Singapore flights to require SAF, impose levy from 2026

Market: Biofuels, Hydrogen, Oil products
19/02/24

Sustainable aviation fuel (SAF) use will be required for flights departing Singapore from 2026 with a SAF levy also to be imposed, according to its sustainable air hub blueprint launched today.

Singapore will aim for 1pc of SAF use by 2026, projected to rise to 3-5pc by 2030, subject to global developments and wider SAF availability and adoption, according to the blueprint launched by Singapore transport minister Chee Hong Tat at the Changi Aviation Summit.

SAF use is expected to contribute to around 65pc of the reduction in emissions needed by aviation to achieve net zero by 2050, according to the International Air Transport Association.

Singapore's jet fuel demand in 2019, prior to the Covid-19 pandemic, was around 8.43mn t (182,000 b/d), according to IEA data. Consumption is 2023 was likely lower with Changi Airport data showing 328,000 commercial aircraft movements against 382,000 in 2019. Demand will likely exceed 2019 levels by 2025, according to Argus Consulting projections.

The blueprint, developed by the Civil Aviation Authority of Singapore (CAAS) in consultation with the industry and other stakeholders, sets out Singapore's action plan for the decarbonisation of its aviation sector. It will also be submitted this month to the International Civil Aviation Organisation as Singapore's state action plan.

CAAS will also introduce a SAF levy to support the purchase of SAF to achieve its target. It will be set based on the SAF needed to achieve 1pc use and the projected SAF price in 2026. CAAS said the levy will not change even if the actual SAF price differs from the projected one, with the actual SAF uplifted adjusted instead, to provide cost certainty to airlines and travellers.

The levy will vary based on factors such as distance travelled and the class of travel. CAAS projects that it could increase economy class ticket prices on a Singapore-Bangkok direct flight by around S$3 ($2.20), a Singapore-Tokyo flight by S$6 and a Singapore-London flight by S$16 to support 1pc SAF use in 2026. Passengers in premium classes will pay higher levies.

CAAS will continue its consultation with stakeholders on the levy's implementation and will announce more details in 2025.

CAAS this year will also work with stakeholders to start a trial on renewable diesel use for airside vehicles — especially heavy and specialised vehicles — to better understand the feasibility, cost and operational impact of using renewable diesel.

The premium of fob Singapore SAF (class 2) prices over its conventional fob Singapore jet-kerosine counterpart has been narrowing from around $2,160/t in early October last year to $1,866/t as of mid-February, according to Argus assessments. The premium of RED hydrotreated vegetable oil fob Singapore (class 2) premium over fob Singapore 10ppm (0.001pc) sulphur gasoil prices fell to record lows of $649/t on 14 February before widening slightly to $659/t on 16 February.

Singapore also aims to reduce domestic carbon emissions from airport operations from 404,000t in 2019 to 326,000t by 2030. This translates to a total 119,000t of reductions by 2030 accounting for projected growth.

By Sarah Giam

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