SAF Policy Risk: What I Check Before Backing a Project

9 min read · Mar 16, 2026 · By Alex

SAF policy risk is the risk that the rules a project depends on change, weaken or are applied differently from what the sponsor assumed. If you are an equity investor looking at a SAF project that relies on a mandate, this is where I would start. Policy is not the only risk, but it is the one that can change the whole revenue case without a single operational mistake. This is the checklist I use before a project gets my attention.

In short

A mandate reduces demand risk, but it brings policy risk in exchange.
I ask five questions: durability, obliged party, penalty, eligibility and contract cover.
The design of mandates is still debated by airlines, airports and producers, so assume it can move.
ReFuelEU has a review clause with a date: a report by 1 January 2027, and every four years after that.
A project that survives a weaker policy case is a better project.

Policy risk in a mandate-backed project

For example, take ReFuelEU Aviation. Specifically, it sets minimum SAF shares from 2025 to 2050, with a 10-year transitional period and penalties for non-compliance. The shares run from 2 % in 2025 to 6 % in 2030, 20 % in 2035, 34 % in 2040, 42 % in 2045 and 70 % in 2050. The synthetic sub-share reaches 35 % in 2050. That is a strong base. The scope is defined in Article 3: airports above 800 000 passengers or 100 000 tonnes of freight, and operators with at least 500 passenger flights or 52 all-cargo flights. The demand pool is therefore a named list and not the whole market, which is the first thing I check when a sponsor quotes a market size.

However, stakeholders have argued about its design. IATA has stated that a mandate is not its preferred option for scaling SAF, particularly without production incentives, and has warned about higher prices for airlines and consumers. Airport representatives support the ambition but reject the idea that airports should carry the infrastructure duty, and they propose book and claim instead of physical supply at each airport. Producers of waste-based fuels have warned against fencing off waste feedstocks for aviation. A debate like that is a signal that details can change, not a signal that the rule disappears.

Five questions I ask on SAF policy risk

How durable is the rule? Is there a scheduled review, and what could change in it? For ReFuelEU, Article 17 answers that with a date, and I come back to it below.
Who is the obliged party, and are they solvent? After all, a mandate on a weak counterparty is weak. Here the duty sits on the aviation fuel supplier under Article 4, so I ask which supplier, at which airport, and with what balance sheet.
Is the penalty real? If non-compliance costs little, demand softens. Article 12(4) sets the supplier fine at no less than twice the price gap per tonne, multiplied by the quantity that does not comply. That is a real number and not a rounding error.
Does my fuel stay eligible? Still, feedstock lists and criteria can change. Article 4(5) already excludes palm, soy, PFAD and food and feed crops from the share, and that list is the one I test first for an Asian project.
Is the revenue contracted? A contract protects against policy drift better than a regulation does, because a change in law lands on the buyer’s obligation before it lands on your revenue.

The 2027 review is the date I diarise for SAF policy risk

Article 17(1) requires the Commission to report to the European Parliament and the Council by 1 January 2027, and every four years after that. Article 17(3) sets out what that report must evaluate. The list includes the possible need to revise the scope of the regulation, the SAF definition, the eligible fuels, the minimum shares in Article 4 and Annex I, and the level of fines.

Two further items matter to an investor. Article 17(5) requires the report to assess carbon leakage and the competitiveness of EU hubs. It points to targeted mechanisms by 31 December 2026, including a possible extension of the carbon border adjustment mechanism to international aviation. Article 17(6) ties the whole review to a potential ICAO framework. Consequently a project underwritten to 2040 is underwritten to at least three review cycles.

The origin of the rule matters here. In its own assessment, as summarised by the European Parliamentary Research Service, the Commission concluded that the renewable energy framework and the EU ETS had not produced a sufficient increase in SAF uptake. It also concluded that CORSIA alone might not provide a sufficient economic incentive. That is why the mandate exists, and it is also why a review is unlikely to remove it outright. Therefore the realistic weak case is a slower ladder, not a repeal. In practice, I treat the review date as a diligence date: what would have to be true for a share to be cut, and who would carry that loss in the contract.

Feedstock eligibility is where SAF policy risk bites an Asian project

Eligibility is the quiet version of policy risk. Article 4(5) excludes several feedstocks from the calculation of the minimum shares. The list covers food and feed crops, intermediate crops, palm fatty acid distillate, palm and soy derived materials, and soap stock and its derivatives. Article 4(4) caps aviation biofuels that are not advanced biofuels at 3 % of the fuel supplied for compliance.

