Westminster has put a hard spine into the UK's sustainable aviation fuel push. The Sustainable Aviation Fuel Act 2026, which became law on 5 March 2026 according to legislation.gov.uk, creates a contracts-based revenue floor for domestic SAF production and funds it via a levy on aviation fuel suppliers. For investors, this is a financing instrument as much as it is a climate policy.

At the centre of the statute is a revenue certainty contract - essentially a two-way price collar. If a contract's strike price sits above the market reference price, the designated counterparty pays producers the difference; if the market reference price rises above the strike, producers pay back the spread. Payments are calculated on volumes sold and the price gap. The Act defines UK-produced SAF broadly: if any part of the feedstock-to-fuel conversion happens in the UK, it qualifies.

Those payments sit with a new designated counterparty, a company limited by shares with every share held by a Minister of the Crown. The Secretary of State designates it, must publish that notice, and can replace it if needed using transfer schemes that preserve staff rights on TUPE-like terms and allow compensation. The counterparty can be supported with grants, loans, guarantees or insurance, and must provide information to government when asked.

Contracts will not arrive via an open portal. The Secretary of State can direct the counterparty to make an offer to a named producer, setting the terms, the compliance window and how long the offer stays open; directions must be published. That power runs for ten years from 5 March 2026 and can be extended in five-year blocks by affirmative regulations. In practice, producers now face a queueing and timing game.

Here is the pricing logic in plain numbers. If the strike price were 100p per litre and the market reference price 80p, the counterparty would pay the producer 20p per litre on eligible UK volumes sold over the period. If the market price later moved to 120p, the producer would pay 20p per litre back. This symmetry is what gives lenders confidence to size debt.

Transparency is built in. Regulations can require a public register and publication of contracts or their key details, with redactions permitted by the regulations or by the Secretary of State. Expect headline numbers to be visible while commercially sensitive schedules stay confidential.

The cash comes from the industry, not general taxation. Relevant suppliers of aviation fuel, i.e. those captured by the Renewable Transport Fuel Obligation when supplying jet fuel, can be required to pay a levy to the counterparty. The levy can scale with market share, be collected on account, accrue interest for late payment and be backed by financial collateral. Dispute resolution, including arbitration and appeals, can be set in regulations, and exemptions are possible.

Levy design can also allow the counterparty to hold sums in reserve. That means money may be called earlier in the year to smooth cashflows as projects ramp, which matters for treasury teams. For suppliers with tight working capital, the combination of on-account payments, collateral and interest is a reason to open dialogue with lenders now.

If the system ends up in surplus, regulations can require money to flow back to levy payers, with a legal duty on recipients to ensure customers benefit. In practice that points to wholesale price adjustments rather than windfalls sitting on a single balance sheet.

Non-compliance has teeth. Breaching levy or information requirements can trigger penalties up to the lower of £100,000 or 10% of turnover, with the fixed cap adjustable for inflation. Due process applies: a notice of intent, at least 28 days for representations, then a final notice and a right of appeal; unpaid sums can be enforced through the courts and paid into the Consolidated Fund.

Most of the Act is now in force; the power to issue revenue certainty directions starts two months after Royal Assent, in early May 2026. The big mechanics - levy rates, publication rules and surplus payments - need secondary legislation, much of it by affirmative procedure. The government must consult widely, including the devolved administrations, before finalising these rules.

For producers, the upside is clarity and a lower cost of capital. A project that completes at least part of its conversion process in the UK can qualify as UK-produced and seek a contract via a Secretary of State direction that reduces price volatility. That could bring forward final investment decisions for first-of-a-kind waste-to-jet facilities anchored near industrial clusters.

For fuel suppliers, the levy is a new operating cost line. Competitive dynamics will determine pass-through, but the direction of travel is clear: higher wholesale costs are likely to feed into airline fuel bills and, over time, ticket prices. Airlines should assume a surcharge environment while domestic SAF volumes scale and hedging options remain limited.

Two variables will shape valuations from here: how the market reference price is defined in each contract, and how large the counterparty's reserves are allowed to be. Both will arrive via regulations or deal terms. The Act also defines aviation fuel to include fuel used in testing aircraft engines, which closes off a potential loophole.

The architecture mirrors the contracts-for-difference logic familiar from UK power markets: government creates a predictable revenue line and the industry funds the scheme. Investors know the playbook; the small print will decide who captures the margin.

Bottom line for capital allocators: this statute transfers price risk from producers to a minister-owned counterparty, financed by a ring-fenced levy. If the secondary rules are timely and transparent, the UK has a credible path to domestic SAF capacity within the ten-year window; if they slip, levy friction and uncertainty will keep money parked.