Sustainable Aviation Fuel Act 2026: your guide
Here’s your plain‑English tour of the Sustainable Aviation Fuel Act 2026. It became law on 5 March 2026. Most of the Act started that day; the part that lets government order long‑term contracts switches on two months later, on 5 May 2026. We’ll walk you through what those contracts are, how the levy works, and why “UK‑produced” now matters. (hansard.parliament.uk)
The big idea is a “revenue certainty contract” between a government‑owned counterparty and a producer of sustainable aviation fuel (SAF). If the agreed strike price is above the market reference price, the counterparty tops up the producer; if the reference price is higher, the producer pays back the difference. Parliament tightened the scope so support applies only to UK‑produced SAF, defined as fuel where any part of the conversion of feedstock into fuel happens in the UK. (publications.parliament.uk)
Think of strike price as the target you lock in, and market reference price as the benchmark you compare against. If a contract sets £1.50 per litre and the reference price for eligible SAF is £1.10, the counterparty pays 40p per litre on covered volumes. If the reference price rises to £1.70, the producer pays 20p back. It’s a two‑way stabiliser designed to get first‑of‑a‑kind UK plants financed. (gov.uk)
Who signs on government’s side? A “designated counterparty”: a company limited by shares, with every share held by a Minister. It must consent to the role; ministers must keep one designated at all times; and if the role moves, property, liabilities and staff can be transferred under a scheme with TUPE‑style protections so projects aren’t stranded. For context, the UK’s electricity Contracts for Difference scheme uses a similar government‑owned counterparty model. (publications.parliament.uk)
Where does the money come from? The Act allows a levy on relevant suppliers of aviation fuel to fund top‑up payments and scheme costs. The levy can vary by market share, build a reserve, create exemptions, require payments on account, and charge interest on late payments. Regulations can also require suppliers to post financial collateral against what they owe. (publications.parliament.uk)
Who counts as a “relevant supplier”? In law, it’s tied to those obligated under the Renewable Transport Fuel framework by virtue of supplying aviation fuel in a set period. Government has trailed that the levy will sit with aviation fuel suppliers-around 20 companies-aligning with a “polluter pays” approach and spreading costs across the supply chain. Early modelling suggests limited per‑ticket impacts if volumes are kept tight. (publications.parliament.uk)
Transparency is built in. Regulations can require the counterparty to keep a public register about these contracts and to publish contracts or details of them, with sensitive information redacted either under rules set in the regulations or by a Secretary of State decision. Directions given to the counterparty must also be published, and ministers can require information or advice from the counterparty. (publications.parliament.uk)
If someone breaches the levy rules, the Secretary of State can fine them up to the lower of £100,000 or 10% of their turnover, with a right of appeal to the High Court (or Court of Session in Scotland). There’s due process: a notice of intent, time to make representations, and then a final notice-plus the ability to challenge the decision and amount on appeal. (publications.parliament.uk)
Timelines you can plan around: the contract‑direction power starts on 5 May 2026. Ministers have a 10‑year window-from 5 March 2026 to 5 March 2036-to direct the counterparty to offer contracts, and can extend that by up to five years at a time via regulations approved by both Houses. That mix of hard dates and review points is deliberate: it gives investors a runway without writing blank cheques. (publications.parliament.uk)
How this fits with the wider SAF push: the separate UK SAF Mandate drives demand by requiring a rising share of jet fuel to be SAF-2% in 2025, 10% by 2030 and 22% by 2040-with a cap on HEFA so advanced fuels have room to grow. The new Act provides the producer‑side price certainty to build UK plants so that mandate can be met with more domestic supply. (gov.uk)
Quick glossary you can teach with: revenue certainty contract is the two‑way price‑stability deal; strike price is the guaranteed level set in the contract; market reference price is the benchmark used to settle payments; designated counterparty is the government‑owned company that signs and manages contracts; levy is the charge on aviation fuel suppliers that funds the scheme; UK‑produced SAF means any part of conversion from feedstock to fuel happens in the UK. (publications.parliament.uk)
What to watch next this year: the formal designation of the counterparty; draft levy regulations; and the first contract allocation round. Government’s indicative heads‑of‑terms say the reference price will be grounded in actual SAF sales data, with a Jet A‑1 floor used to cap top‑ups-details that matter for how big the levy needs to be in practice. (assets.publishing.service.gov.uk)