2025

Global Sustainable Aviation Fuel Report

SAF Offtake

07 | SAF Offtake

The global SAF offtake market is evolving rapidly, driven by regulatory mandates, corporate sustainability commitments, and advancements in production technologies. Governments worldwide are implementing policies to mandate or incentivize SAF usage. Regulatory frameworks such as the EU’s ReFuelEU Aviation initiative, the United States’ SAF Grand Challenge, and Canada’s Clean Fuel Regulations are creating demand for SAF through blending mandates and financial incentives. These regulations are pivotal in driving market growth and ensuring a steady demand for SAF. This chapter explores the current state of the global SAF offtake market, including key players, market dynamics, offtake agreements, challenges, and future prospects.

Regulatory Drivers: Governments worldwide are implementing policies to mandate or incentivize SAF usage. Regulatory frameworks such as the EU’s ReFuelEU Aviation initiative, the United States’ SAF Grand Challenge, and Canada’s Clean Fuel Regulations are creating demand for SAF through blending mandates and financial incentives. These regulations are pivotal in driving market growth and ensuring a steady demand for SAF.

Corporate Sustainability Commitments: Airlines and aviation companies are making significant sustainability commitments, often in response to shareholder pressure and consumer demand for greener travel options. Major airlines have announced ambitious targets for SAF usage, entering into long-term offtake agreements to secure supply and demonstrate their commitment to reducing emissions.

Source: ICAO, 2024

Globally, by November 2023, airlines had entered into forward purchase agreements on SAF worth $45 billion. In volume, these contracts outstripped the existing availability, indicating that airlines are securing the supplies they need for fuel transition and suppliers are leveraging these contracts for capacity expansion (IATA, 2023). These commitments highlight the cost burden that the industry must bear, with airlines incurring an additional $500 million in costs due to SAF purchases in 2022. ICAO’s latest estimates from the tracked 120 offtake agreements show a volume of over 52 billion litres, with seven airlines holding two-thirds of the total offtake volume, and United Airlines alone holds over a quarter in share.

As shown in Figure 27 announced offtake agreements have been on the rise over the past 6 years, with a rush for deals by the end of 2022 in response to the Refuel EU Aviation package. In many cases, offtake agreements are also related to SAF production. This has been the case in the US, where long-term offtake agreements are, in effect, agreements for production (Fastmarkets, 2024). However, the SAF offtake market lacks depth due to limited transactions. Pricing often does not reflect the market condition as contracts are based on one-on-one negotiations. Many agreements are open-ended and refer to the airline’s right to purchase, instead of a firm long-term procurement. The absence of a spot market makes the commercials challenging for SAF producers and buyers to close deals.

Source: IATA, 2023

Another consideration is the proportion of offtake volume associated with each production method. IATA’s estimates as of mid-2023 indicate that 85% of the contracted volume is based on the HEFA process (IATA, 2023). However, HEFA ranks lowest in scalability for the upcoming fuel requirements. Airlines must consider this factor in emerging procurement scenarios. In February 2024, the International Airlines Group (IAG) announced a 14-year contract for 785,000 tonnes of SAF based on PtL using renewable energy and CO2. This contract, to be met by the US-based producer Twelve, will support IAG’s five European airlines, namely British Airways, Iberia, Aer Lingus, Vueling, and LEVEL. This deal made IAG the first European airlines group to place such an order for PtL-based SAF. In January 2024, Norwegian Air Shuttle and Cargolux Airlines International committed to purchasing 140,000 tonnes of PtL fuel from Norway’s Norsk e-fuel (Cargolux, 2024). Furthermore, both companies will extend strategic support for additional production facilities by 2030.

Figure 29 -Offtake Agreements to Commence in 2024

Source: S&P Global Commodity Insights

The SAF offtake market is poised for significant growth, driven by regulatory support, technological advancements, and strong corporate commitments. However, several challenges need to be addressed:

High Production Costs: SAF production is currently more expensive than conventional jet fuel, primarily due to high feedstock and production technology costs. Bridging this cost gap is essential for the commercial viability of SAF.

Regulatory Hurdles: While regulatory frameworks are driving demand, the lack of harmonized global standards for SAF certification and usage can create market fragmentation and operational challenges for airlines operating in multiple jurisdictions.

Corporate Purchase

Corporate purchase agreements play a critical role in the offtake of SAF, driving the market forward through long-term commitments and strategic partnerships. These agreements, often formed between airlines and SAF producers, serve as a foundational mechanism to ensure a stable demand for SAF, thereby facilitating investment in production infrastructure and advancing the commercialization of sustainable fuels.

Corporate purchase agreements provide a reliable and predictable demand for SAF, which is essential for producers to justify the significant capital investments required for production facilities. These long-term contracts offer financial security to SAF producers, encouraging them to scale up production and innovate in cost-reduction technologies. The guaranteed offtake volumes under these agreements help mitigate the risks associated with the volatility of fuel prices and market fluctuations.

Figure 30 – Select Partnership Agreements by Corporate Buyers

Source: Business Traveller, 2021; Airport Technology, 2024; Carbon Credits, 2023; Green Air, 2021

Key Examples of Corporate Purchase Agreements:

Lufthansa Group: Lufthansa has committed to increasing its use of SAF and has entered into several long-term offtake agreements. For instance, in 2021, Lufthansa signed a deal with Shell Aviation to purchase SAF over multiple years, ensuring a consistent supply to meet its sustainability targets.

Delta Air Lines: Delta has secured SAF offtake agreements with producers such as Gevo and Neste. These agreements are part of Delta’s broader sustainability strategy to reduce its carbon footprint and demonstrate its commitment to greener aviation.

