Sustainable aviation fuel (SAF) could see much wider adoption by airlines if structural challenges around credit issues, technology and its high costs can be overcome, says Mitsubishi UFJ Financial Group (MUFG) EMEA in a new white paper.
Despite supportive government policy and with some lenders willing to finance the use of SAF - take-up among airlines has been weak. The paper called “Beyond mandates: Turning SAF demand into bankable projects,” points to barriers to adoption resulting from issues related to technology and feedstock costs and complexity.
“The banking sector is keen to support the decarbonisation of the aviation industry and draws confidence from the progress made so far. The motivation is clear across stakeholders, and appetite is growing, but a considered approach to risk allocation will be needed,” said Ed Craddock, Managing Director, Energy Structured Finance, MUFG EMEA.
The paper argues that wider adoption of sustainable aviation fuel (SAF) will depend less on mandates and more on making projects financially viable. A key solution is the introduction of measures such as the UK’s Revenue Certainty Mechanisms and the EU’s Sustainable Transport Investment Plan (STIP), which aim to stabilise prices and give developers predictable returns.
By reducing price volatility and improving visibility over future revenues, these mechanisms are designed to unlock investment and move projects towards final investment decisions.
Better offtake models
The paper highlights the need to strengthen demand through more flexible and scalable offtake models.
These include “book and claim” systems, which allow companies to buy SAF credits without physically using the fuel, as well as multi-buyer consortia and aggregator platforms that pool demand and spread risk. The paper goes on to propose auction-based systems to guarantee revenues and attract a broader set of buyers.
These approaches aim to channel fragmented demand into firm, bankable agreements that can support large-scale production.
Finally, reducing costs and improving risk allocation are seen as critical. The paper points to greater use of public funding, blended finance and strategic partnerships to lower upfront costs and de-risk projects for private investors. At the same time, risks across the value chain, such as technology, feedstock and pricing, need to be more evenly shared between stakeholders. In parallel, the industry should continue scaling mature technologies in the near term while supporting the development of newer pathways to ensure long-term supply.
“We believe that pathways to unlock financing can accelerate the commercial deployment of SAF,” said Craddock. “The risks facing the SAF market aren’t new. Every newly-established clean technology has faced bankability hurdles that have been overcome through effective structuring and sector-wide collaboration. Achieving bankability requires a balance of creative thinking and learning lessons from other sectors.”
According to MUFG EMEA the aviation’s carbon footprint has grown in recent years, accounting for more than 2.5% of global emissions. While SAF is recognised as the most viable near-term solution to reach net zero by 2050, the pace of adoption remains too slow. Global production has increased by 1,150% since 2021, and it will need to keep up this rate of growth to meet the demand for SAF which it expects to rise steeply over the next decade.