Greg Smith
MP for Mid Buckinghamshire · Conservative · United Kingdom
“As was mentioned earlier, the UK Sepsis Trust had a big bang in 2016 with the famous orange and red posters saying, “Just ask ‘Could it be sepsis?’”, which can be seen in many GP surgeries, hospital waiting rooms and so forth.”
“I am sure that many of my constituents considering a UK break will look to Cambridgeshire, where the always fiscally sound Conservative mayor Paul Bristow has made it clear that now is not the time for such a tax.”
“Ministry of Justice contractors are acting in a deeply inconsiderate manner, affecting my constituents in Edgcott, Grendon Underwood and the Springhill Road estate in the construction of a new mega-prison adjacent to HMP Grendon. I asked the Minister in writing over the summer if she would come and see with her own eyes those problems.”
“Over 2,000 flights cancelled, with more than 150,000 passengers affected; delays, disruption and pain; embarrassment for Britain—what an absolute mess! As you said, Madam Deputy Speaker, there was no offer of a statement from the Government, hence this urgent question from the Conservative Benches.”
“A report by 16 September, which takes us into recess, and six months then to fully diagnose the problem—that is not good enough. A third failure deserves immediate action, not delaying tactics. The Government have a considerable say in how NATS operates.”
“If they were, why on earth are we back here again? Why are airlines and airports lacking suitable contingency plans for when NATS fails—when Government fails—and there is no Government support on the ground?”
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“Secondly, planes can tanker in fuel, as we all know, so if fuel is more expensive in the UK than elsewhere, people will fill up with more fuel in France, for example, before they fly into the UK, thereby decreasing demand in the UK, decreasing revenues and ironically increasing consumption because more jet fuel is being hauled around the world. I think that those are important unintended consequences that we need to take into account.”
“That is one way of asking, “What are the actual costs? What are we going to impose as a levy?” It is published, it is transparent, the supplier knows what we are going to charge, and what we charge the supplier is 100% passed through. There are a lot of mechanics I think we really need to be clear on. It is also worth saying clearly that if we have a mechanism that we do not believe is necessary, but which is going to incur incremental costs, we will be passing incremental costs to British consumers and to an area in the UK that is clearly a global market. Having a potentially higher jet fuel cost because of the levy will have some unintended consequences. First, it makes the UK less competitive.”
“They are the ones who are causing the flight to happen and creating the consumption. Our principle should therefore be that the cost of the levy goes directly to those entities, but the way we look at it now, it is structured in such a way that it is based on the market share of the fuel supplier. That gives us two issues. First, it is not really on the polluter; it is on the fuel supplier. Secondly, we are very concerned about whether we will have the absolute transparency necessary to be able to pass 100% of the cost through to the ultimate consumer: either the passenger on the plane or the person who books the freight. We strongly urge you to look at that mechanism and perhaps look at something like the contracts for difference supplier obligation levy that exists in the electricity sector.”
“Let us be clear that this is around incentivising production. My question is not necessarily whether the Bill is right or wrong; I just do not think it is necessary. What you want is a market that functions and sends a signal, and then production will meet that demand signal and the sustainable aviation fuel will be supplied. My question is whether the Bill is necessary. Let us look at some of the unintended consequences. The first is that there will potentially be an incremental cost, which will be put on the fuel supplier and then, in theory, passed over to the consumer. It is important to say that although that has been put under the principle of the polluter pays, the fuel supplier in this scenario is not the polluter; it is clearly the passenger on the aeroplane or the person who is booking freight on a cargo plane.”
“We all wish to decarbonise, but I think we have to call out some fundamental flaws in the Bill. I do so with the aim of saying, “Let’s make sure that we can be really clear about what this is doing and what some of the potential unintended consequences are.” First, I think it is important to say—this might sound slightly controversial, but I do not wish it to be—that this is not a step that will decarbonise. It is a step that will increase the production of sustainable aviation fuel. The way you decarbonise is effectively by incentivising consumption of sustainable aviation fuel, which we already do through the SAF mandate. The SAF mandate is a reasonably well-developed tool that sets a volume threshold and a buy-out price. That is a major lever that you pull as a Government to incentivise consumption.”
