Lack of risk-transfer tools hinders SAF investment: IATA economist

Sustainable aviation fuel producers and airlines have expressed concern over investment risks in the growing market without financial mechanisms to manage their exposure, executives said at the International Air Transport Association on May 12.

Expected returns in the sustainable aviation fuel businesses currently lag fossil fuels by around 15 percentage points, deterring capital from a fixed pool of investment funds, Marie Owens Thomsen, IATA senior vice president and chief economist, said during the organization's Aviation Energy Forum in Paris.

"There is no lack of money, but the money is obviously rational," Owens Thomsen said, calling the potential earnings gap a "handicap that we somehow have to help the market overcome."

The only commercially viable option to decarbonize aviation, SAF makes up just 0.8% of today's global jet fuel demand, the IATA economist said.

However, in contrast to mature fossil fuel markets, where participants can manage risk with a variety of hedging instruments, futures contracts and other mechanisms, prospective SAF buyers and sellers have few available tools to manage price volatility and regulatory uncertainty, Owens Thomsen said. As a result, the risk remains "much too high" for would-be investors weighing costs against potential returns, she said.

The energy sector received $3.3 trillion in investment in 2025, but only $40 billion, or 1.2%, was directed toward low-emission fuels, including SAF, Owens Thomsen said. By comparison, venture capital investment in artificial intelligence reached $259 billion in 2025 alone, enough to cover all cumulative SAF investment needed through 2039, she said.

Policy dependence

Policy support remains imperative to close the gap between mandated production and actual output, said Owens Thomsen, noting that renewables sectors like wind and solar both required significant government backing to reach commercial scale.

In 2026, global SAF production is expected to average 64,000 b/d, of which Europe will account for 54%. However, the industry has suffered from a series of recent high-profile project cancellations.

Last year, Shell blamed high costs and low competitiveness for its decision to abandon what would have been one of Europe's largest waste-to-fuel plants in Rotterdam, while BP scaled back plans for dedicated biorefineries amid a wider green spending review.

In the EU, under the terms of its ReFuel EU Aviation regulation and its escalating mandates, risk sits with the obligated supplier, said Jim Davies, head of sustainability at airline group IAG, leaving potential producers exposed to policy changes.

Carl Nyberg, the senior vice-president for renewable products at Neste, the world's largest SAF producer, said the company can share some risk with buyers, demonstrated through recent offtake agreements with United Airlines and Cathay Group. To date, the company has invested Eur10 billion in renewable facilities, and its Eur2.5 billion investment project at Rotterdam is due to come online in 2027, Nyberg said.

Pricing dynamics

Global SAF demand is on track to reach 75,000 b/d by 2027, equivalent to roughly 1% of today's jet fuel consumption, according to forecasts from S&P Global Energy Horizons, but growth is slowing and remains dependent on policy support.

"But at the end of the day, it is of course the overall supply-demand of the market, which is typically derived from these different types of mechanisms that are driving SAF demand ... demand created primarily from politically-driven decisions," Nyberg said.

Uptake has so far been delayed by a wide price gap between SAF and jet fuel, though the premium has narrowed amid the Middle East conflict and resulting supply shock. Neste's CEO, Heikki Malinen, previously suggested that the conflict could potentially spur Asian renewables uptake as the region faces acute shortages, although carriers like Air France have said decarbonization costs could pose a double burden for airlines already saddled with surging costs.

Platts, part of S&P Global Energy, assessed SAF produced via hydroprocessed esters and fatty acids on a CIF basis, in Northwest Europe at $2,950/mt May 11, more than double the equivalent cost of conventional jet fuel cargoes at $1,302.50/mt. On Feb. 27, before the Middle East war started, the SAF price was closer to triple the value of jet, which was $831/mt.