thought about this, but I ask him to now put some of the Government’s thinking about this on the record, so we can understand where it is going as we go through the Bill.
My second concern is there has got to be a direct link between the commencement of the levy and the opening of the first SAF plant. We do not realistically expect the first SAF plant in the UK to be operational much before 2030. So, the levy cannot start until close to 2030, otherwise we would be raising money—which passengers are paying more for—and just leaving it sitting in the bank. It is important that there has to be a clear linkage between the arrival of SAF manufacturing in the UK and the application of the levy.
On the timeframe, there is one other thing I would just ask the Minister to consider. At the moment, because there is not an awful lot of SAF capacity anywhere in the world, we must not apply the mandate on a ratchet scale up to 2030 in a way that is detached from the reality of the availability of SAF in the marketplace. I would ask him to keep monitoring the mandate as we go towards 2030 and make sure we are not actually out of kilter with the availability of SAF for the airlines to put in their planes.
The third concern I would ask the Minister to address is there has got to be no legal doubt whatever that the proceeds of the levy will be used only to support investment in the manufacturing of SAF in the UK. There has just got to be a proper safeguard against any other part of Government going, “Oh, there’s some money there. We’ll have that for something else”. It does happen; it has happened in other countries in similar areas. We need that certainty in the Bill.
I think the most important addition to the Bill—and I would ask the Minister to go away and think about this, because it must be in primary legislation, so there is no doubt in the courts going forward—would be to make it absolutely certain that the revenue support mechanism is going to be used only to support the production of SAF in the UK. There has got to be no legal doubt about this and no loopholes whatever.
The Government already know that there are loopholes out there and there are people trying to take advantage of them. The Government have already had to stop one multinational in the hydrogen marketplace from benefiting from UK financial support while planning to produce part of its product in the Middle East. It would be relatively easy for a manufacturer of SAF to import an intermediate fuel into the UK, process it at a SAF plant and claim the benefits the RCM would offer. The legislation has got to be absolutely categoric: that cannot be allowed to happen.
I would like the Bill to say very explicitly that any certified fuel that is a component of SAF has to be manufactured in the UK and that only the feedstock can be imported. Of course, there will be times when we buy biowaste from other European countries—that is perfectly reasonable. But you cannot be allowed to produce a three-quarters-finished fuel that you just adjust, turn into SAF at the end and claim that that should benefit from the revenue support mechanism. I would only countenance the feedstock as being imported, and hopefully, as we see the move towards urban municipal waste and even sewage turned into fuel, even that will not be necessary.
It is really important that we have that in the Bill, because courts do strange things. They interpret laws in different ways, sometimes in ways that those in Parliament do not expect or do not want to be the case. We have got to have absolute certainty on that in primary legislation. I mention this now to the Minister ahead of Committee to give him advance warning that I really want to explore this in detail.
I believe the Bill to be essential to the UK, benefiting from a new industry that we have ourselves mandated as essential to one of our most important and oldest sectors. It makes no sense to tell airlines to buy SAF but then ignore the opportunity to produce it here and let other Governments incentivise their own investments and industries instead.
I am very glad that both the last Government and this one accepted the intent behind that amendment two years ago, and I look forward to seeing the Bill pass into law. Our job in this House is to make sure it leaves no loopholes and then to encourage the Government to get on with the secondary legislation, so that contracts and the constructions can begin as quickly as possible.
I was interested to read that the Irish Government recently confirmed their intention to implement a renewable heat obligation, confident that their feedstocks are available to supply their off-grid homes. That is terribly important, as the noble Lord, Lord Grayling, referred to. If there are enough feedstocks, the market will work.
This is an opportunity to deliver a win-win: cleaner skies and warmer homes. I hope that my noble friend the Minister will discuss this with his new ministerial colleague, the noble Lord, Lord Whitehead—who was introduced today and has a lot of experience—confirm the Irish Government’s conclusion and commit to implementing Section 159 swiftly following the consultation.
On that basis, I hope we can have a win-win solution for aviation and home heating.