Overview

The Sustainable Aviation Fuel Bill aims to boost the UK's sustainable aviation fuel (SAF) production by providing financial incentives and establishing a levy system. This involves creating revenue certainty contracts for SAF producers, a levy on aviation fuel suppliers, and a designated counterparty to manage the scheme.

Description

The bill establishes a system to support the production of sustainable aviation fuel (SAF) in the UK. Key elements include:

Revenue Certainty Contracts

The Secretary of State can direct a designated counterparty (a government-owned company) to offer contracts guaranteeing a minimum price ("strike price") for SAF sold by producers. Producers receive payments if the market price falls below the strike price, and conversely, make payments if the market price exceeds the strike price. These contracts will be in place for a maximum of 15 years (initial 10 years, with potential 5-year extensions).

Designated Counterparty

A government-owned company will be designated to manage the contracts and the levy system. The Secretary of State has the power to revoke and replace this counterparty.

Levy on Suppliers

A levy will be imposed on relevant aviation fuel suppliers to fund the revenue certainty contracts and other costs associated with the scheme. The levy amount will be determined by regulations, potentially varying based on market share and including exemptions. Suppliers will be required to provide financial collateral.

Surplus Payments

If the designated counterparty has a surplus, regulations will determine how this is distributed back to levy payers, potentially with stipulations regarding how these funds benefit customers.

Financial Penalties

The Secretary of State can impose financial penalties (up to £100,000 or 10% of turnover) on those who breach levy regulations or requirements related to surplus distribution. A detailed process for issuing and appealing penalties is laid out in a schedule.

Government Powers

The Secretary of State has broad powers to issue directions to the designated counterparty, request information and advice, provide financial assistance to the counterparty, and make regulations to implement the bill's provisions.

Government Spending

The bill doesn't specify exact figures for government spending. However, significant government expenditure is anticipated through financial assistance to the designated counterparty and potential losses resulting from revenue certainty contracts where market prices are higher than the strike price. The cost to the government will be funded through the levy.

Groups Affected

• Sustainable Aviation Fuel Producers: Will benefit from price guarantees, potentially stimulating production.
• Aviation Fuel Suppliers: Will be subject to a levy, potentially increasing their costs.
• Airlines (indirectly): May see altered fuel costs depending on the levy's impact on suppliers.
• UK Government: Will bear financial risks and costs associated with the scheme, but will benefit from increased SAF production and environmental goals.
• The Designated Counterparty: Will manage the scheme and be responsible for administering the levy and contracts. It will also receive financial assistance from the government.

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