Who Pays for Net-Zero Flight?
Decarbonizing aviation with SAF is possible, but high costs raise a critical question—will governments, airlines, or passengers bear the price of a greener future?
Decarbonizing aviation is one of the toughest net-zero challenges in transportation. Airplanes are constrained by both space and weight, meaning the ideal fuel must have high energy density. Sustainable Aviation Fuel (SAF) is seen as the key to solving this challenge. This green fuel is nearly identical to the jet fuel we use today. Because of this, it is considered a drop-in solution.
The biggest advantage of a drop-in solution is that planes are already equipped to use it, making a carbon-free transition far easier. That’s a major benefit—it means the infrastructure for fuel storage, handling, and aircraft operation requires little to no modification. Given the complexity and safety concerns of altering aircraft fuel systems, this is a crucial advantage. It’s ready to go now. The focus must be on producing it at a cost competitive with today’s jet fuel.
SAF is chemically very similar to jet fuel. Today, most SAF is made from biomass like agricultural waste, used vegetable oil, or fats—commonly referred to as bio-SAF. While not entirely carbon-neutral, bio-SAF can significantly reduce greenhouse gas emissions. It is seen as a short-term solution for decarbonizing aviation until e-SAF, which is basically made using clean electricity, becomes more widely available and cost-effective.
Bio-SAF is currently cheaper than e-SAF but has limitations—it is not an unlimited resource. As SAF demand grows, the availability of waste biomass will tighten, leading to supply constraints and potential shortfalls. Feedstocks like waste oils are not widely abundant, and relying on farm-grown sources raises concerns about food security. As bio-SAF supply becomes strained, its cost is likely to rise. Eventually, the rising cost of bio-SAF will surpass the declining cost of e-SAF.
Today, the biggest challenge for e-SAF is that it is significantly more expensive to produce than bio-SAF. This is because e-SAF relies on green hydrogen and captured carbon dioxide—producing both requires abundant electricity and remains costly. But because of the limitations of bio-SAF, by 2050, e-SAF is expected to become more widely available and more affordable than bio-SAF.
Emissions
Reducing emissions boils down to three core actions: avoid what you can, reduce where possible, and offset what remains.
Airplane emissions have declined over the past several decades as aircraft have become more efficient at transporting passengers. Efficiency gains will continue as aircraft become lighter, aerodynamics improve, and engines burn fuel more efficiently. Newer models are already 15–30% more efficient than their predecessors. These advancements help airlines reduce emissions per passenger.
But efficiency alone will never bring emissions to zero without a radical shift in fuel. SAF, as a drop-in solution, can play a key role in aviation’s decarbonization. Current planes can operate with a 50% SAF blend, and with minor upgrades, nearly all could run on 100% SAF. Depending on whether bio-SAF or e-SAF is used, CO2 reductions could range from 50–60% to nearly 100%.
Today, e-SAF remains expensive, so airlines often turn to carbon offsets as an alternative way to reduce emissions. By purchasing offsets, companies fund projects that lower or remove greenhouse gases elsewhere, such as reforestation or renewable energy. In regulated carbon markets, companies can also buy credits from others with unused emissions allowances, effectively paying for the right to emit within a set cap. Given the challenges of reaching net zero through technology alone in the short term, airlines may need to rely on offsets to mitigate part of their emissions. As the cost of these credits rises, investing in e-SAF will become a more attractive option. Increased demand will drive up supply, and as production scales, costs will decline.
Affordability
SAF currently costs at least 3 to 5 times more than regular jet fuel. However, despite high costs, SAF’s drop-in nature allows for gradual adoption in small quantities with minimal impact on ticket prices. As demand rises, supply will expand, economies of scale will develop, and costs will steadily decline through learning and innovation.
