Sustainable Aviation Fuel (SAF): Can Flying Go Green and What It Means for Airlines and Investors

Aviation accounts for roughly 2.5% of global CO₂ emissions—but when non-CO₂ warming effects (contrail formation, nitrogen oxides, water vapor) are included, aviation’s total climate impact may be 3–4 times larger. Decarbonizing air travel presents a unique challenge: the energy density requirements of long-haul flight make battery electrification impractical for most commercial routes, and hydrogen aircraft face infrastructure and certification hurdles that are decades away from commercial scale. Sustainable aviation fuel—made from biological or synthetic feedstocks rather than fossil jet fuel—is the near-term pathway the industry and regulators are betting on.

What Is SAF and How Is It Made?

Sustainable aviation fuel is chemically similar to conventional jet fuel but produced from non-petroleum sources. Seven production pathways have received ASTM International certification for blending with conventional Jet-A at concentrations up to 50%. The dominant commercial pathway today is Hydroprocessed Esters and Fatty Acids (HEFA), which converts fats, oils, and greases—used cooking oil, animal fats, municipal solid waste—into jet fuel using hydrogen under high pressure. Fischer-Tropsch synthesis converts biomass or municipal solid waste through gasification into synthetic liquid fuels. Power-to-Liquid (PtL) processes use renewable electricity to convert CO₂ and water into synthetic kerosene, producing what’s called e-fuel or electrofuel with a potentially near-zero lifecycle carbon footprint.

The IRA’s SAF Incentives

The Inflation Reduction Act created a SAF blender’s tax credit (Section 40B) providing $1.25–$1.75 per gallon depending on lifecycle carbon reduction achieved (minimum 50% reduction versus fossil jet fuel required). This credit, combined with the $3/kg clean hydrogen production credit (for hydrogen used in PtL SAF production) and Section 48C advanced manufacturing credits for SAF production equipment, creates a meaningful incentive stack that is attracting major investment in US SAF production capacity.

Despite these incentives, SAF currently costs $6–$10 per gallon compared to $3–$4 for conventional jet fuel. Closing this price gap requires scaling production, developing cheaper feedstocks, and continued policy support. The EU’s ReFuelEU Aviation regulation mandating minimum SAF blending fractions—2% in 2025 rising to 70% by 2050—creates a guaranteed demand signal that is encouraging production investment globally, with spillover effects on US producers targeting European airlines.

Airline Commitments and Corporate Aviation Demand

United Airlines has made the most aggressive SAF commitments among US carriers, signing offtake agreements totaling over 3 billion gallons and investing directly in SAF producers including Alder Fuels and Cemvita. Delta Air Lines has committed to 10% SAF usage by 2030 and reached agreements with multiple producers. American Airlines, Southwest, and Alaska Airlines have signed SAF offtake agreements to varying degrees.

Corporate aviation demand is increasingly significant. Companies with sustainability commitments—and employees who take many flights—face growing pressure to address business travel Scope 3 emissions. SAF-blended fuel for corporate travel is emerging as a premium product, with airlines offering SAF certificates allowing corporations to claim emissions reductions from their business travel. Microsoft, Google, and Amazon are among companies that have signed SAF purchasing agreements to address employee travel footprints.

SAF Investment Opportunities

The SAF investment landscape spans feedstock producers, technology developers, and project developers. Neste (Finnish listed company) is the world’s largest SAF producer and a bellwether for the sector’s commercial maturation. World Energy, LanzaTech, and Gevo are significant US SAF producers with different production pathways. Phillips 66, World Energy, and Valero have announced SAF production capacity at existing refinery sites, leveraging existing infrastructure to produce HEFA SAF at lower capital cost.

For investors, the key uncertainties are feedstock availability and cost (used cooking oil and other preferred HEFA feedstocks are limited in supply and face competition from biodiesel and renewable diesel producers), technology risk for advanced pathways (Fischer-Tropsch and PtL are not yet commercial at scale), and policy continuity risk for the tax credits that drive current project economics. The sector’s growth trajectory is clear; the timing and company-level returns are less certain.