IATA Warns SAF Production Growth Slowing Amid Regulatory Hurdles

The International Air Transport Association (IATA) has raised concerns that the production growth of Sustainable Aviation Fuel (SAF) is losing momentum, threatening the airline industry's ability to meet critical decarbonization targets. According to IATA's December 2025 data, SAF output is projected to reach 2.4 million tonnes in 2026, an increase from the 1.9 million tonnes produced in 2025. While production doubled from 2024 to 2025, the projected growth for 2026 represents a significant slowdown.

This limited supply remains a fraction of what is needed, accounting for just 0.6% of total global jet fuel consumption in 2025 and expected to rise to only 0.8% in 2026. The shortfall has severe financial implications for airlines, which paid an additional $3.6 billion in fuel costs in 2025. IATA's Chief Economist, Marie Owens Thomsen, noted that poorly designed policies forced airlines to pay a $2.9 billion premium for the limited SAF available. The organization places significant blame on regulatory policies that it argues have failed to stimulate production effectively.

Regulatory Missteps and Market Impact

IATA specifically criticized government mandates such as the European Union's ReFuelEU Aviation regulation and the UK's SAF Mandate. These policies require airlines to use a minimum percentage of SAF but have not sufficiently incentivized an increase in supply, according to the association. This has created a scenario where demand outstrips supply, allowing producers in concentrated European markets to widen margins. Delivered SAF prices have reportedly reached up to five times the cost of conventional jet fuel.

Willie Walsh, IATA's Director General, offered a sharp critique of the current approach. "If the goal of SAF mandates was to slow progress and increase prices, policymakers knocked it out of the park," he stated. Walsh warned that due to the supply shortage, many airlines will be forced to reconsider their voluntary commitments to use 10% SAF by 2030, a key milestone in the industry's path to net zero carbon emissions by 2050.

Compounding the financial pressure is the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), a global measure from the International Civil Aviation Organization (ICAO) to reduce emissions. Compliance costs under CORSIA are anticipated to grow to $1.7 billion in 2026, adding another layer of expense for carriers.

Historical Context and Stakeholder Burdens

The current challenges in scaling SAF production echo previous industry efforts. In the early 2010s, a push for aviation biofuels based on feedstocks like algae and jatropha ultimately failed to achieve commercial viability due to high production costs and scaling difficulties. This historical precedent highlights the persistent gap between alternative fuel ambitions and the reality of mass production.

The financial burden of current policies falls heavily on several groups. European airlines, including Lufthansa and Air France-KLM, are facing the brunt of the $3.6 billion SAF premium, which squeezes operating margins. Conversely, SAF producers benefit from mandated demand and high prices. Ultimately, passengers are likely to face increased ticket prices as airlines pass on the combined costs of expensive SAF and CORSIA compliance.

Adding to the complexity, some environmental groups have challenged the industry's narrative. Organizations like ClientEarth and Fossielvrij have issued legal warnings to dozens of airlines, arguing that promoting SAF as a green solution constitutes greenwashing and misleads consumers.

What Comes Next

The industry will closely watch production volumes throughout the coming year, with IATA expected to release its official 2026 SAF production figures in December 2026. Looking further ahead, a key regulatory milestone is the ReFuelEU Aviation sub-mandate for electro-Sustainable Aviation Fuel (e-SAF), which is confirmed to take effect in 2030. This will require airlines to incorporate a specific percentage of synthetic fuels produced using renewable electricity and captured carbon, adding another layer of production complexity.

Until production capacity for all types of SAF, including the common Hydroprocessed Esters and Fatty Acids (HEFA) pathway, is significantly expanded, the gap between regulatory targets and available supply is expected to persist. This will continue to challenge the financial stability of airlines and the credibility of the industry's decarbonization timeline.

Why This Matters

The slowing growth of SAF production represents a critical bottleneck in the global aviation industry's strategy to achieve net-zero emissions. This development highlights a significant disconnect between ambitious regulatory mandates and the practical realities of the energy supply chain. For airlines, it creates immense financial pressure and operational uncertainty, while for passengers, it signals the likelihood of higher travel costs in the medium term.