“Paul Greenwood: I fear I may be a slightly dissenting voice, after you have just heard some comments about how everybody is very supportive. I will start with our perspective at FIUK; I will talk very much as ExxonMobil, but please feel free to challenge me on how there may be some differences in view across the members of FIUK. Let me start by saying that ExxonMobil owns and runs a very large refinery and petrochemical complex, the Fawley refinery in Southampton, which is actually the largest producer of jet fuel in the UK. We supply about 13% of the UK’s jet market and have recently invested $300 million in a new larger pipeline from Southampton to London. I say that just to highlight the fact that we take the aviation business and the supply of jet fuel very seriously. One thing is absolutely clear: this is very well-intentioned.”
“It has a fairly discrete job, which is basically to get the counterparty established and engaged and to get the levy in place. All the detail on how the revenue certainty mechanism works will come through in secondary legislation. We are very engaged with the thinking and the development on that, as we have been in the lead-up to the RCM becoming a policy of both the former Government and this Government. It is important to get the design right. Broadly, we are happy with this. The fuel producers are agnostic as to who pays the levy. It is good to hear you note that the cost is going to be small; indeed, it could go either way. There is quite a bit of confusion between the costs of the mandate and the costs of the revenue certainty mechanism. We are keen to make sure that the differences are understood.”
“We could put ourselves in a really good position by having a domestic advanced SAF industry producing the scalable SAFs that will play an increasingly big role. The Bill, as written, is technology-neutral. There a number of ways in which you can do advanced SAF. When we come to the design and how projects are chosen, allocated and prioritised, we think it will be really important that this RCM supports projects that are quickly deliverable, scalable and commercially viable to help us to meet the volumes that we will need come 2030. There is nothing in the Bill that says that that cannot happen, but the design stage and how we get into the detail will matter. Gaynor Hartnell: I agree that no amendments are necessary for the Bill.”
“Relatively speaking, although the RCM costs are very important and we need to do everything we can to make sure that they are kept as low and as efficient as possible, they are part of a bigger picture. There are a number of factors that will determine the cost of SAF for the UK. We need to get everything right; the RCM is just one part. You asked whether the Bill will support the advanced 2G SAFs. The UK has taken a fairly unique route with SAF and the mandate. We have the sub-mandate for advanced SAF, which is about 300,000 tonnes by 2030. We think that it could be a pretty smart move for the UK to do that, because at some point 1G SAF will become feedstock-constrained. That could happen sooner rather than later.”
“Rob Griggs: We recognise the £1.50, and we absolutely welcome the commitment through the mandate that if there were price spikes as a result of SAF policy, steps would be taken to address that. For us, it is probably a little too early to say definitively what the price impact of the RCM will be. A lot of it depends on its ultimate scope and design, as well as the costs in the 2G market and the strike price. We have to bear in mind that ultimately it is the market price of SAF that will drive the biggest impact on ticket prices and the costs borne by the sector. With the RCM, the costs relate essentially either to paying the difference between the cost of SAF and production or to the fact that money can come back the other way.”
“Q That is very helpful. Before we move on to the next witness, may I probe two elements of what you said? On your last point about costs ultimately being passed to the consumer, the Government stated clearly—the Minister said it from the Dispatch Box on Second Reading—that the Department for Transport believes that any addition to, or indeed subtraction from, airfares as a result of the Bill will be no more than £1.50. Do you agree with that point? Secondly, you have talked about advanced SAF. Does the Bill do enough to safeguard any state involvement in encouraging the right long-term technology, rather than standing up earlier technologies that we can all see might well need to be stood down in 10 or 20 years when something better has come along?”
“I used to work for the oil industry—for Exxon, in fact—and I know how this works. That will come back quicker than you can imagine. Our view is that will result in double payment by the airlines. We are paying for the SAF and for emissions trading. We should not be paying for RCM as well. Our view is that if that money is passed back through to the airlines we should be compensated through the money that aviation puts in the UK emissions trading scheme, to avoid double payment.”
