Sustainable aviation fuel boss wants more EU regulations

BRUSSELS — The EU's effort to slash CO2 emissions from flying is running into serious trouble and Brussels needs to force airlines to use more sustainable aviation fuel and even slap tariffs on imports, the head of the bloc's largest sustainable fuel producer told POLITICO.

The situation for sustainable aviation fuels (SAFs) is so dire that Finland’s Neste will complete an existing refinery in Rotterdam and then halt all of its other planned projects.

“We will have to hold on other investments, simply because … the amount of debt of the company has reached a level where we simply cannot continue,” Heikki Malinen, CEO of Neste, said in an interview with POLITICO. “The issue is simply the lack of demand.”

That creates the danger the EU won't hit its target of cutting greenhouse gases from flying — a key part of its Green Deal project to make the bloc climate neutral by 2050. Aviation is responsible for about 2.5 percent of global CO2 emissions, and that is expected to rise as demand for flying grows.

SAFs are seen as the easiest way to make flying greener. The fuels are made with plant and animal materials like cooking oil and agricultural residues and emit up to 80 percent less CO2 than fossil kerosene. SAFs can be mixed with conventional fuel and burned current jet engines.

The problem is that SAFs are about 2.5 times more expensive than fossil kerosene. That makes airlines unwilling to buy the fuel, and producers are wary of investing in new refineries without assured demand. The result is there is too little production and costs remain high.

The EU aims to fix that with its ReFuelEU Aviation law, which mandates that airlines and fuel suppliers use at least 2 percent of SAF for flights in Europe as of this year, rising to 6 percent by 2030 and 70 percent by 2050.

That's supposed to set a baseline for demand. On top of that, several airlines pledged to use more sustainable fuel than required by EU legislation, either by setting their own targets or by offering passengers the option to pay more to offset the extra cost of flying with SAF.

But Neste says that's not happening.

“This voluntary demand for SAF basically has not materialized,” said Malinen.

When the Finnish company started investing in SAF, “We made estimates of what the demand could be, both mandated and voluntary,” Malinen said. But the only demand comes from the EU mandate; airlines aren't buying any extra.

“The market for SAF last year was less than 1 million tons, and the kerosene jet fuel market over 350 million tons, so it’s a drop in the bucket,” Malinen said.

The company — which says it has invested about €10 billion in SAF, biodiesel and other types of renewable fuels — is completing a refinery expansion in Rotterdam.

“Neste’s capacity alone in 2027 [will be] 2.2 million tons,” Malinen said, adding his company could satisfy “double” the current European demand for SAF. But without voluntary buying, that’s unlikely to be required.

And waiting in the wings is yet another EU mandate, this one for synthetic eSAF which is made with renewable energy and CO2 captured from the air to make a truly green fuel. By 2030, 1.2 percent of aviation fuel will have to be eSAF, but the price is “at least double the cost of SAF,” Malinen said — more than four times the cost of fossil kerosene.

Calling on Eurocrats

The CEO wants Brussels to help.

First, he wants to tweak the ReFuelEU mandate to avoid jumping from 2 percent to 6 percent only in 2030. Instead, the mandate should be increased smoothly.

“It kind of goes hand-in-hand with the increase in supply,” Malinen said.

He also wants Brussels to protect domestic producers.

There is massive uncertainty in the global market thanks to U.S. President Donald Trump, who is scrapping his predecessor's green mandates. Former President Joe Biden's Build Back Better program aimed to meet 100 percent of aviation fuel demand with SAFs by 2050.

But Trump's "drill baby drill" pledge to expand oil and gas projects could mean U.S. airlines buy less SAF than foreseen — affecting global demand.

A possible introduction of SAF mandates by Beijing could also reduce imports of used cooking oil and other feedstocks from China to Europe — making SAF production even more difficult.

“We're not saying that the imports shouldn't happen. Europe has always been open to global markets ... there are tariffs now for renewable diesel, but nothing for SAF and I think this is something that we really ask the regulators to seriously consider,” Malinen said.

“The challenge we face is that in this world, which is geopolitically now getting quite complicated, you have a lot of divergence in terms of how different regions of the world address subsidies, how they address tariffs. And Neste, as a European company, is trying to find that balance,” he added.