For a Southeast Asian producer, that is not a technicality. PFAD and palm-derived material are common regional feedstocks. A project built on them can produce a fuel that is sustainable in principle and still does not count toward a buyer’s share. As a result, the buyer will not pay the premium, and the offtake never reaches a price discussion. For what the buyer can actually sign, read ReFuelEU Offtake.

The greenhouse gas test sits on top of the list. The delegated act on the methodology for renewable fuels of non-biological origin and recycled carbon fuels sets the calculation, and it holds recycled carbon fuels to a minimum saving of 70 %. In effect, a project has two eligibility files: one for the feedstock list and one for the carbon intensity, and both have to survive a change of methodology.

Where SAF policy risk meets price

If the premium over fossil fuel depends on a policy mechanism, I want to see the project case without it. In effect, a model with a base case that needs a carbon price at a particular level is a model with policy risk inside it. See EU ETS Aviation for the mechanism that gives eligible SAF a zero-emission rating.

The penalty formula is the part investors underuse. Because the fine is tied to the price gap between conventional fuel and SAF, the buyer’s cost of non-compliance rises with the premium. That supports the price a supplier will pay, which is good news for revenue. However, it also means the revenue case is sensitive to a policy that can redefine the gap, and to enforcement that varies by Member State under Article 12(1).

Therefore I run the price three ways: with the mandate and the ETS benefit, with the mandate only, and with no mandate and a voluntary market. If the third case kills the project and the second one barely works, the equity story is a policy story.

How I test SAF policy risk in the model

I do not forecast policy. I run the same project under a weaker set of assumptions and see what breaks. The table below is the version I use for a mandate-backed SAF project, and the right-hand column is my scenario and not a forecast.

Assumption	Base case	Weak policy case
SAF share required	Annex I schedule, 6 % in 2030 rising to 70 % in 2050	Growth stops at the 2030 level after a review
Synthetic sub-share	Average of 1.2 % over 2030 and 2031, then 2.0 % over 2032 to 2034	Sub-target delayed by one review cycle
Feedstock eligibility	Feedstock on the eligible list, certified	One regional feedstock excluded after a methodology change
Penalty enforcement	Fine at the Article 12(4) floor	Fine imposed late or at a lower national level
Contract cover	Take-or-pay with change-in-law wording	Minimum volume with a renegotiation window

If the project services debt in the middle column and only breaks even in the right-hand column, the file is investable with a price adjustment. If it fails in the right-hand column, the equity return depends on a rule that someone else can amend, and that is a different conversation.

Red flags for SAF policy risk

A revenue case that is only the mandate, with no contract behind it.
No downside case with weaker policy, or a downside case that keeps the same volumes.
Feedstock eligibility assumed, not certified, especially where the feedstock is regional.
Offtake by letter of intent, with no volume, term or price formula.
A model that treats the fine as a cost of doing business, when Article 12(8) still requires the shortfall to be supplied.

What a good file looks like

It names the rule, the obliged party and the contract. The file shows a case with the premium cut. It shows certification in hand, not a plan to certify later. It also shows the review dates and says which clause covers a change in law. For the developer’s side of the same file, read ReFuelEU Bankability and What Equity Investors Are Underwriting.

One more test I apply: does the buyer have a reason to perform that survives the policy? The IEA makes a related point about LNG, where portfolio players used their balance sheets to fill the gap left by buyers who were hesitant to commit to long-term offtake over decades. The same logic applies here, and it is why I look for a buyer with an obligation, a balance sheet and a physical need, in that order.

Sources

Sources

Regulation (EU) 2023/2405 of 18 October 2023 (ReFuelEU Aviation), Articles 3, 4, 12, 15, 17 and Annex I, EUR-Lex: https://eur-lex.europa.eu/eli/reg/2023/2405/oj/eng
European Parliamentary Research Service, “ReFuelEU Aviation initiative”, PE 698.900, November 2023 (stakeholder positions, final schedule, transitional period): https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/698900/EPRS_BRI(2022)698900_EN.pdf
Commission Delegated Regulation (EU) 2023/1185 on the greenhouse gas methodology for RFNBOs and recycled carbon fuels, Articles 1 to 3: https://eur-lex.europa.eu/eli/reg_del/2023/1185/oj
IEA, World Energy Investment 2025 (buyers hesitant to commit to long-term offtake): https://www.iea.org/reports/world-energy-investment-2025