“We in the industry support polluter pays; we are part of the emissions trading scheme, and we have a global carbon offset scheme. Of course, the airlines will be paying for SAF from the 2030s onwards, and that is by far the biggest element of the cost. We talk about a figure of £1.50; to us, that seems a conservative number, but anyway, that is only for the RCM mechanism. By far the biggest cost is actually paying for the SAF. Let me give some top line numbers: 10% by 2030 is 1.2 million tonnes; a conservative premium for the SAF is about £2,000 per tonne, so you are looking at over £2 billion of SAF premium that the airlines will be paying. We are paying for the SAF and also for our carbon emissions. The issue is that we know the levy on the fuel suppliers will come straight back to the airlines.”
“He knows a lot about this market, and he wrote an extensive paper for the Government, which said that we will not get these SAFs without the revenue certainty mechanism. For that reason, we support it. I will come on to the impacts shortly. We have no amendments to suggest at this stage, but we think that there are two points that could make it better in the next phase. One is that it has to be targeted. Not all 2G projects will need the revenue certainty mechanism; some of them will get funding without it, so it has to be targeted at the early-stage, first-of-a-kind projects that need it. That is how we can contain the total cost of the scheme. Then, as mentioned during the previous panel, there is the funding question.”
“However, that will hit feedstock constraints in the early 2030s, so we are going to start to cap out on the amount of 1G SAF we can produce. That is why 2G and 3G are critical if we are to meet long-term decarbonisation targets. We expect that by 2050, 90% of SAF will be 2G and 3G, so it is critical that we have a policy mechanism that incentivises 2G SAF. That is why I disagree with some of the comments from the oil company representative in the previous witness panel, who said that we do not need this policy intervention. We absolutely do, because without it we will not get 2G SAF on the mandate alone. That was shown in the work done by Philip New, the chief executive officer of BP renewables.”
“Q Good morning to our witnesses. It is impossible to consider the Bill without also considering the mandate, side by side. What impact do you feel the Bill will have not just on your businesses but on the fares that you charge passengers on your aircraft, and, for those of you who have cargo operations, the impact on the cost of shipping goods by air? Jonathon Counsell: We are huge supporters of the Bill. As Luke has said, SAF is critical to decarbonising aviation. There is no silver bullet, but this gets pretty close. We think that by 2050, 70% of our fuel will be SAF. There are three types of SAF: first, second and third generation. Quite clearly, the first generation is all that you can buy today, and 95% of it is from hydroprocessed esters and fatty acids—used cooking oil.”
“If an excessive cost gets passed on, the risk is that that disadvantages the consumer, but economically it would also mean that aviation cannot play the role that we intend to play in the UK’s growth.”
“A step down from that, there is a not quite as bad, but still bad, scenario in which the market is short on supply, so there is little incentive for suppliers to charge significantly below the buy-out price. You would end up in a situation where the cost that being passed through to airlines, and therefore to consumers, is disproportionate to the decarbonisation that happens. Finally, putting our ability to absorb those costs into context, easyJet’s profit margin is £6 per passenger—roughly 1.5 coffees in the vicinity of this building—and that is once we have paid several billion for new, more efficient aircraft, invested in the operation and paid for 18,500 employees. We have very little margin to work with without having to pass the cost on to the consumer.”
“When you go all the way to 3G or power to liquid SAF, estimates right now range from $7,000 to $8,000 in Europe. That is a massive increase in cost, which goes into the cost base. To keep flying affordable in the long run, we have to manage that carefully, because it risks the industry adding significantly to what goes through. The cost of the levy is additional to what we would be paying for SAF, which is something that we do by fulfilling the mandate. A scenario that we are absolutely trying to avoid at any cost is one in which we cannot meet the mandate and therefore are paying buy-out prices with no SAF. In that case, those costs will be going through without any environmental benefit.”
