SAF Economics & Carbon Trading: What Airport Finance Officers Are Pricing In
Scope & Methodology
This article maps the structural cost components flowing into airline operating budgets from sustainable aviation fuel (SAF) procurement and carbon compliance across three regulatory regimes: U.S. federal tax incentives, ICAO's CORSIA mechanism, and the European Union's emissions trading and blending mandates. The focus is on first-hand source data from 2024–2026 and the transmission channels through which airline-level costs affect airport finance and rate-setting.
Bottom Line Up Front
Three distinct cost streams are converging into a combined carbon compliance burden for airlines operating internationally:
- SAF premiums of 2–5x conventional jet fuel cost are driving industry-wide costs of $3.6 billion annually, with U.S. federal credits reduced 43% under H.R. 1 (July 2025).
- EU ETS allowances now require 100% auctioning (as of January 1, 2026) at €70–€100/tonne CO₂, creating €70–€100 million annual costs for mid-sized carriers on intra-European routes.
- CORSIA Phase 1 (2024–2026) offsets traded at $21.70–$22.55/tonne CO₂e in 2024–2025 spot transactions, with Phase 2 costs projected at $25–$36/tonne as supply tightens.
Airport directors should monitor how these costs flow through airline route economics, fuel sourcing decisions, and capital requests, particularly the 90% EU fuel uplift rule and ReFuelEU blending mandates (2% in 2025, scaling to 20% by 2035).
Sources & Quality Control
Data sources: IATA (SAF production and pricing, December 2025), ICAO (CORSIA baseline and participant data, February 2026), European Commission (EU ETS allowance phases and ReFuelEU schedules), ICCT and EASA (SAF production costs), CATF and Baker Botts (U.S. 45Z tax credit, February 2026), Argus and Airlines for America (conventional fuel pricing), Azzera, ENGIE, and Sylvera (EEU pricing history and projections).
Verification notes: All facts are anchored to primary regulatory documents or published market data. Price ranges reflect spot market transactions or published auction results; regulatory changes reflect official legislative text or regulatory guidance. CORSIA participation and baseline figures cite ICAO's official dataset. EU allowance pricing sources include exchanges and market analysts active in carbon markets.
SAF Production and Pricing: Where the Numbers Stand
Global SAF production reached 1.0 million tonnes in 2024 and doubled to 1.9 Mt in 2025, with IATA projecting 2026 output at 2.4 Mt (December 2025), representing 0.8% of total global jet fuel consumption. For context, conventional jet fuel was trading at $3.24/gallon as of March 3, 2026 (Airlines for America).
SAF trades at a 2–5x premium over conventional jet fuel in mandated markets (IATA, December 2025). On the U.S. West Coast—one of the few markets with transparent spot pricing—SAF reached prices near $3.50/gallon in early 2026 (Advanced Biofuels USA, March 2026). That price still carries a premium and does not reflect delivered costs at most airports. IATA calculated the industry-wide SAF cost burden at $3.6 billion in 2025, driven by the structural price spread between SAF and fossil-derived jet fuel.
The European Union Aviation Safety Agency (EASA) estimated 2024 SAF production costs at €1,461/tonne for biofuels (primarily HEFA pathway) and up to €7,695/tonne for synthetic e-fuels (ICCT, November 2025). The HEFA pathway—hydroprocessed esters and fatty acids, using waste oils and fats as feedstock—accounts for over 90% of current SAF production (CleanBridge, 2025).
U.S. Federal SAF Incentives
The Section 45Z Clean Fuel Production Credit, which replaced Section 40B beginning January 2025, originally allowed a maximum SAF credit of $1.75/gallon under the Inflation Reduction Act (CATF, October 2025). The "One Big Beautiful Bill Act" (H.R. 1), signed July 4, 2025, reduced the maximum SAF credit to $1.00/gallon and restricted feedstock eligibility to sources grown or produced in the U.S., Mexico, or Canada (CATF, October 2025). IRS proposed regulations issued in February 2026 confirmed the reduced credit amount and clarified that the applicable per-gallon amount is 20 cents, adjusted by the fuel's emissions factor (Baker Botts, February 2026).
