On 23 March 2026, the UK ETS Authority (the "Authority") launched a consultation on how sustainable aviation fuel ("SAF") should be treated within the UK Emissions Trading Scheme ("UK ETS").1 The consultation seeks views on how emissions reductions from SAF should be recognised and claimed under the UK ETS, as well as on potential operational changes to how SAF use under the UK ETS is regulated.
Under the current UK ETS framework, aircraft operators conducting in-scope flights are required to monitor and report their fuel use and associated CO₂ emissions and to surrender a corresponding number of UK Emissions Allowances annually. Operators may claim emissions reductions from eligible SAF, with qualifying fuels treated as having zero emissions for UK ETS purposes, such that no allowances are required to be surrendered in respect of those fuels.
The consultation considers whether, and how, this treatment should be revised. In particular, the Authority is seeking views on the scope of eligible fuels, applicable sustainability criteria, emissions thresholds and the methodology by which emissions reductions from SAF are recognised, as well as on how the UK ETS should interact with the UK sustainable aviation fuel mandate (the "SAF Mandate").
The approach adopted following the consultation will have direct implications for carbon compliance costs and the commercial incentives to produce and use SAF.
What does the consultation propose?
The Consultation is seeking views on five core topics in relation to the UK ETS treatment of SAF:
- Eligible fuel types: Currently, only biofuels meeting sustainability criteria derived from the Renewable Transport Fuel Obligation ("RTFO") are eligible for claiming emissions reductions under the UK ETS. The Authority is considering whether to expand eligibility to non-biofuel low carbon fuels such as power-to-liquid fuels ("PtL") and recycled carbon fuels ("RCF"), which are recognised under the SAF Mandate but not currently eligible under the UK ETS.
- Sustainability criteria: The Authority proposes replacing the current RTFO-based sustainability criteria with those used under the SAF Mandate. These standards are more recent and reflect updated approaches to lifecycle emissions assessment, and would address the misalignment between UK policy affecting the supply and demand sides of the UK SAF market.
- GHG saving threshold: The Authority is considering whether the current 65% threshold should be lowered to 40%. Lowering the threshold would align the UK ETS with the SAF Mandate and bring RCF within scope but would create a point of divergence from the EU ETS, adding complexity for operators with obligations under both schemes. Maintaining the current threshold preserves that alignment with EU ETS but risks leaving some mandate-compliant SAF ineligible for UK ETS purposes, which could create confusion in the market.
- Fossil fuel comparator: The current comparator of 94 gCO₂e/MJ aligns with the EU ETS. The Authority is considering whether this should be revised to 89 gCO₂e/MJ, in line with the SAF Mandate and CORSIA. This lower figure, which ICAO also uses for lifecycle emissions savings calculations, would reduce the assumed GHG emissions of fossil kerosene against which SAF savings are measured, affecting eligibility assessments under the UK ETS.
- How emissions reductions from SAF are recognised: Under the current zero-rating approach, eligible SAF is treated as producing zero emissions, meaning allowances do not need to be surrendered in respect of emissions from the combustion of SAF. The Authority is considering whether to:
- Retain the current zero-rating approach: Eligible SAF is treated as producing zero emissions, simplifying surrender obligation calculations and helping to offset the cost differential between SAF and fossil kerosene, but without differentiating between SAF types based on their actual emissions savings.
- Move to a proportional lifecycle assessment model: SAF would be credited in proportion to its actual lifecycle emissions savings relative to fossil kerosene, better reflecting the "polluter pays" principle and aligning with the SAF Mandate, though at the cost of greater administrative complexity for operators.
- Remove preferential treatment entirely: SAF would be treated identically to fossil kerosene for UK ETS purposes, with no credit given for lifecycle emissions savings.
Three issues for SAF market participants
The consultation arrives at a critical juncture for the SAF industry. SAF production in 2025 represented only 0.6% of total jet fuel consumption globally, and the cost premium of SAF over fossil kerosene — which can reach a factor of five in mandated markets — remains a significant constraint on wider uptake. The choices made following this consultation will therefore be scrutinised not only for their technical robustness, but for how they shape the economic incentives to produce, supply and use SAF.
1. Recognition methodology: the cost of greater accuracy
A move away from zero-rating towards lifecycle-based recognition would, in most cases, increase ETS compliance costs for operators using SAF: rather than eliminating allowance obligations entirely, emissions reductions would be recognised in proportion to lifecycle savings, increasing residual surrender exposure. It would also introduce more complex monitoring, reporting and verification requirements (including additional evidencing obligations) adding further administrative cost at a time when operators are already absorbing a significant SAF price premium.
2. Eligibility and thresholds: growth vs environmental integrity?
Expanding eligibility to include fuels such as RCFs and PtL, alongside lowering GHG savings thresholds, would allow a broader range of SAF pathways to generate ETS benefits, improving procurement flexibility and strengthening demand signals, with potential to support additional supply over time. However, it would create divergence from the EU ETS 65% threshold, adding complexity for operators subject to both regimes, and may weaken environmental integrity where fuels with fossil-derived inputs qualify as low-carbon. The result is a trade-off between supporting market growth and maintaining confidence in reported emissions reductions.
3. Regulatory alignment and ETS linkage risk
The consultation also raises broader questions around alignment between the UK ETS, the SAF Mandate and the EU ETS. Divergence in eligibility criteria, thresholds or accounting methodologies could result in the same fuel being treated differently across regimes, requiring market participants to navigate parallel frameworks and potentially optimise SAF use on a jurisdiction-specific basis. At a time when the UK and EU are in formal negotiations to link the UK ETS and EU ETS, the degree of alignment achieved will be critical to avoiding fragmentation — and any linking agreement may require the framework adopted following this consultation to be revisited before its targeted implementation date.
Next Steps
The consultation is open until 15 June 2026, with the Authority expected to publish its response thereafter and implement any changes by 2028.
The proposals form part of a broader UK policy package aimed at scaling SAF, including the SAF Mandate and the development of a revenue certainty mechanism based on a contracts-for-difference ("CfD")-style model to support SAF production. Given the potential implications for ETS cost exposure and the treatment of SAF in emissions reporting, SAF market participants may wish to consider engaging with the consultation process to help shape a framework that is both workable in practice and aligned with decarbonisation objectives
Dominic Oben (Trainee Solicitor, White & Case) contributed to the development of this publication.
1 https://platform.airfinanceglobal.com/articles/3598744/iata-calls-for-saf-policy-rethink
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