The UK’s Department for Transport (DFT) recently launched a £219m ($293m) low-carbon fuels fund (LCFF) to meet sustainable aviation fuel (SAF) mandate targets and support decarbonisation efforts across the domestic aviation industry.
From mid-July, UK-based aviation companies can apply for a share of £93m ($125m) over the next two years to scale SAF production. This builds on £198m ($261m) invested through the DFT’s advanced fuels fund (AFF) to scale domestic SAF production and clean aviation technology.
While the LCFF and existing AFF signal stronger policy commitment, questions remain over whether grant funding alone is sufficient to unlock scalable SAF production in the absence of mature hydrogen, carbon dioxide (CO2), and renewable power supply chains.
In July 2025, the AFF committed £6.4m ($8.4m) to US carbon solutions company LanzaTech Global (LanzaTech) in round three funding.
Freya Burton, Chief Sustainability Officer and Head of Europe at LanzaTech, told gasworld the AFF funding supported site selection, early engineering, planning, and permitting for the company’s ethanol-to-jet Dragon II project in Hull, England.
Last year, the AFF also committed £6m ($7.9m) to UK sustainable e-fuels developer Carbon Neutral Fuels.
Isobel Thomas-Horton, Sustainability and External Affairs Lead at Carbon Neutral Fuels, told gasworld the AFF financing supported the basic engineering stage and site procurement of its power-to-liquid (PtL) e-fuels facility, Project Starling, in Workington, West Cumbria.
By supporting LanzaTech and Carbon Neutral Fuels’ respective developments, the DFT’s AFF and LCFF initiatives represent a coordinated effort to build a domestic SAF market.
In response to the , and after the success of its AFF participation, Carbon Neutral Fuels confirmed it will apply for the new fund.
Both companies share insight into potential LCFF market impact, the importance of the call for evidence, and the future of regional SAF production.
Impact of LCFF on the domestic market
The funding comes as the International Air Transport Association (IATA) recently reported that global SAF production is expected to reach around 2.4 million tonnes in 2026, representing just 0.8% of aviation fuel globally.
In 2024, the European Union Aviation Safety Agency (EASA) also said that SAF production represented only 0.53% of global jet fuel use. This shows an increase of just 0.27% in SAF integration over the past two years.
Willie Walsh, IATA’s Director General, said, “We have yet to see either the energy shock, the need to develop energy independence…or the urgency to mitigate climate change materialise in the incentives needed to create a viable SAF market.”
The UK government’s AFF and LCF initiatives could provide necessary support to create a stable SAF ecosystem in the UK. According to LanzaTech’s Chief Sustainability Officer Freya Burton, the AFF funding has positioned the UK as a global leader for SAF production facility development.
“Targeted funding such as LCFF can help reduce early-stage risk and encourage a diversity of technology approaches [but] no single pathway will meet overall SAF demand,” she said.
“The scale of support will need to be sustained and complemented by broader policy mechanisms to address fundamental challenges.”
But not all companies have the same outlook. UK-based Carbon Neutral Fuels believes that wider support must be in place to make a tangible difference to the SAF sector.
Mark Amor, Commercial Director at Carbon Neutral Fuels, told gasworld, “Grant funding alone cannot create a market…It needs to sit alongside a stable mandate that gives investors and lenders confidence there will be long-term demand for all eligible SAF pathways, including PtL.”
If the UK SAF mandate and policy frameworks are not kept consistent, Amor says there is risk that investment goes elsewhere and the domestic SAF supply chain weakens.
Call for evidence
Alongside the LCFF announcement, the UK government also launched a call for evidence on the SAF mandate to receive industry feedback.
Under current plans, PtL fuels must account for 0.2% of total jet fuel demand from 2028, rising to 3.5% by 2040.
The call for evidence comes amid industry feedback that once the PtL obligation is active, the availability of electro-sustainable SAF (e-SAF) could be much lower than expected, disrupting the domestic e-SAF supply chain.
According to the recent IATA report, the EU and the UK have a total mandated e-SAF production of around 0.6 million tonnes per annum (mtpa) by 2030, but production currently sits at 0.02 mtpa.
Marie Owens Thomsen, IATA’s Senior Vice-President Sustainability and Chief Economist, said, “The 2030 e-SAF targets by the United Kingdom and the EU are beyond unrealistic…it is a reckless energy market creation strategy to impose mandates before production is enabled.”
“It will be important to ensure that the evolution of policy does not dilute existing mandates or alter key structures in ways that could undermine advanced technologies,” Burton from LanzaTech adds.
The government will also assess the impact of the mandate’s cap on hydro-processed esters and fatty acids (HEFA) fuels, which is set at 71% of SAF supply in 2030 and 35% in 2040 to encourage deployment of advanced fuel technologies.
“The call for evidence confirmed the overall mandate targets will not be diluted, but we remain concerned about the impact on the HEFA cap that creates a market for advanced SAF in the UK,” says Burton.
If the HEFA cap remains higher, there is less incentive to develop advanced SAF, which slows SAF supply chain development.
Buyout mechanism
Both the SAF mandates main obligation and the ‘PtL obligation’ have buy-out mechanisms to ensure compliance in the event suppliers cannot secure SAF supply.
The UK government’s recent call for evidence, launched alongside the LCFF, comes amid industry feedback that once the PtL obligation and HEFA cap are active, the availability of non-HEFA and PtL SAF could be much lower than expected, disrupting the domestic SAF supply chain.
This introduces the problem of having a buy-out mechanism in place even in a SAF supply deficit. Therefore, under the call for evidence, the UK government will assess wider flexibility options for the existing buyout mechanisms.
The proposed flexibilities aim to address fluctuations in SAF supply across different production methods, while securing investment and maintaining the environmental goals of the SAF mandate.
According to Amor, “Where the market needs flexibility, the existing design already provides it through certificate trading and the buy-out.”
“The UK will need a portfolio of solutions, and policy stability gives each pathway the chance to scale rather than allowing the market to narrow too early,” he added.
Regarding whether the LCFF will materially impact domestic PtL SAF production, Burton told gasworld, “While [the] LCFF can help catalyse early projects, it is unlikely on its own to fully mitigate these structural challenges in the near term.”
Burton highlights green hydrogen as a fundamental challenge for scaling PtL pathways. PtL projects continue to face challenges, including the high cost of green hydrogen production and competition for renewable electricity.
“In this context, the ability to use both the hydrogen business model and sell under the SAF mandate will also be important to help de-risk investment and enable scale,” she noted.
2030 and beyond
For Amor, beyond 2030, “The biggest impact should be confidence… Investors need to know that the UK is not only supporting projects through grants but also maintaining a stable demand framework over the long term.”
In comparison, for Burton, beyond 2030, “Ensuring a level playing field across technologies, including appropriate recognition of advanced pathways…will be key to long-term competitiveness.”
The conversations brought about by LanzaTech and Carbon Neutral Fuels show that infrastructure, funding, and policy need to be coordinated to build a viable SAF market.
