Imagine planning an eco-friendly flight, only to discover that the "green" premium has multiplied your ticket price several times over. This is the frustrating reality facing European aviation as it struggles to implement sustainable fuel mandates.
The ReFuelEU Aviation Conundrum
The ReFuelEU Aviation (RFEUA) regulation, set to take effect in January 2025, requires fuel suppliers at EU airports to provide a minimum percentage of sustainable aviation fuel (SAF). While the policy aims to accelerate the industry's green transition, its implementation has created unintended consequences that threaten to undermine its environmental goals.
The fundamental issue lies in market dynamics: while the obligation falls on fuel suppliers, the costs ultimately land on airlines—and by extension, passengers.
The Oligopoly Problem
More than a third of EU airports have three or fewer fuel suppliers, creating an oligopolistic market where dominant players can impose unfavorable contract terms. Rather than actively negotiating SAF supply contracts, many suppliers simply pass compliance costs to airlines through "ReFuelEU fees"—charges that typically exceed SAF market premiums by 200-300%.
Worse still, these fees don't guarantee that suppliers will fulfill their SAF obligations or provide the necessary sustainability documentation for emissions reporting.
A History of Fuel Price Manipulation
European airlines have long contended with anti-competitive fuel pricing at many airports. Some carriers developed workarounds—establishing self-supply programs or strategic partnerships at hub airports—but the RFEUA's "anti-tankering" rule (requiring airlines to purchase 90% of flight fuel at each airport) severely limits these mitigation strategies.
The SAF Premium Paradox
Early 2025 fuel contracts reveal SAF prices far exceeding those in non-mandated markets. International Air Transport Association (IATA) data shows compliance fees averaging double SAF market premiums—sometimes quadruple conventional fuel prices—without clear justification in logistics or additional costs.
Glimmers of Hope
The regulation does include a flexibility mechanism (Article 15) to reduce compliance costs and avoid unnecessary SAF logistics. While implementation guidelines remain pending, this could potentially alleviate some market distortions.
Supply Chain Challenges
Current infrastructure, optimized for conventional fuel volumes, struggles with SAF's smaller-scale logistics. Airlines with existing SAF purchase agreements face additional hurdles, as suppliers won't typically buy and resell these volumes to meet their RFEUA obligations—discouraging further SAF investment.
The Global Certification Gap
Many non-EU airlines operating in Europe lack incentives to purchase SAF, as EU-certified fuel doesn't qualify for reporting under the global CORSIA emissions program. Dual certification—recognizing SAF under both EU and CORSIA frameworks—could resolve this disconnect and create broader market demand.
Mounting Costs, Uncertain Benefits
Current projections suggest RFEUA could add €1 billion in unexpected airline costs for 2025, potentially exceeding €2 billion annually. Without corrective measures, these market distortions may increase decarbonization costs without delivering proportional emissions reductions.
Europe's aviation green transition faces significant headwinds. While the RFEUA's intentions are commendable, its current implementation risks creating a system where sustainability comes at an unsustainable price—ultimately borne by travelers and potentially undermining the very environmental goals it seeks to achieve.