“Right now, the 2G and 3G SAF technology has been developed but there is a key transition period it needs to go through, to get from technology demonstrations to commercial scale. That is where the market failure is which is being addressed by the RCM. Like my colleagues, we are supportive of the RCM. It is clear to us that the eyes of the world are on the UK to see how we make this work. To answer directly the question about the cost impact on consumers, let me split that into two things. First, there is the cost of SAF, full stop, and secondly, the potential cost of the levy. Fuel costs are about a third of our cost base. The cost of jet fuel today is about $750 a tonne. You are looking at upwards of $2,500 dollars a tonne for first generation SAF.”
“In creating this Bill, you are allowing that opportunity for those that do need it. I do not think we need 100% of SAF covered by RCM for 2G production. We do need imports and to make sure that SAF in the UK remains competitive. That means balancing that need for investing in first of a kind 2G plants that require the investment certainty with the ability to create a competitive market and allow imports into the UK as well. Lahiru Ranasinghe: From a strategic perspective, there are three things we are trying to do as an airline. We want to grow, to do so sustainably while decarbonising at the same time, and to keep fares affordable for consumers. For us to be able to do that, we need a functioning SAF market to develop over time, so that supply and demand are balanced and the market is working under its own steam.”
“It is interesting from an oil producer’s perspective to state that the polluter must pay. Well, the oil companies are also part of that problem and must pay. We believe that our consumers will pay the price of SAF but we do not believe we should pay to underwrite the logistics and the production facilities. That is why there should be differentiation between paying for SAF and paying for the RCM. We as a company have fully supported some of the potential producers in the UK and they are the ones saying to us, “We need an RCM; we need a level playing field to attract investment into producing 2G SAF in the UK.” When we say, “Let the market do what it wants to do,” we are hearing from the market and from producers, some of which do not want an RCM but some of which definitely do.”
“Q If I can probe that a little more, you say £1.50 is a conservative estimate. Does IAG have its own estimate? Jonathon Counsell: No. We have not at this stage managed to fully analyse that number. We think there are potentially some elements that have not been included in that calculation, but £1.50 per passenger feels quite low when you think the costs of the SAF itself will be nearer to £10. We can take a close look at that, but I think the key principle is we should not be paying for that plus the SAF, hence we need to net that off against the UK emissions trading scheme costs. Luke Ervine: I fully support Jonathon’s comments. We are fully supportive of the RCM, as we have been for the mandate. The mandate drives demand and the RCM drives the supply, and we do see a massive shortage in the 2G that we need.”
“This could potentially be explored in the UK long term, again to help airlines to minimise the impact of SAF price increases. I think there is a role for scalability and time, but equally, in the short to medium term, there is still a role for policy in being able to support that.”
“The other thing I would add is that scalability takes you to one level, but I do not think that scalability alone will become completely identical with a market that has had years and years of operation and cheap access to crude oil, for example, to convert into jet. As for the idea that we will immediately be able to become competitive, that is where there can be another role for policy. The RCM is one of those tools. Another example that we have seen in Europe is that they have been looking at things such as ETS allowances. These allowances basically help airlines to minimise that uplift in terms of the price of SAF. At the moment, that is time limited until 2030, but for biofuels you are able to take 75% of the cost difference between fossil jet and biofuel. For e-fuels, you are able to take 95% of the price difference.”
“In our case and for our route, it is key to be connected to the carbon cluster in Teesside, because then I will be able to provide a lower cost for these carbon certificates, if we get the RCM potential. Sophia Haywood: Just to build on that, scalability is absolutely key. We are looking at a global suite of different projects all across the world. With that, each time we are learning and improving, and becoming more efficient. For example, we built a demonstrator project in the US of our ethanol-to-jet process. From that, we have been able to learn and to become more efficient in spaces, so that when we then develop in Teesside with Project Speedbird, we are able to improve consistently on that basis.”
“We think that when we potentially scale up production, we can recycle engineering and we can utilise other services to push the price down further. However, in our case, because we are using the FT-SPK route, biogenic CO2 is produced in the process. If I capture that CO2 and connect to Net Zero Teesside, I will be able to generate more carbon certificates—actually, it is triple. For example, if I produced 100 carbon certificates without carbon capture, with carbon capture I can produce 300. By this process, we can reduce the cost of SAF to the offtaker or to the consumer, because then I will divide the capex with the overall cost; instead of dividing it by 100, I will divide it by 300.”
