Material Insights · Understanding the Material World

Aviation propulsion and Renewable diesel and SAF

Sustainable aviation fuel is a drop-in replacement for jet fuel that existing engines can burn in blends, but it was only about 0.6% of jet fuel in 2025 and costs at least twice as much. Its growth is set by mandates such as ReFuelEU and India's CORSIA-linked targets, not by price.

Aviation propulsion (energy) and Renewable diesel and SAF (chemical): 4 relationships.

How they are linked

1. Energy flow

Physical flow · Rising · SAF to aviation propulsion

SAF is blended into conventional jet fuel and burned in today's jet engines without modification, while most hydrotreated renewable fuel still goes to road diesel.

  • 6% of renewable diesel and SAF energy going to aviation (Material Insights analysis)
  • 1.9 Mt SAF produced in 2025 (IATA estimate), up from 1 Mt in 2024
  • 0.6% SAF share of total jet fuel consumption, 2025

Many hydrotreating plants can, within limits, shift output between renewable diesel and SAF, so aviation's share rises when mandates make SAF pay more than diesel. IATA expected growth to slow to 2.4 Mt in 2026, about 0.8% of jet fuel.

Sources: Material Insights analysis (World Bank, FRED, IMF data); IATA

2. Mandated blending

Policy · Strong · Mandates create aviation demand for SAF

Because SAF costs more than fossil jet fuel, airlines buy it mainly where law requires a minimum blend, so regulation sets the size of the market.

  • 2% in 2025, 6% in 2030 ReFuelEU minimum SAF share at EU airports
  • 70% by 2050 ReFuelEU SAF share, including 35% synthetic fuels
  • 1%, 2%, 5% India's SAF targets for international flights in 2027, 2028 and 2030

ReFuelEU adds a sub-target for synthetic e-fuels from 2030, at least 0.7% that year rising to 5% in 2035, which bio-based SAF cannot meet. India's targets are tied to the start of CORSIA compliance on 1 January 2027 and cover international flights only.

Sources: EASA; S&P Global Commodity Insights

3. Fuel cost premium

Cost and price · Strong · SAF premium to airline costs

Fuel is a large share of airline operating costs, so a blend of fuel that costs several times more than jet fuel raises ticket costs in the markets where it is mandated.

  • 2 to 5 times SAF price relative to fossil jet fuel: about twice in general, up to five times in mandated markets, 2025

At low blends the added cost per ticket is small, but it rises steeply as mandates climb toward 20% in 2035. IATA has said that EU and UK mandates have sharply raised costs without speeding up SAF production.

Sources: IATA

4. Price link: SAF demand

Cost and price · Weak · Both ways

The aviation proxy is an aircraft engine price index, which follows manufacturing costs rather than fuel, so it says little about SAF prices.

  • 0.01 monthly change correlation
  • 0.06 12-month change correlation
  • 1.01 fitted elasticity

A more useful price link is between SAF and fossil jet fuel, whose gap is set by policy credits and feedstock costs such as used cooking oil.

Sources: Material Insights analysis (World Bank, FRED, IMF data)

For investors

Key learnings

  1. SAF was only about 0.6% of jet fuel in 2025, so demand growth comes almost entirely from mandates rather than from airline choice.
  2. SAF costs two to five times as much as fossil jet fuel, so mandated markets such as the EU carry the cost and set the price.
  3. Producers of hydrotreated fuels can switch output between renewable diesel and SAF, so aviation mandates draw supply away from road fuel.

What to track

  • SAF price premium over jet fuel: A narrowing premium signals supply catching up with mandates (Weekly · Argus, Platts; yearly · IATA)
  • Global SAF production: Shows whether supply meets the 2% EU 2025 and 6% 2030 mandates (Yearly · IATA)
  • Used cooking oil and tallow prices: Rising feedstock costs raise SAF costs (Weekly · trade press)

For policymakers

Key learnings

  1. ReFuelEU rises from 2% SAF in 2025 to 70% in 2050, with synthetic fuels from 2030, and is the main global driver of SAF demand.
  2. India's 1% target for international flights from 2027 rising to 5% in 2030 ties it to CORSIA and will need domestic feedstock such as used cooking oil and farm residues.
  3. Mandates without supply raise airline costs, so feedstock collection and production capacity need to be planned alongside blending targets.

What to track

  • Notification of India's SAF policy: Fixes the obligation and who must supply it (As notified · Ministry of Petroleum and Natural Gas, Ministry of Civil Aviation)
  • Domestic SAF capacity and certification: Shows whether India can meet its targets from local production (Yearly · oil marketing companies)

India

India has committed to SAF blends of 1% for international flights by 2027, 2% by 2028 and 5% by 2030 under CORSIA, using feedstocks such as used cooking oil, farm waste and municipal waste; S&P Global reported in July 2026 that the formal policy was in its final stages.

Sources

  1. Energy flows and price correlation, Material Insights, Material Insights analysis (World Bank, FRED, IMF data)
  2. SAF production growth rate is slowing (press release), IATA (2025)
  3. Fit for 55 and ReFuelEU Aviation, EASA (2024)
  4. India mandates 1% sustainable aviation fuel blend from January 2027, S&P Global Commodity Insights (2026)