2026 Aviation Decarbonization Policy Deep Dive & Outlook
This report is provided for informational purposes only and does not constitute legal, tax, or regulatory advice.
Aviation sustainability is increasingly shaped by policy. While the goals of most policies are the same, the various mechanisms to support aviation decarbonization can differ tremendously. Amid this growing patchwork of regulations, staying informed is essential for aircraft operators navigating compliance and cost exposure. This report highlights 2025 policy changes and what to expect in 2026.
U.S. Federal Policy
2025 Recap
One Big Beautiful Bill: In July 2025, the OBBB extended the §45Z Clean Fuel Production Credit for low-carbon fuel production through 2029, but introduced significant changes for SAF. Feedstocks must now be sourced exclusively from North America, and lifecycle analysis calculations were revised in ways that could allow crop-based SAF to earn higher credits. The most consequential change was a reduction in the SAF credit amount from $1.75 to $1.00 per gallon. Producers are still awaiting final clarity from the Department of Treasury on how to claim this credit for 2025 and beyond. This adjustment, effective January 1, may make other renewable fuels, like renewable diesel, more attractive to producers in the near term—unless the credit is restored through new pending bipartisan legislation in 2026. More on the OBBB and its impact on aviation sustainability here.
Trump Administration Initiatives: As the Biden Administration closed out its tenure, a progress report on the SAF Grand Challenge was published, summarizing efforts from 2021 to 2024 toward producing three billion gallons of SAF by 2030. Under Biden, more than $290 million was allocated to SAF technology and grants, but most of this funding was reversed under Trump, with only a loan to SAF producer Montana Renewables surviving. Although the SAF Grand Challenge technically remains in place, the Trump Administration has shown little focus or progress on its goals. The USDA also canceled its Climate-Smart Commodities partnership, and the SEC officially withdrew its defense of its climate disclosure rules.
Despite its aggressive stance against environmental mandates, the administration has demonstrated strong support for farmers, energy independence, and emerging technologies—all of which align with SAF development. Two SAF projects received funding through the DOE’s Technology Commercialization Fund, aimed at moving emerging energy technologies to market. In addition, an executive order directed federal agencies to accelerate testing and commercialization of eVTOLs and drones, signaling a commitment to aviation innovation.
Bipartisan SAF Support: SAF continues to enjoy bipartisan backing. Early in 2025, before the passage of OBBB, a group of House Republicans urged the Ways and Means Committee to preserve renewable energy credits established under the Biden Administration, citing local economic benefits and alignment with Trump’s “energy dominance” agenda. Legislative momentum also continued with the reintroduction of the Farm to Fly Act, the SAF Information Act, and the Agricultural Biorefinery Innovation and Opportunity (Ag BIO) Act. If passed, these measures would provide critical financial, agricultural, and infrastructure support for SAF production and commercialization.
2026 Outlook
Proposed SAF Legislation: Given the strong bipartisan support for sustainable aviation fuel, one key development to watch is proposals to restore all or part of the original §45Z Clean Fuel Production Credit (worth $1.75 per gallon). For example, the Securing America’s Fuels (SAF) Act, introduced at the end of 2025, would restore the full credit for SAF producers and extend it through December 31, 2033—an additional four years beyond current law. Legislation like this has been under discussion since the passage of the OBBB and would strengthen U.S. SAF supply, reduce the green premium, and help keep SAF an attractive investment in the near term, ultimately lowering costs for both commercial and private aircraft operators.
Looking ahead, advocates will need to emphasize SAF’s broader benefits: manufacturing strength, energy independence, affordability, and its role in maintaining U.S. competitiveness.
Renewable Fuel Standard Clarity: The Renewable Fuel Standard (RFS) requires a set volume of renewable fuel to replace or reduce fossil fuel in transportation fuel, including jet fuel. When fuel meets RFS requirements, it generates a Renewable Identification Number (RIN), which obligated parties use to demonstrate compliance with annual Renewable Volume Obligations (RVOs). RINs carry market value and can help lower the effective cost of SAF.