“Q Good morning to both of you. You are both bringing different technologies to SAF production. Ms Haywood, your SAF is more bioethanol based, and Mr Al Adhami, yours is more waste derived. At what point do you think that the incentives—shall we call them that?—in the Bill, if it becomes law, such as the price mechanism, will mean that you can get your respective products to a cost that is similar to regular, fossil fuel-derived jet fuel in today’s prices? How long will it take you to get prices down? Noaman Al Adhami: Maybe I can answer this question. This comes with scale. The technologies that we are implementing currently have been implemented in other sectors, so they are not necessarily new, but with the scale, in terms of logistics and feedstock availability, it will take time.”
“If we took that additional capacity—not counting our current project, which is 2G or second generation—we would be able to build three and a half more Project Speedbirds in the UK, just taking that potential capacity, if that was all theoretically to come to us. We see SAF as a great opportunity to fix the current issue that the bioethanol sector is facing. Certainly, we see it as complementary also to the scale-up of 2G, because for us it means that we can reduce the overall cost of project development and we could still transition to 2G over time, or indeed have blends of first generation and 2G together to increase roll-out. For our technology, as long as it is sustainable ethanol that is coming in, we are producing sustainable jet on the other side.”
“The bioethanol here is particularly produced from crops such as wheat. I am not sure about the exact proportion that is grown here and then converted into bioethanol here. I think that SAF is a great opportunity for the challenge that the bioethanol sector is currently facing. If we were allowed to use in SAF the bioethanol that is currently allowed to be used in the road transportation sector, we would be able to take that and convert that into jet fuel at our facility Speedbird. I did some quick statistics—quick maths—looking at the total capacity that we have for bioethanol production in the UK today.”
“Q This question is probably more for you, Ms Haywood, given the ethanol element of your product. Clearly, there has been some concern in the UK that the lower tariffs deal with the United States has quite a significant bioethanol element to it, which has made UK producers nervous, if I can put it that way. Given that what sits underneath a lot of the Bill is domestic fuel security and production here in the UK, how big a concern is it for you, producing SAF that is ethanol derived, that we might not have that UK security, because we will be dependent on imports—in this case, imports of the bioethanol feedstock? Sophia Haywood: At the moment, we are not allowed to use the bioethanol produced in the UK, because the majority of it is technically first generation, whereby it is produced from crops.”
“We need to make sure that the IP is generated here in the UK and kept here because I believe that in five years from now all the big decisions around e-fuels—all the important ones—and the freedom to operate will have been worked out, and we do not want that to be worked out anywhere other than in the UK. It will enable us to kickstart the energy generation within the UK so that we have a sovereign capability for energy generation. I hope that answers your question.”
“Because of our education system, we probably have some of the best talent in this sector globally, and we are able to recruit that. We have already made significant inroads into the quality of the fuel, which is over and above anything else that is now available—and when I say that, I mean globally available. This little company that we have—and it is little—has been able to outperform some of the bigger competitors in the field. Towards the end of this year, we will submit our product to the ASTM governing body to get it certified. The intellectual property that we are generating is key to the UK.”
“In my view, those are not truly scalable, and their cost will only ever go up, because of the shortage of land and so on. The power-to-liquid side is truly scalable. The feedstock is air, water and renewable energy. It is extremely clean, and it gives the industry the opportunity—in, say, 10 or 15 years’ time—to move to fuels that are even more performant than current fossil-based fuels. We are very supportive of the Bill, and we think it will be useful for us if it goes through. It will give confidence to the sector and bring investment, which then helps to bring capability to the UK. It is a great way to kickstart the e-fuels industry, which is the medium to long-term solution, not a short-term solution. We have been working in this sector for only five years.”
