UK Sustainable Aviation Fuel Act 2026 explained
Parliament has passed a new law to kick-start UK-made sustainable aviation fuel (SAF). The Sustainable Aviation Fuel Act 2026 received Royal Assent on 5 March 2026. If you’re studying energy policy or just trying to decode price mechanisms, this guide keeps it practical. The official text is published on legislation.gov.uk.
The headline tool is a revenue certainty contract. Think of it as a long-term deal that cushions producers from price swings and gives investors clearer forecasts. When prices are weak, the scheme tops producers up; when prices are strong, producers pay back the difference. The public aim is to help new SAF plants get built in Britain without writing a blank cheque.
Two prices matter. The strike price is the target price written into each contract. The market reference price is the benchmark written into the contract to stand in for the going market price in each period. Settlements are based on the difference between these two, multiplied by the volume of UK-produced SAF actually sold. It is symmetrical: the same formula runs both ways.
A quick example helps. If the strike price is £1,200 per tonne and the market reference price averages £1,000 in a month, the designated counterparty pays the producer £200 per tonne on qualifying sales. If the market reference price rises to £1,400, the producer pays £200 per tonne back. Note that the market reference price is defined in the contract, so it may be a benchmark rather than the spot price you see on a trading screen.
The Act also defines what counts as UK-produced. If any part of the process that turns feedstock into aviation fuel happens in the United Kingdom, the resulting fuel can qualify as UK-produced SAF for these contracts. This definition matters for where plants are built and where jobs land.
Who makes the offers? The Secretary of State can direct a designated counterparty to offer a revenue certainty contract to a named producer. Directions must be in writing and must set the terms, a deadline for the counterparty to comply, and how long the offer stays open. This power runs for 10 years from Royal Assent, so until 5 March 2036, and can be extended by regulations in blocks of up to five years. Section 1 (the power to direct) starts two months after Royal Assent, so from 5 May 2026.
Who is the designated counterparty? It is a company limited by shares, with every share held by a Minister of the Crown. It must consent to being designated, the designation can be revoked, and there must always be a designated counterparty in place. If the role moves, a transfer scheme can shift contracts, property, and staff across, with provisions similar to the TUPE regulations to protect employment rights and scope for compensation.
Transparency matters. Regulations can require a public register of revenue certainty contracts and the publication of the contracts or their details. Some information can be redacted to protect commercially sensitive material, either under the contract’s own terms or by decision of the Secretary of State. This aims to balance scrutiny with legitimate confidentiality.
How is all this paid for? The Act allows a levy on relevant suppliers of aviation fuel-those subject to the Renewable Transport Fuel Obligation when they supply aviation fuel. The levy covers top-up payments under the contracts and other running costs, and it can be set to build a reserve. Amounts can vary by market share, there can be exemptions, suppliers can be asked to pay on account, and interest can be charged on late payment.
Levy rules can also require suppliers to post financial collateral-cash, securities or another form-so the counterparty is not left exposed. The counterparty can be given functions to administer and enforce the levy, and the Secretary of State can help by collecting and sharing information. Disputes can be routed to arbitration or appeals as set out in the regulations. The Secretary of State may also give the counterparty directions and provide it with financial assistance by grant, loan, guarantee, indemnity or insurance.
What happens if the levy pot ends up with a surplus? Regulations can require the designated counterparty to pay that surplus back to levy payers and, crucially, can require recipients to pass benefits on to their customers. Rules will set how a surplus is defined and calculated and over what period. Payments can come with conditions, including clawback if benefits are not passed through.
There are penalties for breaking the rules. If a person breaches levy requirements, or fails to provide information required under the levy framework, the Secretary of State can impose a financial penalty. The maximum is the lower of £100,000 or 10% of the person’s turnover, with scope to update the £100,000 cap for inflation. Due process is set out in the Schedule: a notice of intent, at least 28 days to make representations, a final notice with another 28 days to pay, and a right of appeal to the High Court (or the Court of Session in Scotland). Unpaid amounts can be enforced by the courts, and any sums received go to the Consolidated Fund.
Before making key regulations the Secretary of State must consult, including with the Welsh Ministers, the Scottish Ministers and the Department for the Economy in Northern Ireland. Some regulations, such as the levy itself, surplus-payment rules, any extension to the 10-year window for issuing directions, and changes to the penalty cap, require the affirmative approval of both Houses of Parliament. Other regulations follow the negative procedure. The Act extends to England and Wales, Scotland and Northern Ireland.
A quick timing check helps you study smart. Most of the Act took effect on 5 March 2026, the day it was passed. Section 1-the power to instruct the counterparty to offer contracts-switches on from 5 May 2026. From a learner’s point of view, the real action will come in statutory instruments that set the levy rate, define the market reference price method, and pin down any exemptions. Keep an eye on those instruments, because they decide the numbers.
What this could mean in everyday terms. For producers, the contract can make it easier to finance new UK plants because lenders can see revenue stability. For fuel suppliers, the levy is a new cost line-although surpluses may be returned. For passengers and airlines, the Act does not set ticket prices, but costs could move either way depending on the levy settings, contract outcomes, and any pass-through requirements. The aim, set out in law on legislation.gov.uk, is to accelerate cleaner jet fuel while safeguarding the public interest.