Financing Aviation Decarbonisation & SAF: Striking the public-private sector balance
In this recorded webinar, our panel of experts discussed exactly what it will take for SAF and aviation decarbonisation more broadly to secure the investment required to scale.
In addition, Wafaa Ermilate, ING Capital and Martin McAspurn-Lohmann, Independent Consultant, share their written responses to the audience Q&A.
As is often the case, our expert panel generated many questions in the live webinar, but weren’t able to answer every one. Read on for Wafaa Ermilate, Managing Director and Head of Energy, Americas, ING Capital, and Martin McAspurn-Lohmann, Independent consultant and expert in new energies and commodities finance, responses’ to a few of those unanswered questions.
Wafaa Ermilate
Managing Director and Head of Energy, Americas
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ING Capital
Independent consultant
Considering the high quantity of fossil fuel in the Arabian region, how will the major oil suppliers in the region be incentivised to move away from an oil/carbon based economy?
Clean fuels represent for most of the big O&G majors, incl in the GCC, an opportunity to diversify away from oil revenues consistent with policies they pursued in the past – in some cases very successfully - and position for commodities that will be traded in the future. In that sense, policy drivers (in the EU and APAC mostly) are equally important to them as they are to other players elsewhere around the world as they drive demand until cost parity can be in sight.
The GCC as an aviation hub is an advantage for the region, given potentially greater ability to amortise the (possibly lower) investment in handling/blending/transport infrastructure – which may not be the case in all other EU based locations.
The UAE’s Net Zero by 2050 Initiative exemplifies how oil economies can align with global decarbonisation goals. For oil suppliers, incentives stem from both external pressures, such as global demand for low-carbon products, and internal motivations to diversify revenue streams. Investments in renewable hydrogen, SAF production, and bio-refineries are strategic moves to future-proof business models.
Regionally, policies like ReFuelEU in Europe and the Inflation Reduction Act (IRA) in the US provide export incentives, while voluntary initiatives such as Clean Skies for Tomorrow encourage innovation. In practice, national oil companies like ADNOC are leveraging their financial resources and expertise in refining to enter SAF markets, blending traditional strengths with decarbonisation opportunities.
Although the outlook for SAF supply looks relatively positive for the next few years, with the mandates increasing significantly from 2030, it will be challenging for supply to meet demand. Will we see investment in additional renewable facilities to meet the growing demand after that date?
SAF supply outlook is challenged by the lack of policies driving meaningful demand prior to 2030, with possibly the exception of the UK mandates. This may cast a shadow on the deployment at scale necessary to drive costs down and facilitate a bigger adoption of SAF into the future.
Yes, but the timing and scale of these investments depend on clear policy signals and market incentives. Current production pathways like HEFA-SAF rely on limited feedstocks, constraining capacity growth. However, technologies such as Fischer-Tropsch (FT) and alcohol-to-jet (AtJ) hold significant potential if cost barriers can be overcome.
Corporate offtake agreements, such as Microsoft’s partnership with IAG, are emerging as critical tools for de-risking early investments. These agreements provide revenue certainty to producers, encouraging the development of new facilities. Post-2030, scaling SAF supply will require integrating advanced technologies and a combination of public-private financing mechanisms like Horizon Europe, the IRA, and state-backed loans to bridge investment gaps.
Note: While the IRA’s SAF production incentives remain a significant driver for US investment, future political scrutiny could impact its continuity and scope.
Most of the current technologies to produce SAF are not economically feasible for adoption, even with subsidies. Where is the capital to develop and scale new technologies, and what do you see as the impediments to funding them?
Capital is flowing into SAF innovation from a mix of public funding (e.g., Horizon Europe, InvestEU, IRA) and private investment. However, the deployment of new technologies like e-SAF faces several bottlenecks: high CAPEX, feedstock constraints, and a lack of long-term pricing certainty.
In addition to these bottlenecks, a lack of policy clarity and robust support mechanisms remains a significant impediment. Investors need assurance that subsidies, tax credits, or carbon contracts for difference (CfDs) will remain consistent over the life of the project. Without these guarantees, the risk of regulatory or policy shifts can undermine project bankability and deter investment.