“Q 29 For transparency, I should declare that I have visited Zero Petroleum on a couple of occasions and met with people there. Mr McKiernan, your product is a power-to-liquid product; it is not derived from feedstocks or waste. Do you think that a power-to-liquid solution is the long-term solution for sustainable and synthetic fuels for aviation use? Do you worry that any part of the Bill incentivises short-term solutions over long-term solutions? Doug McKiernan: On the first part of the question, given my knowledge of the sector as an engineer, I do not believe that there is a long-term solution other than power to liquid. At the moment, in the ASTM fuel standards, there are a lot of bio-based, sugar-based and food-waste solutions.”
“With regard to the IP, there needs to be a mandate somewhere in Government to support core e-fuels development. A lot of small companies at the moment are not getting that, so we are at risk of going abroad with the technology. The Aerospace Technology Institute heavily sponsors hydrogen and electric, but does not really support the core technology of e-fuels. Although we have this mandate, which we think is great, there is a bit of a gap there that could do with addressing.”
“Q It does. I have one brief additional question, mindful that we have only 20 minutes with you. Off the back of that protection of UK IP, do you think the Bill could be strengthened to bring in greater protection of technologies such as those that have been developed by Zero and other companies in the UK, so that when the strike price is set it does not end up with foreign-owned technology being incentivised in the United Kingdom? Do you believe that you, along with others that have similar technologies, can scale fast enough to meet the other side of the coin of this Bill, the SAF mandate? Doug McKiernan: That is a very good question. I think we are in a race. At the moment we need the Bill to give confidence to investors. That will help us to scale. That is the main benefit in the short term.”
“But a lot of it has to do with the value of the product that we make, and the certainty around the value of the product. The revenue certainty mechanism being discussed in the Bill is very compelling. There is always a combination of different factors. It is partially fundamentals about whether we can get the right feedstocks, but part of it is also about the certainty we have about the price we are going to get for our products. The revenue certainty mechanism is absolutely very helpful.”
“Q Good afternoon. You have talked about the sourcing of aviation fuel and blending SAF as well as fossil fuel for aviation. Shell is clearly a global company, but the Bill’s underpinning is the United Kingdom’s domestic fuel security. Where does Shell sit in terms of viewing domestic fuel security for aviation use within the United Kingdom? Do you think the Bill will deliver on not just that primary goal but increasing UK-based SAF production? Ruben van Grinsven: That is a really good question. We are looking globally at various opportunities to build SAF production plants. The second and third generations especially are more challenging than the first generation. To make the investment case robust, we need to solve a whole number of challenges—some are around ensuring that we can make the technology work, and some are around financing.”
“Ethanol to jet, for instance, is very feedstock dependent, and I think that the UK can be as competitive as other places. Again, the fundamental competitiveness is one element. The other element is whether the whole investment case makes sense, and part of that is financing —and part of the financing is driven by revenue certainty. It is not just the fundamentals but the whole package that determines the attractiveness of the investment.”
“I think the principles are very promising, but there are many things that need to be detailed out, which, at the end of the day, will decide how appealing the investment is going to be. There is a lot of that. Can UK-produced SAF be competitive in a global market? I think that depends a little bit on the type of technology, but it is also very timebound. At this point in time, this is not the cheapest place to make e-SAF, just because power is more expensive than other places in the world. But if we continue to build out the renewables, as I have seen in plans before, I think there are going to be more affordable electrons around that can then be converted into e-SAF. In the longer term, e-SAF can be competitive. For other technologies, I think things are less location dependent.”
“Q That is helpful, but on this particular point about UK-based production, a global company like Shell—there is nothing wrong with this position; it is what you do—will source SAF from wherever it is cheapest around the world. Does the Bill go far enough to pump-prime UK-based production so that a global giant like Shell—nothing wrong with being a global giant—will choose UK-based plants, or will the mechanism in the Bill not produce SAF at a cost that you think is competitive for your usage, blends and potential future use when compared to that from suppliers overseas? Ruben van Grinsven: There are two elements. One is whether we can invest in a UK plant. That is hard to tell at this point in time for two reasons. We do not fully understand all the details associated with the Bill.”
“Q That is very helpful. On one last point of clarity, when you talk about the long term for e-fuels, we can all put a different definition on “long term”. What do you mean by that—10, 20, 50 years? Ruben van Grinsven: I do not know. I do not know exactly what the price projections are for renewable power in the UK. It is hard to guesstimate that, so I do not know.”
