Why delaying SAF adoption could cost European airlines €500/tonne by 2035
New report reveals ETS carbon taxes—not just SAF penalties—will drive the biggest cost surge.
Delaying investment in sustainable aviation fuel (SAF) will cost European airlines significantly more than early action, according to a new analysis from climate finance specialist Dr Dana Shoukroun.
The report, Quantifying the Cost of Compliance: A Sensitivity Analysis of SAF Mandates and Penalties in the EU Aviation Market (2025–2035), offers a detailed financial model of Europe's SAF mandates under the ReFuelEU Aviation regulation. It evaluates four levels of SAF adoption across three cost outlooks—low, mid, and high—and projects total fuel costs out to 2035.
Carbon pricing, not SAF penalties, will be the real driver of cost
While industry focus has often centred on the price premium of SAF over fossil jet fuel, Dr Shoukroun’s findings highlight a more pressing issue: the EU Emissions Trading System (ETS) is set to become the largest component of fuel cost growth, surpassing even penalties for non-compliance.
In the mid-range case, ETS prices are projected to rise from €80 per tonne of CO2 in 2025 to €150 by 2035. In the high-range scenario, prices could reach €200/tCO2 by 2035.
Since burning one tonne of fossil Jet A produces approximately 3.15 tonnes of CO2, these ETS prices translate to an added €474 to €632 per tonne of fuel—making ETS the single largest source of added fuel cost in most scenarios.
“Across all scenarios, the financial impact of non-compliance is dominated by the ETS carbon tax,” the report notes. “ETS costs often surpass mandate-related penalties or the added premium from SAF blending.”
What each strategy will cost by 2035
Dr. Shoukroun’s analysis models four potential SAF compliance strategies under the EU ReFuelEU mandate, each with sharply different cost outcomes by 2035.
Most expensive: The “Zero Compliance” scenario is one in which airlines continue to rely entirely on fossil Jet A, ignoring SAF mandates altogether. Under mid-range assumptions, this strategy results in a total fuel cost of €1,879.58 per tonne in 2035—driven heavily by €474 in carbon taxes and €510 in penalties for mandate non-compliance.
“Realistic Compliance” assumes SAF production grows at a moderate rate of 50% every five years, based on projects already under development. While this reduces penalties and emissions exposure slightly, total fuel cost still reaches €1,654.31 per tonne, with €460 in ETS costs and €143 in penalties remaining on the balance sheet.
“Accelerated Compliance”: SAF supply scales more aggressively—doubling every five years. This delivers more meaningful relief, lowering total fuel cost to €1,512.26 per tonne. This strategy saves over €360 per tonne compared to inaction.
Lowest cost: In the “Full Compliance” scenario, SAF and eSAF blending fully meets mandated levels, despite higher upfront SAF costs, total fuel expense drops to €1,401.97 per tonne in 2035. Crucially, this scenario eliminates all penalties and substantially reduces ETS exposure, with just €413 in carbon tax liability—savings of nearly €478 per tonne compared to the most expensive route.
Production bottlenecks and eSAF constraints
The report also highlights significant supply-side challenges:
HEFA (Hydroprocessed Esters and Fatty Acids) remains the dominant near-term pathway in Europe, relying on limited feedstocks such as used cooking oil largely imported from countries such as China and Malaysia. European HEFA capacity stands at ~1 million tonnes per year, with Fischer-Tropsch (FT-SPK) contributing ~180,000 tonnes and alcohol-to-jet (ATJ) production largely absent from the near-term project pipeline.
Synthetic eSAF (Power-to-Liquid) is particularly underdeveloped. Although startups like Ineratec have secured funding (e.g. €70 million in early 2025 to produce 2,500 tonnes/year of e-fuel), total European eSAF output remains far below the 5% sub-mandate required by 2035, equivalent to roughly 3 million tonnes/year.
“eSAF mandates could become the primary source of cost escalation post-2030,” the report warns. “A rapid scale-up in eSAF is as vital as general SAF growth.”
Strategic takeaway: SAF is a financial hedge, not just a green investment
The report reframes SAF not as a climate-driven compliance burden but as a practical cost-avoidance strategy.
For airlines and fuel suppliers, the report provides a clear strategic insight:
“Investment in SAF and eSAF infrastructure is not just a regulatory obligation, but a financial hedge against future compliance costs,” it states. “The SAF premium today is the penalty avoided tomorrow.”
Early adopters who secure SAF supply chains, co-develop projects, or lock in offtake agreements will benefit from long-term cost stability and regulatory headroom. In contrast, those who delay face cascading ETS liabilities, mandate penalties, and margin pressure.
With fuel costs already comprising up to 30% of airline operating expenses, the €400–500/tonne cost gap between compliant and non-compliant strategies may determine winners and losers on European routes.
The full report, Quantifying the Cost of Compliance: A Sensitivity Analysis of SAF Mandates and Penalties in the EU Aviation Market (2025–2035), is available upon request from Dr. Dana Shoukroun via LinkedIn.