The UK has the technological and industrial ability to build the world’s leading sustainable aviation industry. But, unless we find our answer to the USA’s enormous tax cuts, which threaten to take investment away from our net zero industries, we are at risk of falling behind.
As the UK’s Aviation Minister, I helped deliver the Government’s answer to the challenge of decarbonising aviation. Our ambitious, world-first Jet Zero Strategy rightly focused on innovation and technology as the route for aviation to reach net zero. It is this technology that provides the answers, not aiming to reduce passenger numbers, which would not only hurt our aviation industry, damage public support for net zero but change the very nature of the country that we want to be.
So, we have the strategy. We know what we have to do. Not only is the answer in front of us, but so is the commercial opportunity within our grasp. But we face stiff competition from other nations equally determined to seize the commercial opportunities from becoming the home of sustainable aviation – and they are fast taking action. President Biden’s Inflation Reduction Act (IRA) offers investors generous tax cuts for sustainable aviation fuel (SAF). At the same time, the EU has introduced a mandate requiring airports to supply aircraft with ever more SAF from 2025 until 2050. It is also looking to step up its offering to the emerging industry in response to the USA’s tax breaks.
We now need to see the details of the UK’s offer – or lose the commercial opportunity in front of us. If the UK is going to lead this industry, we need to move from ambition to action. That’s why together with colleagues in the Conservative Environment Network, we have published a manifesto of policy ideas
to achieve Jet Zero by 2050 by accelerating the use of new technologies. Here are three ideas that the government must adopt to help our aviation sector end its contribution to climate change.
Firstly, the industry needs a price stability mechanism for Sustainable Aviation Fuel, which is the answer to decarbonising aviation in the short term. The UK Government is committed to a SAF mandate, requiring an increasing proportion of jet fuel from sustainable sources, and five new SAF plants are also due to start construction by 2025. But the problem is that, at present, SAF is much more expensive than kerosene. So whilst everybody wants to use more SAF in their jets, no sensible business can voluntarily accept vastly higher costs in a ruthlessly competitive market. As more production becomes available, the market will adjust and bring costs down – but we need a way to speed this process along.
The UK is taking all the right steps in the right direction, but if we want producers to build their factories here and not abroad, and if we want to see the pace of change that is encapsulated in a 2050 target, we need to give SAF producers more certainty that there will be a cost-realistic market for their fuel.
And this is particularly so given the increasing competition from the USA and EU. Bluntly, this fuel is going to be produced. If we don’t do it, they will, and we will import this fuel rather than make it here, losing huge commercial and employment opportunities in the process.
So, whilst we already have world-class technological expertise on sustainable aviation, in order to make the UK an even more attractive place to do business, the industry would benefit from a Contracts for Difference (CfD) scheme – similar to that which made all the difference for the offshore wind industry. SAF producers would compete for fixed-price, long-term contracts for their product when selling to airlines, with the Government paying the difference between a volatile wholesale price and a fixed strike price.
Crucially, this should be funded by the industry, not taxpayers. The Government should use tax receipts from airlines’ enhanced contributions to the UK’s Emissions Trading Scheme (ETS) to pay for the CfD. The removal of airlines’ ‘free allowances’ from the ETS will cover the costs of these contracts. A CfD will need primary legislation and the upcoming Energy Bill could be the best bet.
Secondly, we should cultivate the fledgling zero-emission aircraft manufacturing industry that has made the UK home, for these new technologies, like electric and hydrogen, may well be the longer-term solution to decarbonising aviation. World-leading businesses have set up shop here, and we should not take that for granted. Instead, we should look at how to bring the new green technology to commercial scale, including fiscal and regulatory reform. We could start with a competition that mirrors the recent £1 million race to fly the first transatlantic flight powered wholly by SAF with a similar competition for the first commercial, domestic route using zero-emission aircraft.
For zero-emission aircraft to be ready for long-haul flights by 2050 will certainly be a challenge. But they could significantly contribute to short-distance emissions reductions in any event. Public Service Obligation routes, such as those between London City and Dundee, or Newquay to Gatwick, for example, are already subsidised by the Government. These could be the first routes to go zero emission. Government PSO policy should be amended and expanded to aid this aim, linking our United Kingdom’s various areas swiftly, bringing business opportunity and economic growth to all areas and lowering emissions.
Lastly, we should not shy away from well-regulated carbon offsetting, where it is not possible to cut emissions quickly enough. In the past, carbon offsetting has had a patchy record, but these schemes may well be necessary for the aviation industry to reach net zero. We should ensure that any offsetting schemes are of the highest quality. That means establishing stringent requirements on equivalence, additionality, permanence, and sustainability. There should be a UK scheme to top up the UN’s unwieldy international aviation offset scheme, with an independent accreditation and oversight body to ensure these requirements are being met.
This UK gold standard scheme should be mandatory for airlines to take part in. However, to ensure less ambitious international competitors do not disadvantage the UK aviation industry, passengers should be given a choice whether to buy them or not. Funds raised should be used to help meet some of the huge funding gaps for halting and reversing the decline of nature, supporting projects that store carbon.
We can win the race to jet zero, creating jobs and securing investment while safeguarding our existing hugely successful, world-leading aviation sector. But time is short, and the competition is intensifying. The Government’s Jet Zero Strategy set the trajectory, and I hope ministers will consider these policies to achieve it. These ideas are practical and achievable and will ensure that the UK’s aviation sector is thriving well beyond 2050 – onwards and upwards.
Robert Courts is the Conservative MP for Witney and was Aviation Minister from 2020 to 2022.
Columns are the author's own opinion and do not necessarily reflect the views of CapX.