ICCT calls for revenue certainty mechanisms to bridge funding gap for SAF projects
Info Office Council of Europe European Parliament
The International Council on Clean Transportation (ICCT) launched two separate studies analysing the sustainable aviation fuel (SAF) mandates in Europe calling for a revenue certainty mechanism to help mitigate financing challenges faced by projects.
To solve this problem, the ICCT has proposed a revenue certainty mechanism (RCM), with a focus on projects contributing to the synthetic fuel sub-mandate.
“An RCM could reduce financial risks for fuel producers and investors, establishing price guarantees that unlock the capital needed for advanced fuel facilities. Under the UK’s guaranteed strike price model, for example, producers agree on a target fuel price with a government counterparty. If market prices fall short, the government covers the gap; if they exceed the target, producers pay back the difference,” said the ICCT in its press release.
A complementary ICCT-commissioned study highlights this approach, suggesting it could be funded by levies on emitters to enable debt financing while reducing required investor returns.
The ICCT also stressed the need for revenue certainty mechanisms with a focus on projects contributing to the synthetic fuel sub-mandate. In EU, the sub-mandate for synthetic e-fuels will kick in from 2030 starting at 0.7% and increasing to 35% in 2050.
Without these measures, the ICCT argues that the Europe’s SAF mandate risks falling short.
“A targeted mechanism in the EU’s upcoming Sustainable Transport Investment Plan could help first-of-a-kind fuel producers secure financing and ramp up production in time to meet climate targets,” the press release issued by the ICCT stressed.
The ICCT said that the existing SAF supply is dominated by first-generation HEFA fuels using waste oils and fats. These feedstocks are in limited supply and carry sustainability risks. However, in order to the meet ReFuelEU targets, the region will require advanced production pathways, including second-generation biofuels from solid waste or cellulosic feedstocks and synthetic e-kerosene produced with renewable electricity.
“Advanced fuels will be essential to reaching aviation’s global net-zero by 2050 goal,” said Chelsea Baldino, ICCT Fuels Program Lead. “But in Europe, first-mover facilities face high production costs in an uncertain market, creating a financing bottleneck that threatens the EU’s ambitious climate targets.”
These barriers remain despite the ReFuelEU Aviation regulation being one of the world’s most ambitious SAF frameworks, the report finds based on a survey of SAF developers and technology providers.
“Europe already has strong long-term SAF mandates,” said Chelsea Baldino. “But participants in our survey highlighted that these alone may not be enough to move advanced fuel projects forward and pointed to the need for more revenue certainty to help attract investment. The European Commission could fund a revenue certainty mechanism through EU Emissions Trading System revenues, and the upcoming Sustainable Transport Investment Plan is a good opportunity to reference this kind of support.”
The ICCT lamented that no advanced pathways (projects) have reached commercial scale (over 10,000 tonnes/year). High capital costs and price uncertainty prevent binding offtake agreements, blocking final investment decisions. Without targeted support, existing policies may favour cheaper, first-generation fuels – potentially leaving Europe short of its 0.7% synthetic-fuel target by 2030.
You can read both studies using the links below.