Why European SAF Premiums Are Falling Despite Growing Demand

European sustainable aviation fuel (“SAF”) premiums are falling even as demand, regulatory mandates and long-term offtake commitments continue to grow.

The reason is not disappearing demand. It is a market developing faster on the supply side than on the consumption side, combined with sharply higher conventional jet-fuel prices that are compressing the price differential between fossil jet fuel and SAF.

The result is an increasingly important lesson for SAF developers and investors: growing demand does not automatically guarantee attractive producer margins.

SAF Demand Is Growing — But So Is Supply

Europe entered the mandatory SAF era in 2025 under ReFuelEU Aviation, which requires SAF to represent at least 2% of aviation fuel supplied at European Union airports through 2029 before increasing to 6% in 2030.

The market has already exceeded that initial requirement.

According to the European Union Aviation Safety Agency (“EASA”), EU fuel suppliers delivered approximately 1.1 million tonnes of SAF in 2025, representing 2.8% of total aviation fuel supplied, compared with the mandatory 2% minimum.

Globally, the International Air Transport Association (“IATA”) expects SAF production to reach approximately 2.4 million tonnes in 2026.

Demand is therefore clearly expanding.

The problem for producers is that manufacturing capability, announced projects and available production capacity are also expanding, creating greater competition for a still relatively small premium-fuel market.

Why European SAF Premiums Are Falling

SAF itself has not necessarily become dramatically cheaper.

Part of the premium compression comes from conventional jet fuel becoming more expensive.

European pricing data shows that fossil jet-fuel prices rose considerably during the summer and early autumn of 2026 amid geopolitical and energy-market volatility. SAF pricing moved much less dramatically, mechanically reducing the premium between the two fuels.

That distinction matters.

A falling SAF premium does not necessarily mean the absolute SAF price is collapsing. It can also mean that the fossil product SAF is being compared against is becoming more expensive.

At the same time, increasing SAF availability and underutilised renewable-fuel production capacity are placing additional pressure on merchant margins.

For producers, this creates a very different market from one in which scarce SAF automatically commands an expanding premium.

Long-Term Offtake Does Not Eliminate Near-Term Market Risk

Corporate and industrial demand for future SAF remains strong.

Recent long-term commitments involving companies including Google, Bain & Company, McKinsey, Uniper, YPF and TotalEnergies demonstrate continued demand for future SAF and eSAF production.

But many of these agreements support projects that have not yet reached Final Investment Decision (“FID”) or commercial production.

That creates an important distinction between future contracted demand and today’s physical market.

Long-term offtake agreements can help make future projects financeable, but they do not necessarily absorb existing production capacity or protect merchant producers from current pricing pressure.

This is why bankable offtake is becoming increasingly important.

Merchant SAF Projects Face Greater Pressure

For HEFA-based SAF producers in particular, profitability depends on much more than the selling price of SAF.

Feedstock costs, renewable diesel pricing, operating efficiency, logistics, regulatory credits and plant utilisation can materially affect project economics.

Where facilities can switch production between SAF, renewable diesel and other products, operators gain an important commercial advantage: they can allocate feedstock toward the market offering the strongest netback.

Single-product facilities have less flexibility.

That is one reason future SAF projects are increasingly being designed around integrated refining, multiple product pathways and secured long-term revenues rather than pure merchant exposure.

JetBio Shows Why Product Flexibility Matters

Brazilian developer JetBio recently expanded the proposed scope of its approximately US$2 billion Paulínia biofuels project to include renewable diesel alongside SAF.

The project intends to use Brazilian ethanol as its primary feedstock and Honeywell UOP technology to convert that ethanol into drop-in renewable hydrocarbons.

The strategic significance is product flexibility.

Rather than relying entirely on SAF demand, the proposed facility could potentially allocate production across multiple renewable-fuel markets as pricing and demand evolve.

With ethanol expected to represent the majority of production costs, feedstock procurement and product optimisation will be critical to project competitiveness.

The facility remains pre-FID, with commercial production currently targeted for 2030.

Verbio Moves Biomass Further Up the Value Chain

A similar diversification strategy can be seen in Germany.

Verbio has commissioned an approximately €100 million industrial ethenolysis facility at its Bitterfeld-Wolfen site designed to produce up to 60,000 tonnes of renewable chemicals annually.

Rather than selling all of its renewable feedstock into conventional biofuel markets, Verbio can convert biodiesel intermediates into higher-value chemical products used in lubricants, polymers, detergents and other applications.

The strategy demonstrates a broader trend emerging across renewable fuels and biorefining:

the competitive advantage increasingly lies not simply in securing biomass, but in having the technology and market flexibility to convert that feedstock into whichever products create the greatest value.

What This Means for the SAF Market

Europe’s SAF market is not suffering from a lack of long-term demand.

Regulation is increasing consumption. Airlines and corporations continue signing offtake agreements. New SAF and eSAF projects continue to advance.

The challenge is timing.

Production capability can expand faster than mandated and voluntary demand, while feedstock costs, fossil-fuel prices and competing renewable-fuel markets can change considerably before a new refinery reaches operation.

For project developers and investors, the strongest SAF projects are therefore likely to be those that combine:

secure feedstock + competitive conversion technology + multiple product pathways + contracted offtake + disciplined capital deployment.

The European SAF premium may be falling, but the larger story is not declining demand.

It is the transition from a scarcity-driven emerging market toward a more competitive industrial commodity market — where project quality, flexibility and bankability increasingly determine who succeeds.

Learn More:

• Co-Processed SAF: Near-Term Aviation Decarbonisation
• Sustainable Aviation Fuel from Waste: The SAF Feedstock Frontier
• Klean & Terragreen Partner on Waste Plastics-to-Refinery Feedstock for SAF