CORSIA: How the Offset Math Works
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is ICAO's market-based mechanism requiring airlines to offset CO₂ emissions growth from international aviation above a defined baseline (ICAO CORSIA). Under ICAO Assembly Resolution A42-22, the baseline is set at 85% of 2019 CO₂ emissions for all State pairs subject to offsetting requirements (IATA CORSIA).
Phase 1 (2024–2026): Voluntary
ICAO calculated the 2019 baseline at 305,522,071 tonnes CO₂ for applicable State pairs, with total 2024 emissions of 361,159,641 tonnes reported by 126 States, producing a 2024 Sector's Growth Factor of 0.15405257 (ICAO/Green Air News, February 2026). Airlines on routes between the 138 participating States offset emissions exceeding this baseline by purchasing CORSIA Eligible Emissions Units (EEUs).
Phase 1 demand is estimated at 146–236 million EEUs based on IATA's September 2025 update, against which 15.8 million EEUs have been publicly issued and confirmed as CORSIA-eligible—drawn entirely from Guyana's ART TREES jurisdictional REDD+ program (Azzera, December 2025). The first Guyana auction in late 2024 priced EEUs at $21.70/tCO₂e, with 11 airlines purchasing 400,000 credits; subsequent 2025 transactions moved to $22.25/tCO₂e in Q1 and $22.55/tCO₂e in Q3 (Azzera, December 2025).
IATA estimates the cost of CORSIA compliance at $1.3 billion for 2025 and $1.7 billion for 2026, with cumulative Phase 1 costs between $1.9 billion and $6.3 billion depending on price scenarios (IATA Brief on Climate Regulatory Frameworks). MSCI Carbon Markets modeled a range of $1.9–$7.0 billion for Phase 1, with EEU prices projected at $18–$51/tCO₂e (MSCI, November 2024).
Phase 2 (2027–2035): Mandatory with Exceptions
Phase 2 is mandatory for most international flights, with exemptions for Least Developed Countries (LDCs), Small Island Developing States (SIDS), Landlocked Developing Countries (LLDCs), and States representing less than 0.5% of 2018 global international revenue tonne-kilometers (IATA CORSIA). The expansion is expected to raise CORSIA's coverage from approximately 64% to 87% of international aviation emissions (CEEZER, November 2025).
ICAO has approved Gold Standard, Verra's Verified Carbon Standard (VCS), and Isometric to supply EEUs for the Second Phase (2027–2029) (ICAO/Green Air News, February 2026). Sylvera projects EEU prices at $25–$36/tonne by 2027, with supply-constrained scenarios exceeding $60/tonne (Sylvera, July 2025).
CORSIA and SAF Interaction
Under CORSIA, airlines may reduce their offsetting obligations through the use of CORSIA-eligible fuels, including qualifying SAF. This creates a direct economic trade-off: an airline purchasing SAF at a premium of $2.00/gallon over conventional fuel and achieving a lifecycle emissions reduction of 75% effectively pays a carbon abatement cost that can be compared against the cost of purchasing EEUs. The choice between purchasing SAF and purchasing offsets depends on relative pricing, regulatory recognition, and the airline's broader sustainability strategy.
EU ETS: Full Auctioning Begins
The EU Emissions Trading System (EU ETS) applies to all commercial flights within the European Economic Area (European Commission, Climate Action). Free allocation of emissions allowances to aircraft operators was reduced by 25% in 2024 and by 50% in 2025; as of January 1, 2026, free allocation has been eliminated entirely—airlines operating intra-EEA flights purchase allowances for 100% of their reported CO₂ emissions (European Commission, Climate Action).