Each year, the U.S. Environmental Protection Agency (EPA) sets renewable fuel volumes and percentage standards through rulemaking. In 2025, the EPA proposed a rule for 2026 and 2027 that includes changes likely to affect SAF economics, such as reducing RINs for imported renewable fuel and foreign feedstocks. The proposal also raises RVOs, requiring greater renewable fuel volumes—a change expected to drive renewable fuel growth. The rule was not finalized in 2025, so the EPA expects to finalize it in Q1 2026. Its outcome will directly influence RIN values available to SAF, impacting the green premium at the pump for aircraft operators.
U.S. State Policy
2025 Recap
Arkansas SAF Tax Credit: In April 2025, Arkansas passed an income tax credit for up to 30% of SAF production equipment costs for facilities exceeding $2 billion in investment, provided construction begins by December 31, 2027. The credit applies only to SAF derived from wood biomass.
Iowa SAF Tax Credit: In May, Iowa enacted a $0.25/gal SAF tax credit for qualifying fuel produced in-state. The credit applies from 2026 through 2035, with a cap of $1 million per SAF producer. This long-term incentive is expected to boost SAF supply and reduce the green premium within Iowa.
2026 Outlook
New Mexico CTFS: New Mexico is finalizing its Clean Transportation Fuel Standard, a program designed to reduce the carbon intensity of transportation fuels by incentivizing lower-carbon alternatives. The state must implement the program by July 1, 2026, but is aiming for as early as February. The initial proposal set a carbon intensity baseline for jet fuel that made SAF less competitive than renewable diesel, reducing the credit value available for SAF. However, recent rulemaking hearings suggest this may change, and the final rule—expected early 2026—will determine how much SAF benefits from the program.
California Climate Disclosure Laws: California’s climate disclosure laws continue to evolve, with broad applicability to companies “doing business” in the state, both public and private. In late 2025, CARB extended the SB 253 deadline for Scope 1 and 2 emissions reporting to August 10, 2026, and paused SB 261 enforcement after a Ninth Circuit injunction. Oral arguments are scheduled for January 2026, and the outcome will shape future reporting requirements. The court is also expected to rule on SB 253’s legality later in 2026. For aviation operators, these rules may indirectly affect customers and compliance obligations, a trend to watch as other states consider similar measures.
New State Leadership: 2025 has shown that states are increasingly likely to pass their own energy policies, many of which have the potential to lower the SAF green premium in 2026:
Low Carbon Fuel Standards: More states are considering LCFS programs, which create credit markets for low-carbon fuels like SAF. These programs incentivize SAF without penalizing conventional jet fuel. States to watch: Illinois, New York, Massachusetts, Michigan, New Jersey, and Pennsylvania.
SAF Tax Credits: Following Iowa and Arkansas in 2025, several states may introduce SAF tax credits in 2026. Producer and blender credits are typically favored over end-user incentives as economic drivers and technology enablers. States to watch: Indiana, Kansas, Michigan, Nevada, Pennsylvania, and Wisconsin.
Climate Disclosures: States are trending toward mandatory emissions reporting. New York finalized rules for its GHG reporting system, requiring fuel suppliers that supply an end user in New York State to track emissions in 2026 for reporting in 2027. Other states to watch: Colorado, Illinois, and New Jersey.
European Union Policy
2025 Recap
ReFuelEU Aviation: 2025 marked the start of ReFuelEU implementation, with the 2% SAF blending mandate taking effect at most EU airports and the 90% uplift requirement influencing fueling practices. Operators uplifting fuel at Union airports likely noticed price increases or added line charges for ReFuelEU SAF. Fuel suppliers adjusted logistics and contracting, while the European Commission and the European Aviation Safety Agency (EASA) refined compliance guidance and expanded the Sustainability Portal to support operators preparing their first ReFuelEU submissions for the 2024 reporting year. EASA also released the first ReFuelEU Aviation Annual Technical Report, predicting sufficient SAF production capacity growth to meet the EU’s 2030 6% blend mandate.
