Parliament has enacted the Sustainable Aviation Fuel Act 2026, receiving Royal Assent on 5 March 2026. Most provisions take effect immediately, with the central power to direct revenue‑certainty contracts commencing two months later on 5 May 2026. The legislation creates a government‑backed counterparty, an industry levy and a transparency regime to support investment in UK‑produced sustainable aviation fuel (SAF) while protecting levy payers through defined processes and appeal routes.
The Act empowers the Secretary of State to direct a designated counterparty to offer a revenue‑certainty contract to a named producer of UK‑produced SAF (section 1(1)). These are private‑law contracts structured around a “strike price” and a “market reference price” for eligible fuel sold during a contract period. Payments flow symmetrically: the counterparty pays the producer when the strike price exceeds the market reference price and the producer pays the counterparty when the market reference price exceeds the strike price, with amounts calculated by reference to the difference (section 1(2)–(3)).
Eligibility for “UK‑produced SAF” is broad: fuel qualifies if any part of the process of converting any feedstock into the fuel occurs in the United Kingdom (section 1(3)). This definition matters for project developers structuring multi‑site or modular production chains; partial UK conversion steps can bring volumes within scope for support if other contract conditions are met.
Directions to the counterparty must be in writing and specify the producer, the compliance period for making the offer, the terms on which the offer is to be made, and the period for which that offer remains open (section 1(4)). The direction window is time‑limited: no new directions may be issued after 10 years from Royal Assent-i.e. after 5 March 2036-unless extended by regulations, which may add up to five years per extension (section 1(7)–(8)). The Secretary of State must copy any direction to the producer and may revoke a direction; any unaccepted offer then lapses (section 2).
Transparency provisions allow regulations requiring the counterparty to maintain a register and to publish revenue‑certainty contracts or details about them, subject to specified redactions. Redactions can be authorised by the contract itself or by a Secretary of State decision under the regulations, balancing commercial confidentiality with public accountability (section 3).
The “designated counterparty” must be a company limited by shares, with each share held by a Minister of the Crown, and it must consent to designation (section 4). The Secretary of State may revoke a designation and must ensure a designation is always in force; notices of designation or revocation must state when they take effect and must be published (section 4(5)–(8)). This mirrors established public counterparty models while retaining ministerial control and continuity obligations.
Where the designation changes, a statutory transfer scheme can move property, rights and liabilities-including employment contracts-to the new counterparty. The scheme may replicate protections similar to the Transfer of Undertakings (Protection of Employment) Regulations 2006 and can provide for compensation where interests are adversely affected (section 5 and Schedule references). This ensures operational handover without disrupting contract performance or staffing.
Funding is provided through levy regulations. The Secretary of State may require “relevant suppliers of aviation fuel” to pay a levy to the counterparty to meet difference payments under revenue‑certainty contracts and other statutory costs (section 6(1)). Levy design can include reserves, differential charges based on market share, exemptions, requirements for payments on account and interest on late payment (section 6(2)–(6)). Levy payers are those subject to a Renewable Transport Fuel Obligation because they supply aviation fuel during the specified period, aligning the scheme with existing energy and fuel compliance frameworks (section 6(7)–(8)).
To manage counterparty credit risk, levy regulations may require levy payers to provide financial collateral-cash, securities or other forms-with the counterparty setting the form and terms (section 7). This provision gives the counterparty flexibility to calibrate risk management as payment flows fluctuate with market prices.
Administration and enforcement arrangements can assign functions to the counterparty, enable the Secretary of State to assist by collecting and sharing information, and mandate that firms provide information on request or otherwise. Regulations may also set dispute‑resolution routes, including arbitration and appeals, and specify who calculates key quantities and by which procedures (sections 8–9).
If the levy generates a surplus-whether from producer payments back to the counterparty or other sources-the Secretary of State may require the counterparty to return funds to levy payers, and may require recipients to pass benefits through to their customers according to rules in secondary legislation. Conditions may include repayment if pass‑through obligations are not met (section 10).
Non‑compliance with levy requirements or specified information duties can lead to financial penalties imposed by the Secretary of State. The statutory cap is the lesser of £100,000 or 10% of the person’s turnover, with regulation‑making powers to update the fixed amount for inflation and to define turnover (section 11). A Schedule sets due‑process safeguards: a notice of intent with at least 28 days for written representations, a final notice with at least 28 days to pay, rights of appeal to the High Court (or Court of Session in Scotland) within 28 days, and enforcement provisions. Sums recovered go to the Consolidated Fund.
Ministerial oversight is explicit. The Secretary of State may direct the counterparty on the exercise of its statutory functions, and such directions must be published (section 12). The counterparty must provide information or advice in the form and timing specified, and government may provide financial assistance in any form-grants, loans, guarantees, indemnities or insurance-on conditions including repayment (sections 13–14).
Before making regulations under the Act, the Secretary of State must consult “any persons considered appropriate”. For regulations on contract directions, transparency, surplus recycling or penalty caps, that consultation must include the Welsh Ministers, the Scottish Ministers and the Department for the Economy in Northern Ireland (section 15). Parliamentary procedure is tiered: regulations on extending the direction window, creating the levy, making surplus‑recycling rules and amending the penalty cap require affirmative approval by both Houses; other regulations are subject to the negative procedure (section 16).
Key statutory definitions anchor the scheme to existing regimes. “Aviation fuel” includes fuel for aircraft and for testing aircraft engines; “renewable transport fuel”, and thus the meaning of SAF for this Act, is tied to the Energy Act 2004; and “relevant supplier” tracks the Renewable Transport Fuel Obligation framework. The Act extends to England and Wales, Scotland and Northern Ireland (interpretation and extent clauses). Commencement is immediate on 5 March 2026 except for section 1, which starts on 5 May 2026, and the short title is the Sustainable Aviation Fuel Act 2026.
For producers, the Act offers a bankable price floor and ceiling through private‑law contracts, improving revenue predictability for UK‑based SAF projects once secondary legislation is made and directions are issued. Projects with partial UK conversion steps may qualify, but developers will need to evidence eligibility, align contract periods with expected output profiles and prepare for publication requirements with permitted redactions.
For levy payers-the aviation fuel suppliers captured by the Renewable Transport Fuel Obligation-the immediate task is compliance planning around cash‑flow, collateral and information duties under forthcoming levy regulations. Market‑share‑based apportionment, payments on account and interest on late payments point to the need for accurate volume and market‑share data, robust treasury planning and readiness for audit and dispute‑resolution channels.
Airlines and airports are not direct parties to the contracts or levy under the Act, but they will be exposed indirectly via fuel‑supply terms. The surplus‑recycling and pass‑through provisions anticipate benefits flowing back to customers in certain circumstances, subject to mechanisms specified in secondary legislation. Procurement teams should expect contractual clauses in supply agreements to reflect levy pass‑through mechanics and any redress under surplus rules.
Implementation now hinges on secondary legislation: designation of the counterparty, levy regulations, transparency rules and any surplus‑recycling framework. The statutory consultation duty-covering the devolved administrations for key instruments-signals that detailed design choices will follow, with parliamentary scrutiny via the affirmative procedure where specified. Timelines for contract allocation will depend on when the Secretary of State issues directions after section 1 comes into force on 5 May 2026. Stakeholders should monitor consultations closely and prepare submissions on levy design, collateral calibration and publication redactions to shape the operating rules.