Allowance Pricing
EU Allowance (EUA) prices in 2026 range between €70 and €100 per tonne of CO₂ (Acumen Aero, January 2026). As of November 2025, the EUA market posted a +16% year-to-date gain and was trading at its highest level in two years, with the €80 threshold serving as a support level (Homaio, November 2025). For a mid-sized carrier emitting approximately one million tonnes of CO₂ annually on covered routes, this translates to a €70–€100 million annual cost (Acumen Aero, January 2026). KLM has publicly stated it expects to spend approximately €325 million per year on emission rights by 2030 (Aerospace Global News, citing NL Times, February 2026).
The EU has reserved 20 million ETS allowances—valued at approximately €1.5 billion at €75/allowance—to subsidize the price difference between conventional jet fuel and eligible SAF; for the first support year (2024), approximately 1.3 million allowances (approximately €100 million) were distributed among 53 aircraft operators (European Commission, September 2025). Airlines are not required to surrender allowances for emissions attributable to SAF use, creating an additional incentive valued at approximately €25 million in 2024 for the industry as a whole (European Commission, September 2025).
How EU ETS and CORSIA Interact
EU ETS applies to intra-EEA flights; CORSIA applies to qualifying international flights. The revised EU ETS Directive implements CORSIA for international flights departing from or arriving at EEA airports, while intra-EEA flights remain solely under EU ETS (European Commission, Climate Action). Airlines operating across both scopes run parallel compliance processes: surrendering EUAs for intra-EEA emissions and purchasing EEUs for qualifying international emissions, with safeguards against double counting of the same reduction (Acumen Aero, January 2026).
ReFuelEU Aviation: The European Blending Mandate
| Year | Minimum SAF Share | Synthetic e-Fuel Sub-Mandate |
|---|---|---|
| 2025 | 2% | — |
| 2030 | 6% | 1.2% |
| 2035 | 20% | 5% |
| 2040 | 34% | 10% |
| 2050 | 70% | 35% |
The regulation also imposes a 90% fuel uplift obligation: aircraft operators departing from EU airports must refuel at least 90% of their annually required fuel within the EU, designed to prevent fuel tankering (European Parliament, Legislative Train). As of January 1, 2026, Switzerland adopted the ReFuelEU regulation, applying the same 2% minimum SAF blend at Zurich and Geneva airports (European Commission, Transport).
The steep ramp from 6% in 2030 to 20% in 2035 places pressure on production capacity, particularly for non-HEFA pathways, and the EU restricts recognition of imported HEFA-pathway SAF, which limits the supply pool for compliance (World Energy, November 2025). EASA has identified the risk that actual SAF production volumes may fall short of capacity due to project delays or failures (Policy Tracker/Carbon Gap).
What This Means for Airport Rate Structures
Airport directors and CFOs encounter SAF and carbon costs through several pathways, none of which are fully settled in rate-setting practice.
Fuel Flowage Fees and SAF
Airports that charge fuel flowage fees on a per-gallon basis collect the same fee whether the gallon is conventional jet fuel or SAF. Under a volume-based fee structure, SAF does not by itself alter revenue. However, if SAF premiums cause airlines to fuel-tanker from non-SAF airports or reduce fuel uplift at airports with SAF mandates, fuel throughput—and fee revenue—could decline. The ReFuelEU 90% uplift rule is designed to mitigate this behavior within Europe, but no comparable rule exists in U.S. domestic operations.
Book and Claim Accounting
Book and claim is a chain-of-custody model that decouples the sustainability attributes of SAF from its physical molecules (ICAO/Uniting Aviation, January 2026). Under this model, a producer "books" SAF production into a registry, and an airline "claims" the environmental benefit through a certificate transaction, regardless of whether the SAF was physically delivered to the airport where the airline operates (SkyNRG); see also Airlines for America position statement (April 2024).
For airports, this raises a practical question: if an airline claims SAF emissions reductions through book and claim but no physical SAF flows through the airport's fuel system, the airport's Scope 3 emissions inventory remains unchanged despite the airline's claimed reduction. The treatment of book-and-claim SAF in airport emissions reporting, ACI Airport Carbon Accreditation, and bond disclosure documents is an area of evolving practice.
