Understanding the EU and NL carbon emission obligation schemes for SAF production

For: a Sustainable Aviation Fuel (SAF) producer

[August – October 2024]

A Sustainable Aviation Fuel (SAF) producer focused on the Netherlands, asked studio Gear Up to assist them in identifying their obligations under the EU Emissions Trading System (ETS) and the Dutch national CO₂ taxation scheme.

For this analysis, studio Gear Up assessed the (future) participation requirements of the SAF producer under EU ETS based on their production set-up.

Volume of ETS 1 emissions

We calculated the volume of emissions that would fall under the scope of ETS 1 on basis of the fuels used at the site. Based on benchmark values established by the European Commission, we estimated how many free allowances the SAF producer may receive, and how this would develop over time. We also assessed how other legislation could impact this free allowance allocation, such as the Carbon Border Adjustment Mechanism (CBAM). Together, this leads to an understanding of how many allowances the SAF producer would have to buy in the market.

Dutch national carbon tax scheme explained

Also, we explained the Dutch national carbon tax scheme which will apply to all EU ETS obligated installations in the Netherlands. This scheme works alongside the EU ETS and includes specific rules, such that a part of the emissions may be subjected to additional taxes; and the applicable volumes and costs may change over time. We estimated what this could mean for the cost that the SAF producer can expect from these combined carbon pricing schemes, under the current ruleset.

Analysis of SAF allowances (FEETS) – 2024-price update

February 2025, the European Commission adopted a new support mechanism on ‘SAF allowances’: used to bridge the price gap for the use of alternative fuels to accelerate the roll out of SAF.
We reviewed this mechanism in order to assess its expected impact on supporting the development of SAF market. We conclude that the policy design would require additional policy instruments to support the broader development of the SAF market.

Current POME-based biofuels in EU fall within current production potential

According to studio Gear Up’s numerical analysis, the current volume of POME-biofuels deployed in the EU are in the range of current production volumes of POME residues. We advise to keep a close look on the future volumes of POME-based biofuels, given the upper limits of production. Strengthening the information position of renewable fuels supply chains with more frequent auditing and historical data of POME-oil production are needed.

SAF allowances may not be the best instrument to ramp up SAF production

Sustainable Aviation Fuels (SAF) are renewable fuels that replace fossil based kerosine in aircrafts and are seen as an important option to mitigate climate emissions in the aviation sector. Generally, these alternative fuels are more expensive than their fossil counterpart, kerosene. In order to support the uptake of SAF, the European Commission has introduced several policy instruments.