The funding landscape for SAFs is diverse and dynamic, encompassing public grants, private investments, international financing, and innovative financial instruments. This multifaceted investment ecosystem is crucial for accelerating the development and deployment of SAF, ultimately contributing to the aviation industry’s sustainability goals. As the demand for cleaner air travel grows, continued support from both public and private sectors will be essential to scale SAF production and integrate it into the global aviation fuel supply chain. This chapter delves into the primary funding and avenues for SAF projects and outlines some of the financing and revenue mechanisms that support the private investment ecosystem.

Governments globally are significantly contributing to the advancement of SAF through an array of grants and subsidies. These financial aids are primarily directed towards R&D, pilot projects, and early-stage commercial production, thereby nurturing innovation and scaling within the SAF sector. This section gives a high-level overview of the public funding structures, whilst a more detailed account of the individual schemes is discussed in 04 – Policy and Regulation.

In the United States, substantial funding is provided by the U.S. DOE and the Federal Aviation Administration (FAA) through initiatives such as the Bioenergy Technologies Office (BETO) and the Continuous Lower Energy, Emissions, and Noise (CLEEN) Program. Moreover, the IRA of 2022 has introduced tax credits specifically aimed at SAF producers, further stimulating the market.

Across the Atlantic, the European Union supports SAF via several initiatives, including Horizon Europe and the European Green Deal. The Renewable Energy Directive (RED II) is instrumental in this regard, mandating an increase in the share of renewable energy within transportation, thereby bolstering SAF adoption. Similarly, the United Kingdom’s Jet Zero strategy is backed by substantial funding, exemplified by the Green Fuels, Green Skies competition, which is focused on commercializing innovative SAF technologies.

Tax incentives and credits are also critical in reducing financial barriers to SAF production. These mechanisms effectively lower the tax burdens on both SAF producers and users, thereby enhancing the economic viability of SAF. For instance, the Blender’s Tax Credit in the U.S. offers financial incentives per gallon of SAF blended with conventional jet fuel, encouraging its integration into the existing fuel supply chain. In Europe, the EU Emissions Trading System (EU ETS) encompasses aviation, incentivizing airlines to use SAF as a means to mitigate their carbon tax liabilities.

PPPs are another vital component, fostering collaboration between governments and private entities. These partnerships leverage public funds to attract private investments, thereby accelerating SAF development. Governments frequently collaborate with industry leaders and academic institutions on large-scale SAF projects, as seen with the EU’s Clean Sky 2 and the UK’s ATI Program, which support joint R&D initiatives.

Multilateral development banks (MDBs) such as the World Bank, the EIB, and the Asian Development Bank (ADB) play a crucial role in financing SAF projects, especially in emerging markets where access to private capital is often limited. These institutions offer a range of financial products including loans, guarantees, and technical assistance, aimed at supporting the development of SAF infrastructure and production facilities. Additionally, the Global Environmental Facility (GEF) funds projects that underpin the development of sustainable biofuels, including SAF, in developing countries.

VC and PE firms are well-suited to invest in high-risk, high-reward ventures, making them ideal partners for SAF startups that require substantial capital to develop and scale their technologies. These investments often target companies developing novel processes for producing SAF, such as advanced biofuel conversion technologies, waste-to-fuel processes, and synthetic fuels derived from carbon capture.

Over recent years, there has been a significant uptick in both the volume and value of VC and PE investments in the SAF sector. This surge is driven by a growing recognition of the environmental and economic potential of SAFs. Notably, prominent VC firms such as Breakthrough Energy Ventures, founded by Bill Gates, are leading the charge in funding SAF technologies. These firms are drawn by the promising returns and the significant impact on reducing aviation’s carbon footprint.

The investment theme of SAF-led decarbonization has propelled significant interest in the VC segment, particularly in looking at up and coming technologies such as PtL SAF. To date, the majority of startup ventures focus on biogenic SAF production, however future investments are likely to explore a broader range of technologies. Key areas to watch include technology validation of innovations such as production processes based on concentrating solar thermal power generation for green hydrogen-based SAF synthesis (e.g., Synhelion), CO2 extraction processes from existing industrial combined heat and power plants (e.g., Dimensional Energy), and commercialization of hydrogenation production processes based on CO2 (e.g., OXCCU).

Funding trends amongst VC and PE groups indicate high investor interest, with Bloomberg New Energy Finance (BNEF) estimating that $590 million was invested from 2021 towards PtL SAF production technology, accounting for over 70% of the total investment in SAF (Bloomberg, 2023).