British Airways: British Airways has partnered with LanzaJet and Velocys to secure SAF supplies, supporting its goal of achieving net-zero emissions by 2050. These agreements highlight the strategic moves

Corporate Purchases through Fuel Credit Systems: Corporate purchases of SAF through fuel credit systems represent another emerging and significant aspect of the offtake market. Major corporate customers of air travel use such purchase commitments to avail of credits that they can claim for environmental benefits. While physical fuel volume is not acquired, the certificates secured in the process contribute to expanding the pool of buyers and boosting producers’ revenue streams.

Microsoft’s Initiatives: Microsoft is a notable example in this context. The company tied up with IAG SA and Philips 66 to co-fund the purchase of about 5 million gallons of SAF. Furthermore, Microsoft signed a contract with SAF producer World Energy to buy credits equivalent to about 44 million gallons of SAF over the next 10 years. These agreements highlight the role of corporate buyers in supporting the SAF market through innovative purchasing mechanisms (Luxembourg Times, 2023). by airlines to lock in future SAF supplies.

Ad Hoc Partnerships with Airlines: In July 2022, Microsoft signed a Memorandum of Understanding (MOU) with the US-based technology startup Twelve and Alaska Air Group. The goal was to launch a demonstration flight based on the SAF produced through Twelve’s proprietary technology. Multi-year commitments, such as Microsoft’s, can also partly compensate for airlines’ reluctance to sign such long- term contracts, providing additional market stability (T&E, 2023).

Joint Procurement: Collective engagement in joint procurement allows corporate buyers to have better bargaining power to negotiate sourcing terms. An example of this is the Sustainable Aviation Buyers Alliance (SABA), launched in 2021 by RMI and the US Environmental Defense Fund to further the goal of Net Zero Aviation. Founding members include Bank of America, BCG, Meta, Deloitte, Microsoft, and JetBlue. In April 2023, the alliance announced plans to collectively purchase SAF certificates, which could then be used by the organizations to buy Scope-3 emission credits for their respective businesses. Scope-3 emission credits are a mechanism for companies to offset their indirect emissions by investing in projects or activities that reduce GHG emissions elsewhere. This initiative involves SABA’s members buying certificates for nearly 850,000 gallons of SAF to be produced by World Energy (Argus, 2023).

Figure 31 – Book and Claim Platforms for Corporate Buyers

Source: T&E, 2023; BTN, 2024; Green Air, 2022; Jetex, 2024

Aggregator Models and Book-and-Claim Platforms: Aggregator models and book-and-claim platforms offer corporate buyers a certification through third- party verified reporting to claim for Scope-3 emissions offsets. Such platforms also face constraints, including geographical dependence in the accounting of credits or the possibility of overlaps when multiple schemes might be involved. While SAF producers are taking the lead in these platforms, other entities, such as travel management companies, are also participating.

In conclusion, corporate purchase agreements are vital for the growth and stability of the SAF market. They drive demand, support production capacity expansion, incentivize technological advancements, mitigate cost challenges, and facilitate regulatory compliance. As the SAF market continues to evolve, these agreements will play an increasingly crucial role in the global effort to decarbonize aviation and achieve sustainability targets.

Figure 32 – Corporate SAF Schemes on Offer through Various Platforms

Source: T&E, 2023

Role of Emission Trading and Credits

The integration of emission trading systems (ETS) and the use of emission credits play a crucial role in the SAF offtake market. These mechanisms provide economic incentives for reducing greenhouse gas (GHG) emissions and create a structured market for trading emission allowances and credits.

Emission trading systems are market-based approaches to controlling pollution by providing economic incentives for achieving reductions in the emissions of pollutants. Governments set a cap on the total amount of GHG emissions and issue emission allowances, which can be traded in the market. Companies that need to increase their emission allowances must buy them from others willing to sell, thereby encouraging companies to reduce their emissions in the most cost-effective way.

In the context of SAF, ETS play a significant role in driving demand for cleaner fuels. The European Union’s ETS, for instance, includes aviation and requires airlines to hold enough emission allowances to cover their emissions from flights within the EEA. The cost of these allowances incentivizes airlines to reduce their carbon footprint by using SAF, which has a lower carbon intensity compared to conventional jet fuel.

CORSIA and SAF Certification

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is another critical market-based measure designed to offset carbon emissions. CORSIA allows for the certification of carbon mitigation technologies and their use in offsetting emissions. In June 2023, SAFs were certified for the first time under the CORSIA framework, with nine batches of SAF based on agro-waste produced in China, the Netherlands, and the US receiving certification (ICAO, 2023). This successful certification sets a precedent for incorporating SAF sourcing into the overall process of carbon offsets by airlines, reinforcing the importance of SAF in achieving emission reduction targets.

CORSIA’s offsetting requirements have been in force since 2021. Airlines must demonstrate compliance by canceling an appropriate number of emission units for each three-year compliance period. The scheme’s phased implementation means that, until 2026, only flights between states that volunteer to participate will be subject to the offsetting requirements. Figure 33 illustrates the global map of participating and exept states under the CORSIA framework. Under various ETS frameworks, SAF can generate emission reduction credits or allowances, which airlines can use to offset their carbon liabilities. For example, in the EU ETS, SAF usage can reduce the number of emission allowances airlines need to purchase. This creates a financial incentive for airlines to adopt SAF, as it can directly lower their compliance costs.

The SAF credits are typically generated based on the amount of GHG emissions avoided by using SAF instead of traditional fossil fuels. These credits can be traded in the market, providing a revenue stream for SAF producers and further promoting the development and adoption of SAF. In turn this supports the offtake of SAF by reducing the economic burden on consumers.