Turbulence before take-off: Does EU need to do more for eSAF?

opinion

by Fayaz Hussain

August 26, 2025

The due date for EU’s 1.2% eSAF sub-mandate is approaching fast. European policymakers face a stark reality of current policies being inadequate for project makers to deliver the efuel on time.

“I think it’s just not knowing what the price of the fuel is going to be,” explains Andy Navarette from the International Council on Clean Transportation (ICCT). “In the EU, they have penalties, but that doesn’t tell you what the buyers are actually going to be able to pay at any point in time. You have basically no vision into the value of the product even five years into the future, let alone 25 years.”

Despite the existence of mandates, many member states still haven’t ratified the RefuelEU regulations into national law. This makes the threat of penalties weak.

“Not having enough clarity around the absolute level of penalties means that the counterfactual to assess the risk against is unclear,” observes Trishla Shah from Project SkyPower. “They don’t know what liability they’re facing.”

And while a few first-of-a-kind project developers are producing small quantities of eSAF in pilot facilities, the Big Oil with deep pockets is just watching.

“It looks like they’re kind of discounting e-fuels in particular and the PtL sub-mandate as something that they really need to worry about,” Navarette observes, “and so they haven’t been seriously investing in the space.”

The ICCT would like a government-backed intermediary to purchase eSAF and then sell it on in short-term off-take agreements to off-taking airlines. The price differential between production costs and market willingness to pay would be covered by government funding sourced from aviation sector revenues.

But this would mean subsidising fuel for airlines. Shah of SkyPower warns this is a myopic view. “It’s not really the subsidy that is the main part of that mechanism,” she emphasises. “It is really this market orchestration piece, the piece of carrying the risk of the long-term off-take.”

This model was initiated by H2Global issuing a call to buy eSAF on behalf of the EU to be delivered airlines. But no bids were received. Shah says there are lessons to be learnt from the failure of this eSAF tender. She identifies two critical flaws: “The timeline because it required delivery starting I think even in 2026, which no eSAF projects would be ready to start producing by then. And second, the funding volumes weren’t large enough.”

A second auction, potentially also hosted by H2Global, would address both these issues with practical timelines running parallel to project development and government guarantees beyond initial funding pools. “It needs some government to say that if this initial funding volume is not enough to cover the gap, we will step in and cover the gap,” Shah explains.

Crucially, Shah emphasises that the intermediary model should ideally help spread risks associated with first-of-a-kind production across the entire aviation sector rather than burdening first buyers. “The cost of first-of-a-kind production, the inefficiency cost … is spread across the market rather than really having it concentrated in a few players,” she explains.

Moreover, the financing structure is more nuanced than it may initially appear. “You do not pay anything until the first delivery in 2030,” says Shah. “First you get paid by the off-takers … You then, with that money, top it up with whatever you need to meet the gap. At no point would you ever need the full amount of money to cover the full cost.”

Despite growing calls for an intermediary from practically all of the eSAF developers in EU, implementing this solution will mean crossing political and bureaucratic hurdles. And that will take time.

“Even if they start looking at this now, it’s probably going to take 12 months to 18 months [to put it into force] if they fast track it,” notes one eSAF producer. “And once they approve it, then after if they start actual funding, that’s still a five-to-six-year timeframe before any producer can develop that product and get that into market.”

This narrow timeline is leading to a tension with the 2030 eSAF sub-mandate deadline, which is fewer than four years away. Realistically, only one eSAF project is expected to begin production by 2028.

However, Trishla says their recent engagement with the EU suggests the authorities are receptive to the idea and are taking the proposals seriously. “They’ve been incredibly receptive to this,” Shah reports. “It’s now become a part of their kind of normal discourse within the commission.”

The European Commission has been “supportive of a pilot auction at the member state level” and “working with member states to try to see if we could even fund an eSAF auction in the next year or so,” she says.