Carbon Cost Pass-Through
Airlines may pass EU ETS and CORSIA costs to passengers through ticket pricing or fuel surcharges; MSCI estimated that if Phase 1 CORSIA costs were fully passed through, the average international ticket price would increase by 0.5–1.0% (MSCI, November 2024). Whether carbon cost pass-through affects demand at a specific airport depends on the airport's competitive position, the share of price-sensitive versus business traffic, and the availability of alternative routings.
Infrastructure Considerations
SAF produced via the HEFA pathway is a "drop-in" fuel—it is blended with conventional jet fuel and delivered through existing hydrant systems and fueling trucks without modification (ICF, October 2024). Airports with on-site fuel farms that receive blended fuel from refineries may not face new capital requirements for current SAF volumes.
However, as mandated blending ratios increase (to 20% by 2035 under ReFuelEU, for example), questions arise around blending infrastructure capacity, fuel testing and quality assurance protocols, and storage segregation if unblended SAF is delivered separately. Heathrow Airport has introduced an incentive subsidizing 50% of the SAF premium through a portion of its NOx charge, providing a rebate of £460/tonne of SAF uplifted (ICF, October 2024). This represents one model for airports evaluating whether and how to use existing fee structures to encourage SAF adoption.
The Cost Convergence Ahead
Three cost streams—SAF premiums, EU ETS allowances, and CORSIA offset purchases—are converging into a combined carbon compliance cost for airlines. Each operates on a different price mechanism:
| Cost Stream | Price Mechanism | 2026 Cost Indicator |
|---|---|---|
| SAF premium (HEFA) | Negotiated supply contracts, mandated blending | 2–5x conventional jet fuel price (IATA, December 2025) |
| EU ETS (intra-EEA) | Market-traded allowances, full auctioning | €70–€100/tonne CO₂ (Acumen Aero, January 2026) |
| CORSIA (international) | Negotiated EEU purchases | $21.70–$22.55/tonne CO₂e (2024–2025 actuals) (ENGIE, December 2025); $25–$36 projected for 2027 (Sylvera, July 2025) |
Airlines optimize across these three channels based on relative pricing, regulatory eligibility, and the specific routes they fly. An airline operating a mix of intra-EEA and transatlantic routes faces EU ETS exposure on the former and CORSIA exposure on the latter, with SAF usable to reduce obligations under both frameworks—but not double-counted for the same flight.
For airport finance professionals, the question is how these airline-level costs flow into airport economics. Potential transmission channels include:
- Airline requests for capital cost recovery structures that account for higher operating costs
- Changes in airline route economics that affect enplanement forecasts and revenue projections
- Fuel throughput shifts driven by tankering incentives or SAF sourcing patterns
- Infrastructure capital requests for SAF blending, testing, or storage capacity
- Emissions reporting methodology changes that affect bond disclosure or grant eligibility
None of these outcomes are predetermined. The direction and magnitude depend on SAF pricing trajectories, carbon market conditions, regulatory implementation timelines, and individual airline strategies. Historical data on these interactions is limited to 2024–2025—the first two years of CORSIA Phase 1 and the early phase of ReFuelEU mandates.
Disclaimer: This article reflects publicly available sources and regulatory documents as of March 2026. SAF prices, EU ETS allowance prices, and CORSIA emissions unit prices fluctuate based on market conditions and supply dynamics. Regulatory frameworks including the U.S. Section 45Z credit, ReFuelEU Aviation, EU ETS, and CORSIA are subject to legislative and administrative revision. Airport-specific outcomes depend on competitive positioning, airline mix, fuel sourcing agreements, and local regulatory context. This article does not constitute financial advice or a substitute for consulting regulatory specialists or financial advisors on compliance or rate-setting decisions.
AI Disclosure: This article was drafted using a generative AI system and reviewed by DWU staff for accuracy, source verification, and compliance with DWU quality standards before publication. All citations are linked to first-hand sources.