Sustainable aviation fuel has had to make its way into airplanes refueling at EU airports for the first time in 2025, and while the initial mandates for biogenic SAF are within grasp, the supply is expected to struggle to meet higher targets further down the line, not least for synthetic fuel.

SAF made via the hydroprocessed esters and fatty acids pathway (HEFA), which refines vegetable oils, waste oils or fats, is well-established and forging ahead from low production levels. Analysts at S&P Global Commodity Insights anticipate 2025 consumption of SAF in the EU will be 20,670 b/d, in line with the EU target of 2% SAF for the year.

"As far as SAF supply for the ReFuelEU and UK SAF mandates go, there is enough SAF available globally for meeting the entire ReFuelEU annual targets from 2025 through 2029, as well as enough bio-SAF for ReFuelEU's 6% 2030 SAF mandate," a spokesperson for European biofuel producer Neste told Platts, part of Commodity Insights.

Neste's SAF production capability is projected to be 1.5 million mt in 2025, which would be enough to fulfill the 2% SAF mandates in the EU and UK, estimated at around 1.1 million mt of SAF/year, and there are other SAF producers currently in the market, Neste said.

EU mandates are set to increase to 6% in 2030, at which point EU SAF consumption is expected to reach 85,820 b/d or 8% of jet fuel demand. The consumption is expected to rise steadily to 70% in 2050. By this time, the bloc could be falling short of supplies, burning 507,740 b/d or 48% of jet fuel demand.

The situation becomes challenging from the mid-2030s, with capacity unlikely to keep pace as quotas ramp up significantly and as pressure on feedstocks mounts, Nathan Nguyen, a biofuels analyst at Commodity Insights, said. As a result, the EU could fall well behind the bloc's ReFuelEU Aviation mandates and by 2050, shortfalls could exceed 15 million mt, he said.

The key difficulty lies in sourcing suitable feedstock for HEFA-based SAF for the larger volumes needed, and regulators are, therefore, eying alternative pathways, namely synthetic fuel or eSAF.

Synthetic fuel challenges

From 2030, the e-SAF sub-mandate under ReFuelEU begins at 1.2% by volume and rises to 35% by 2050. A penalty of twice the average yearly price difference between conventional jet fuel and e-SAF may result in a significant cost of non-compliance and a high willingness to pay for e-SAF in the EU. Within Europe, none of the 30 large-scale projects have reached a final investment decision, BP said in company material in October.

"We believe that to see investment in e-SAF production and the required supply chain of green hydrogen, policy needs to support the development of first-of-a-kind, complex, and capital-intensive projects," a BP spokesperson told Platts.

A revenue certainty mechanism coupled with predictable buy-out levels above the expected cost of supply could also minimize the potential for price volatility, reduce uncertainty and help unlock investment, BP said.

In the long term, Commodity Insights analysts expect e-fuel production costs to reduce significantly. This would be by over 60% between 2025 and 2050 in some locations: US Gulf Coast, Middle East and parts of Europe. However, costs are expected to remain uncompetitive against HEFA and fossil jet fuel without further support, they added.

For now, the sector is facing financial headwinds. Uniper has dropped its SkyFuelH2 project; other electrolyzer rollbacks include Neste dropping its 120 MW electrolyzer plans and BP downgrading plans at its Castellon project from a 200MW electrolyzer to a 25 MW unit.

Both SAF and eSAF come at a premium to conventional jet fuel. Platts assessed SAF on a CIF basis in Northwest Europe at $1,736.50/mt on April 8, 165% costlier than jet fuel CIF NWE cargoes. The premium for eSAF is even greater by some calculations. The UK stipulated a buy-out price for eSAF of GBP6,250/mt ($8,003/mt) in its April consultation on creating the SAF mandate.

And at sea

At sea, FuelEU Maritime has been fully applied since the start of 2025. The regulation promotes the use of renewable, low-carbon fuels and clean energy technologies for ships, thereby supporting the decarbonization of the maritime sector.

Brussels has increased the coverage of its Emissions Trading System over greenhouse gases from ship operations to 70%, up from 40% in 2024, while ushering in FuelEU Maritime rules to reduce the GHG intensity of marine energy by 2% from 2020.

Unlike in aviation, the shipping sector is expected to have access to a range of alternative fuels, including ammonia, hydrogen and nuclear; however, shipowners say that biofuels are one of the few viable options in the near term.

The compliance pooling sector for FuelEU regulation is becoming increasingly attractive for small- to medium-sized shipowners, but pricing negotiations remain a point of contention as the space develops, Guido Levie, the co-founder of maritime decarbonization company Carbonleap, told Platts.

FuelEU's pooling mechanism allows compliant shipowners to sell their surpluses to compliant-deficient owners externally who require the balance, creating a marketplace as a result.