Singapore sets up fund to boost sustainable jet fuel

Airlines might need to soften the impact of higher airfare on travelers.

Singapore’s move to create a central procurement and funding system for sustainable aviation fuel (SAF) is positioning the city-state as a regional and possibly global anchor for the emerging green jet fuel market.

“For Singapore to embark on this journey in a more structured manner, they needed to set up a mechanism to collect funding, send clear market signals, address demand and supply, create the ecosystem, and kickstart the market,” Jean Nie Ho, a partner and head of the environment, sustainability and governance practice at Dentons Rodyk & Davidson LLP, told Singapore Business Review.

The Civil Aviation Authority of Singapore (Amendment) bill—passed this year—imposes a fixed sustainable aviation fuel levy on all departing flights starting in 2026. The proceeds collected by the agency will form a fund to procure, manage, and distribute the fuel.

This supports Singapore’s plan to cut aviation emissions from airport operations by 20% from the 2019 level of 404,000 tonnes of carbon dioxide equivalent by 2030, and reach net-zero domestic and international aviation emissions by 2050.

S. Sivanesan, a senior partner at law firm Dentons Rodyk & Davidson, noted that Singapore is already amongst the world’s major oil refining centres, which could encourage more companies to explore SAF-related operations in the city-state.

Several industry players have made significant investments. Finnish refiner Neste Corp. operates a major facility in Singapore with an annual capacity of 2.6 million tonnes of renewable products, including SAF, following its 2023 expansion.

Aether Fuels Pte. Ltd. and Aster Biofuels Pte. Ltd. are developing Project Beacon on Pulau Bukom, with construction planned for 2026 and commercial operations targeted for 2028.

The Sustainable Air Hub Blueprint released in 2024 details a 1% sustainable aviation fuel use target beginning in 2026, with plans to raise this to 3% to 5% by 2030. Ho said SAF adoption is straightforward since it only requires blending into existing jet fuel systems, with no major infrastructure change needed at airports.

Because the SAF levy will be incorporated into airfares, Sivanesan said airlines should assess how ticket prices across different classes would be affected, adding that carriers might need to soften the impact on travelers.

Still, industry examples suggest that passenger traffic need not suffer. Jonathan Yap, director for dispute resolution at law firm Drew & Napier LLC, said experiences in the EU and UK—where a 2% SAF mandate is in place—show that air travel demand remains intact.

“Heathrow offers a useful case study,” he said in an emailed reply to questions. “It is one of the leading airports in SAF adoption and accounted for 17% of global sustainable jet fuel consumption in 2024. In the same year, Heathrow’s passenger numbers reached a new peak.”

Heathrow uses an incentive programme that lets airlines uplift SAF at the airport to bid for rebates that lower their SAF costs. These are funded through existing aeronautical charges.

Under Singapore’s model, its aviation authority will set up Singapore Sustainable Aviation Fuel Company Ltd. to centrally procure sustainable aviation fuel and manage its environmental attributes, ensuring accountability, quality control, and accurate tracking.

Yap said a central buyer could get better commercial terms through bulk purchasing. He noted that Singapore is the first country to impose a SAF levy.

“This adds to our reputation for taking pragmatic measures to advance policy objectives,” he said. “It also signals Singapore’s commitment to environmental sustainability without undercutting our status as an air hub.”