Key considerations for policy choices

Sustainable aviation fuels (SAF) are central to reducing aviation emissions over the coming decades, particularly for long-haul and regional travel. Australia is exceptionally well positioned to produce SAF at scale, drawing on abundant renewable energy, biomass resources, and industrial infrastructure. However, the nation’s high reliance on imported fossil jet fuel, combined with growing demand in the Asia-Pacific and geopolitical uncertainty, makes aviation fuel supply a strategic issue for decarbonisation, fuel security, and competitiveness.

Australia’s aviation fuel challenge in context

SAF deployment in Australia is shaped by the alignment of multiple system elements, spanning energy supply, infrastructure, markets, and governance. Near-term bio-based pathways, including Hydroprocessed Esters and Fatty Acids (HEFA) and Alcohol-to-Jet (ATJ), and longer-term Power-to-X (PtX) fuels place different demands on these systems. Constraints in one part of the system can limit progress even where others appear favourable. Key dependencies include renewable electricity deliverability, hydrogen availability, carbon sourcing eligibility, and port and transport logistics.

Design implications for a credible and scalable SAF policy framework

Decisions taken in the second half of the 2020s will determine if Australia can realise its potential as a global-scale supplier. Policy design must treat SAF and PtX deployment as a cross-portfolio system coordination priority. Coordination is required across electricity system planning, hydrogen development, and carbon sourcing rules to avoid bottlenecks. Policies should enable near-term SAF scale-up using bio-based and hybrid fuels while ensuring eligibility rules and sustainability frameworks accommodate electricity- and hydrogen-based PtX fuels as they mature.

Australia’s system conditions for SAF and PtX fuels

Australia possesses strong renewable energy resources and access to biomass and residues, yet system foundations are developing at different speeds. Renewable electricity is a foundational input for PtX, but grid congestion and transmission constraints influence reliable access. While biomass resources support near-term and transitional pathways, they are insufficient on their own to meet long-term demand at scale. This makes the parallel development of electricity- and hydrogen-based systems essential. Announced projects currently cluster in coastal and industrial regions where these multiple system conditions intersect.

Robust sustainability certification frameworks as a basis for credible market scale up

Sustainability certification frameworks function as market infrastructure rather than downstream compliance add-ons. They determine if fuels are recognised as sustainable and whether producers can access regulatory and voluntary markets. Credible frameworks for SAF typically include five interdependent elements: management and governance systems; environmental and social sustainability criteria; life cycle greenhouse gas calculation and verification; traceability and chain-of-custody systems; and independent verification and assurance.

Global policy lessons for scaling SAF and PtX fuels

Experience from the European Union, the United Kingdom, and the United States shows that no single policy instrument has delivered large-scale deployment of PtX aviation fuels. In the EU, ReFuelEU Aviation introduced blending mandates, yet investment in electricity-based fuels has progressed more slowly than anticipated due to financing gaps. In the US, the Inflation Reduction Act has reduced cost gaps, but deployment remains constrained by project structuring and eligibility interpretation. Progress depends on a combination of demand signals, revenue certainty, and enabling system conditions.

Demand-side policy design: observed considerations and framework interactions

Early design choices influence how fuels are recognised and treated across markets. Effective frameworks combine clarity on fuel eligibility with robust sustainability criteria and the thoughtful use of carbon intensity metrics. For globally traded fuels, transparency and interoperability across frameworks, such as ICAO CORSIA and the EU Renewable Energy Directive, support trust with regulators and markets. Frameworks should be designed to evolve over time, incorporating learning as technologies and market conditions mature.

Book and claim: enabling early market scale-up while preserving sustainability credibility

Book and Claim systems separate physical fuel from verified sustainability attributes, allowing these attributes to be allocated even where physical supply chains are still developing. This mechanism can aggregate demand and reduce offtake risk in early market phases. Applied experience from Brazil demonstrates how Book and Claim can function as a high-integrity market-enabling tool when embedded within a wider policy and certification architecture. High-integrity approaches rely on recognised certification, transparent registries, and independent oversight to ensure environmental integrity is maintained.