Scaling up is crucial to lowering the production costs of green hydrogen and captured CO2. Green hydrogen is extracted directly from water using electrolysis that uses a lot of electricity. The CO2 can be sourced through Direct Air Capture (DAC), from biomass such as trees, or even ocean water—all of which require electricity. A promising approach is extracting CO2 from water. Since water has a much higher CO2 concentration than air, future advancements could make this method significantly cheaper than DAC if scaled effectively.
In the long run, the cost of electricity will be the key factor influencing e-SAF prices. Regions with abundant, low-cost electricity will have a competitive advantage in producing it more affordably. Co-locating e-SAF production facilities with cheap renewable energy sources will help keep costs down. Geography will play a crucial role, as not all regions have access to inexpensive renewable electricity.
Intervention
Airlines and aircraft manufacturers have already committed to SAF. But the governments must recognize the importance of future SAF availability and provide clear guidance on the role of hydrogen. The adoption of SAF faces the classic chicken-and-egg problem seen with other green technologies in their early stages. Without government support, scaling the industry becomes nearly impossible. This makes the role of government crucial. That’s why mandates introduced in the EU, UK, and other regions are so significant.
These mandates set a required percentage of jet fuel that must be SAF, starting small and gradually increasing over the next 30 years. A low initial percentage keeps costs manageable for passengers while providing a clear demand outlook that encourages companies to invest and expand supply. The certainty of future demand is what drives investment and production. The mandated percentage will rise steadily over time. For example, the UK requires 2% of all jet fuel for departing flights to be SAF by 2025, increasing to 10% by 2030 and 22% by 2040. The EU’s mandate is similar but includes a 70% SAF target by 2050.
What This Means
Who buys first? Early adopters of SAF face high costs since the fuel remains expensive. Late adopters will be able to purchase it at a significantly lower price. Does this mean early adopters—such as European airlines—will bear the financial burden? Will late adopters simply reap the benefits without the risks? This is a legitimate concern.
Why should a company be an early adopter? One incentive is technological advantage. Entering the field early allows companies to solve complex challenges and scale solutions, giving them a competitive edge over latecomers. However, airlines aren’t producing the fuel, nor do most have direct investments in SAF production. They are simply the first customers, paying a premium for a fuel far more expensive than conventional jet fuel.
Another incentive is steering the market in a direction that may be costly today but is ultimately cheaper than the alternative. Aircraft manufacturers have a clear interest in promoting SAF. If SAF becomes widely available, they can avoid the immense research and development costs of designing entirely new aircraft to run on alternative fuels. A drop-in solution is simply easier—and conveniently, it also happens to be the optimal one.
But the real force driving European airlines to adopt SAF is government mandates. European countries have set SAF usage requirements, meaning airports must supply blended SAF, and airlines must buy it.
The question of who buys SAF first is no different from who first adopted EVs, solar farms, or wind power. In each case, government intervention helped push an option that was initially more expensive but, in the long run, not only became cost-competitive with fossil fuels but also proved to be the cheaper alternative when considering environmental impact.
At the end, it would likely be the final customer that would bear the cost. Companies like Lufthansa Group have already begun passing SAF costs to customers, introducing a ticket surcharge linked to SAF usage. Airlines, unable to absorb the full cost of the transition, will inevitably seek ways to pass it on to passengers wherever possible.
The cost impact of SAF adoption will be similar to the effect of annual oil price fluctuations caused by Middle East crises—only a few percentage points, but enough to matter. Most airlines will choose to transfer the cost to customers. How they do so will be crucial. For instance, if customers are paying extra for SAF, are they earning more frequent flyer miles? Is the surcharge applied only to business class passengers? Are those paying more receiving perks like priority check-in? And if one airline passes on the cost while a competitor does not, how will that affect ticket sales?
While most of the cost burden will fall on customers, airlines may still absorb some of it—yet not all will be able to afford to do so. This suggests that financially stronger airlines will be better positioned to weather the transition, while weaker ones could become acquisition targets. The airline industry, already far more consolidated than it was 20 years ago, may continue this trend over the next two decades.