Clear, long-term frameworks - such as ReFuelEU’s blending mandates or the IRA’s multi-year tax credits - offer examples of how policy certainty can unlock capital. Governments can further improve investor confidence by tying payouts to performance metrics, such as carbon intensity reductions or production volume thresholds, to ensure alignment with decarbonisation goals.
How do you evaluate financing opportunities for SAF producers, specifically comparing HEFA-SAF to e-SAF production, in terms of risk profile and overall invest-ability?
Key impediments relate to the marketability of more expensive molecules and availability of feedstock for the most proven production pathway – these are key considerations in the bankability of transactions. Solving (contractually) for those issues will unlock capital for projects (multilateral, ECAs, commercial bank, equity)
HEFA-SAF remains the most mature and bankable technology due to proven pathways, established feedstock supply chains, and lower technology risk. However, competition for feedstocks, such as used cooking oil, adds volatility to the cost structure.
E-SAF production, by contrast, is capital-intensive and depends heavily on cheap renewable hydrogen and biogenic CO2. While the risk profile for e-SAF is higher, policy support such as the IRA’s $1.75/gallon tax credit and CfDs can enhance invest-ability. Over time, cost reductions in renewable hydrogen production will be critical to making e-SAF competitive and scalable.
Note: The IRA’s guidance delays and potential policy shifts add uncertainty to its long-term impact.
Are there any major fundamental R&D challenges relating to SAF technology remaining which are barriers for access to financing?
Scaling-up production pathways beyond HEFA remains an industrial challenge for the production of SAF – considering the situation of AtJ plants to date.
For HEFA-SAF, most of the technological challenges have been addressed, but scaling production is constrained by feedstock availability and competition with other biofuels, like renewable diesel. Advanced biofuels, such as those derived from woody residues or agricultural waste, hold promise but require further technological maturity to reduce costs and improve conversion efficiencies.
For e-SAF, the challenges are significantly more pronounced. Cost reductions in electrolysers, CO2 capture, and Fischer-Tropsch synthesis are critical. E-SAF also requires carefully calibrated storage and handling throughout the value chain to stabilise the production process. Without these advances, the operational risks will remain a significant barrier to investment.
Bio-based faces challenges in scaling, while e-fuels are yet to close the cost gap. Has anybody on the panel seen anything potentially disruptive in the early-stage innovation pipeline to resolve this double dead-end?
Two areas stand out:
1. Feedstock Innovation: Algae-based feedstocks and lignocellulosic biomass are gaining traction, though commercialisation is years away.
2. AI and Predictive Modelling: Used to optimise feedstock logistics and enhance process efficiency.
Additionally, modular and decentralised SAF production units may offer a pathway to reduce CAPEX and accelerate deployment.
Is SAF production losing out to renewable natural gas (RNG) because it is easier to produce, lower cost, and less risky?
In some cases, yes. RNG’s well-established processes, shorter timelines, and lower capital intensity make it an attractive option for investors. However, SAF benefits from long-term policy support and growing demand, positioning it as a more strategic choice for aviation decarbonisation.
Will FT (Fischer-Tropsch) conversion of Hydrogen with CO2 have a decent share in future process routes? What carbon tax may be needed?
FT conversion is promising for SAF production, particularly when integrated with renewable hydrogen and CO2. However, high CAPEX and operational complexity remain significant barriers.
Carbon Tax Impact: A minimum tax/carbon price of $400/tonne would likely be needed to make FT-based SAF competitive without subsidies.
Will there be regulations by EU or USA that will help companies to use SAF, and not just the free tax on SAF till 2035 and the gradual increase of Jet-A1 of 1% each year?
The EU provides regulatory clarity through ReFuelEU Aviation, which mandates SAF blending starting at 2% in 2025 and scaling to 70% by 2050. This clear demand signal, coupled with funding mechanisms like Horizon Europe and the Innovation Fund, helps de-risk investments for SAF producers.
In the US, the focus has been on supply-side incentives, such as the IRA, which offers up to $1.75 per gallon of SAF tax credits, and California’s Low Carbon Fuel Standard (LCFS), which provides additional regional support. However, the lack of federal demand-side policies, such as blending mandates, leaves producers reliant on voluntary commitments and regional programs, creating uncertainty for long-term investments.