BalticSeaH2 project partner Liquid Sun is producing eSAF at pilot scale. The project’s latest Regulation Node examined the market and regulatory conditions needed to move towards commercial production.
Synthetic aviation fuel, or eSAF, is produced using renewable hydrogen and captured carbon dioxide. Within the BalticSeaH2 valley, Liquid Sun is developing a distributed production model and demonstrating eSAF production at pilot scale.
To examine the wider conditions for scaling production, BalticSeaH2 organised the Regulation Node online session What Will It Take to Scale eSAF? Policy and Industry Perspectives on 2 October 2026. The event brought together perspectives from the EU SAF Clearing House, the Finnish Ministry of Transport and Communications, Liquid Sun and Finnair. The discussion was moderated by CLIC Innovation.
Regulation has created demand, but investments are still missing
ReFuelEU Aviation has established minimum requirements for sustainable aviation fuels in Europe. The first requirement entered into force in 2025, and the share of SAF supplied in the EU exceeded the initial two per cent target.
Current supply is mainly based on fuels produced from waste oils and fats. As these feedstocks are limited, future targets will increasingly require other production pathways, including eSAF.
Several eSAF projects are being developed, but few have reached final investment decisions. First-of-a-kind production facilities require significant capital, have long payback periods and produce fuel at a considerably higher cost than fossil jet fuel or established SAF alternatives.
The discussion highlighted that a mandate alone does not make projects investable. Companies also need stable regulation, predictable revenues and confidence that demand will continue over the lifetime of an investment. Changes or uncertainty in the regulatory framework can therefore delay investment decisions.
Risk needs to be shared across the value chain
Fuel producers and financiers need long-term revenue certainty. Airlines, however, operate with narrow margins and face uncertainty in passenger demand, fuel prices and other operating costs. They cannot carry all the price and demand risk required to finance new production facilities.
Public and private risk-sharing mechanisms are therefore needed. The session discussed contracts for difference, double-sided auctions, government-backed price guarantees, aggregated purchasing and public procurement as possible instruments.
The design of these mechanisms matters. Support needs to help projects reach investment decisions, reduce the cost gap across the value chain and ensure that the benefit reaches the companies purchasing and using the fuel.
Scaling production also depends on access to renewable electricity, hydrogen, captured carbon dioxide, grid capacity and facilities for fuel upgrading. The availability of these resources varies between locations. A theoretical supply of renewable electricity or biogenic carbon dioxide does not necessarily mean that it can be accessed at a commercially viable cost.
Liquid Sun’s distributed model addresses part of this challenge by locating production close to suitable carbon sources, such as biogas plants where biogenic carbon dioxide is already separated. Standardised production units could also reduce construction and first-project risks.
Regulation and industrial policy need to work together
eSAF projects are affected by ReFuelEU Aviation, the EU Emissions Trading System, renewable energy regulation and policies concerning hydrogen, electricity, carbon use and industrial development. These frameworks need to provide consistent signals across the value chain.
European eSAF production is also connected to industrial competitiveness, energy security and resilience. Domestic production could reduce dependence on imported aviation fuels and create industrial activity around renewable electricity, carbon utilisation, hydrogen technologies and fuel production.
Key findings from the Regulation Node
The session identified five priorities for scaling eSAF:
- Maintain stable regulation and a credible long-term demand signal.
- Develop risk-sharing instruments that can turn mandated demand into investment.
- Coordinate aviation, emissions trading, renewable energy, hydrogen and industrial policies.
- Base production plans on realistic access to electricity, carbon dioxide and infrastructure.
- Recognise the contribution of European eSAF production to competitiveness and resilience.
For BalticSeaH2, the session connected the practical experience of a project partner with the wider market and policy questions affecting deployment. The findings will contribute to the project’s work on regulatory barriers, market development and policy recommendations.