“We do not have enough information at this point in time to calculate what the cost is going to be because a lot of the details of the Bill are unknown. We would like to better understand how this is going to work, what the volumes are, what the timing is going to be, and how we will organise the contracts between the supplier and the off-taker. There are a lot of things that we do not know at this point, and therefore it is difficult to model what the final cost of the levy is going to be for the end consumer. I do not know; it is difficult to answer. On top of that, I think it is going to change over time. Over time, if the market is short and the prices are high, money might flow towards the levy, so it would be like a negative levy but then it might turn into a positive levy. It is very difficult to assess that and put a number on it.”
“Q If the Bill becomes an Act, Shell will find itself in a peculiar place given that it will be both a levy payer, as a fossil fuel producer, and a developer of SAF potentially looking to benefit from the strike price. The Government put an analysis in the public domain on Second Reading: they suggested that the ultimate cost to the end user, such as somebody getting a flight—there will be a different calculation for those using air freight—will be plus or minus £1.50. Witnesses earlier suggested that that might be a “conservative” estimate—in their own words. Where would Shell see the ultimate cost pass on to the end user? Ruben van Grinsven: The principle makes sense: at the end of the day, additional cost will find its way to the end user.”
“We have concluded that demand for flying from Heathrow remains robust even in high carbon price scenarios in future. We are confident about that. The Government have shared their analysis on the revenue certainty mechanism and the reasons behind it. That is one of the carbon costs that consumers will bear—there are clearly others—but I come back to the point that all our forecasts have shown that demand is robust.”
“Matt Gorman: Let me start by saying that we take this issue very seriously, for the reasons you have outlined. It is central to our business. SAF is key to delivering the industry’s net zero transition plan: it is about 40% of the solution. I do not think that anyone can forecast the future costs and prices with exact certainty, but I will say that we test all our demand forecasts for Heathrow against a range of different carbon price scenarios, from low to high—“high” being the Department for Energy Security and Net Zero’s high scenarios. We do that because it is important for us to understand and our investors to understand, and because climate disclosure legislation now requires us to share that information in our annual report.”
“Q Good afternoon, Mr Gorman. I will lead with the question that I asked the previous witness about end-user cost. Clearly, Heathrow’s business model relies on you having many people coming through and getting on aircraft, or arriving in the UK on an aircraft. If the cost of flying were to increase significantly, that might impact Heathrow’s very business model, with fewer people being able to take those flights. Some of the evidence we have heard today seems to challenge the Government’s presumption, presented on Second Reading, that any cost increase to the end user, as a result of the Bill and the SAF mandate, would be plus or minus £1.50. Do you share the Government’s view on that, or do you share some of the other witnesses’ views that that might be optimistic?”
“On jobs and growth, earlier witnesses talked about the industry studies showing up to £10 billion of GVA and 60,000 jobs by 2050. Energy security is one of those reasons. As SAF is a key part of the industry transition plan around the world, there will be global trading of SAF. Kerosene is a global commodity today; SAF will be in future. We think we will import some. However, the sector is supportive of domestic production, which is why we are so supportive of the Bill. I should say that Heathrow is not directly in the fuel value chain—we do not buy, make or sell fuel—but we are very involved in the debate, because it is so significant. All the fuel producers and investors we talk to say that the revenue certainty mechanism will help to unlock investment decisions in the UK.”
“Q In respect of procurement of SAF to be available at the airport, will the Bill safeguard domestic fuel security? I ask that question largely through the lens of the challenge to Heathrow if fuel were suddenly to be unavailable in the United Kingdom for you to supply to the airlines on site. Is there any way that the Bill could be improved to shore up the domestic security position? Matt Gorman: It is a good question. We welcome the Bill. As SAF is so important, the sector and Heathrow have advocated over a number of years both the mandate, which was passed as legislation at the beginning of the year, and the revenue certainty mechanism. It has benefits for energy security, green jobs, growth and decarbonisation. That has been one of the drivers for the sector to support it. The decarbonisation benefits are clear.”