The European Union could fail to meet its 2030 targets for synthetic sustainable aviation fuels (e-SAF) unless key investment decisions are taken within the next 12 to 18 months, according to a new report by Transport & Environment.

The analysis highlights a growing contradiction: while Europe leads the world in announced e-SAF projects, none of them has yet reached a Final Investment Decision (FID), a critical milestone required to move from planning to construction.

Strong pipeline, weak execution

Under the EU’s ReFuelEU Aviation regulation, described by T&E as the most ambitious SAF mandate globally, at least 1.2% of jet fuel must be synthetic by 2030, rising to 35% by 2050.

This policy has triggered rapid market activity. As of May 2025, Europe hosts 41 large-scale e-SAF projects, up from 27 in early 2024, with a combined potential capacity of 2.8 million tonnes per year. These projects represent more than half of global announced production capacity.

However, progress remains slow. Most projects are still in early or intermediate stages, and none has reached FID, meaning no large-scale facility is yet under construction. T&E warns that without immediate progress, Europe risks missing its targets despite having sufficient projects “on paper”.

Financing remains the biggest barrier

The report identifies financing as the main bottleneck. Each e-SAF plant requires between €1 billion and €2 billion in upfront investment, with total needs reaching up to €34 billion by 2032.

Despite their financial capacity, major oil companies have largely stayed out of the sector. Instead, start-ups are leading project development, but face significant difficulties securing funding due to high capital expenditure, technological risks and the lack of long-term purchase agreements. Banks and investors continue to view these projects as high-risk, particularly in the absence of stable revenue streams.

Lack of offtake agreements slows progress

Another major constraint is the limited number of long-term offtake agreements between producers and airlines. While some deals have been signed, including agreements involving IAG, Norwegian and Cargolux, these remain insufficient to unlock large-scale financing.

According to T&E, airlines are reluctant to commit to contracts lasting 10 to 20 years due to the high cost of e-SAF, which can be up to 10 times more expensive than fossil kerosene, as well as uncertainty over future prices and concerns about competitive disadvantage. Although compliance costs are expected to be lower than penalties under ReFuelEU, the fact that penalties apply primarily to fuel suppliers — rather than airlines — creates additional uncertainty over cost allocation.

Europe leads globally, but competition is rising

Europe currently dominates the global e-SAF market, largely driven by its binding regulatory framework. However, other regions are rapidly catching up.

China is developing at least 11 large-scale projects, supported by state-owned companies, while the United States, despite having fewer projects, has already secured the first FID globally as well as the largest offtake agreements to date.

T&E notes that Europe’s competitive advantage lies in its strong policy framework and relatively clean electricity grid. However, this lead could erode if implementation does not accelerate.

Structural and regulatory challenges persist

Despite strong policy support, several barriers continue to delay progress. These include regulatory uncertainty — particularly around the 2027 review of ReFuelEU — as well as grid congestion and high electricity costs, which limit hydrogen production. Access to CO2, a key input for e-fuels, also remains constrained, while existing fuel infrastructure is largely controlled by incumbent suppliers.

The report also highlights potential regulatory loopholes, such as the use of green hydrogen in biofuel production, which could undermine the development of dedicated e-SAF facilities.

CO2 and energy constraints could limit scale

E-SAF production relies on renewable hydrogen and captured CO2. While Europe benefits from a relatively clean power system, several structural challenges remain. Hydrogen production costs in Europe, estimated at €5–6 per kilogram, are higher than in regions such as China. At the same time, securing grid access and power purchase agreements remains difficult, and the availability of biogenic CO2 may not be sufficient to meet future demand.

T&E estimates that by 2050, CO2 demand for e-fuels could exceed available supply, making large-scale deployment of Direct Air Capture (DAC) necessary, despite its high costs and limited maturity.

Public funding insufficient so far

Existing EU funding mechanisms, including the Innovation Fund and the Hydrogen Bank, have so far failed to unlock the required investment. Only a limited number of projects have received support, and even then, funding covers only part of the total costs.

Crucially, none of the funded projects has reached FID, and some have already been cancelled, highlighting the gap between policy ambition and market reality.

Policy action needed to unlock investment

To accelerate deployment, T&E calls for targeted policy measures, including the creation of public funding mechanisms to support offtake agreements, the establishment of a market intermediary similar to a hydrogen clearing house to bridge price gaps, and greater regulatory clarity ahead of the 2027 review.

The report identifies the EU’s upcoming Sustainable Transport Investment Plan (STIP) as a key opportunity to implement these solutions.

A narrow window to act

T&E concludes that the EU still has a realistic chance to meet its 2030 targets, but only if decisive action is taken soon.

“While the project pipeline is strong, the challenge lies in turning plans into reality,” the report states, warning that delays in securing investment decisions could derail Europe’s ambitions to build a competitive and scalable e-SAF industry.