EU ETS: In 2025, aviation entered a new phase of the EU ETS with mandatory MRV of non-CO₂ effects, requiring updates to Monitoring Plans and additional flight data. The Commission and Eurocontrol advanced the rollout of NEATS, providing test environments and updated guidance. The EU strengthened SAF support under the ETS, maintaining a reserve of 20 million EUAs through 2030 and allocating around €100 million in free allowances in 2025 to support SAF use in 2024. In total, 1.3 million allowances were distributed to 53 operators, helping offset the SAF price premium and reinforcing consistent eligibility and verification rules across Member States.
2026 Outlook
ReFuelEU Aviation (Upcoming): 2026 marks the first full review of ReFuelEU implementation, as the 2025 regulated reporting results will be assessed. This phase should clarify uncertainties around SAF documentation, exemptions, and enforcement consistency across Member States. The SAF blending mandate remains at 2% through 2029, providing near-term regulatory stability while supply chains mature ahead of the 6% target in 2030. The European Commission will submit its first implementation report by January 1, 2027, which could potentially lead to revisions in blending targets, eligible fuels, operator reporting and anti-tankering obligations, and penalties.
EU ETS (Upcoming): From 2026, aviation faces tighter EU ETS requirements, including full auctioning of allowances and expanded MRV, increasing cost exposure. As the scheme currently covers only intra-EU flights (around 30% of aviation CO₂ emissions), the European Commission will conduct a formal review of CORSIA in 2026 and—if found insufficient—may gradually extend ETS coverage to international aviation.
The EU is also advancing structural SAF enablers, including the Union Database (UDB), which is expected to be fully operational by the end of 2026 to support SAF benefit claims by operators, while continuing the free SAF allowances program under the EU ETS. The Commission is also considering book-and-claim mechanisms, signaling a shift toward more flexible SAF accounting alongside an expanded ETS framework.
Other National & Global Policy
2025 Recap
French Aviation Solidarity Tax: In 2025, France implemented a revised Aviation Solidarity Tax, introducing some of Europe’s highest per-passenger rates for business jets. Charges vary by destination, travel class, and engine type, significantly increasing costs more than 1000% for business aviation departures from French airports. More on the French Aviation Solidarity Tax here.
UK ETS: The UK advanced its Jet Zero Strategy, launching consultations on integrating non-CO₂ impacts into the UK ETS. While no formal rules were issued, these discussions signal alignment with the EU’s non-CO₂ MRV approach. The government also updated SAF investment programs and zero-emission flight initiatives, emphasizing stakeholder engagement across airports, fuel suppliers, and operators.
UK Air Passenger Duty: In 2025, UK Air Passenger Duty rates increased by around 10% across most distance bands and travel classes, continuing the government’s gradual uprating of aviation taxes. The Higher Rate for business aviation remained substantially above standard passenger rates, reinforcing APD as a growing cost consideration for UK departures.
UK SAF Mandate: The UK SAF Mandate officially took effect in 2025, requiring that 2% of jet fuel supplied in the UK be SAF-compliant. The system relies on tradable SAF certificates (SACs), allowing suppliers flexibility in meeting their obligations. Importantly, unlike ReFuelEU, the UK mandate does not impose reporting obligations on aircraft operators and applies uniformly across all UK airports, regardless of size or traffic volume. This simplified structure made for a smoother first compliance year compared to ReFuelEU.
CORSIA SGF Finalized: ICAO finalized a 2024 CORSIA Sectoral Growth Factor (SGF) of 15.4%, requiring operators that qualify under CORSIA to offset 15.4% of 2024 emissions from flights between participating states. Offsetting is not required if an operator’s total offsetting obligation over 2024–2026 is below 3,000 tCO₂. The deadline to meet these obligations for the 2024–2026 period is January 2028, by cancelling CORSIA-eligible offsets corresponding to that period.
2026 Outlook
UK ETS (Upcoming): From 2026 onward, the UK ETS will enter a longer-term and more stable phase, following the government’s decision to extend the scheme through 2040. The extension, alongside planned market reforms, is intended to improve price stability, strengthen allowance demand, and support long-term decarbonisation investment as part of the UK’s net-zero strategy. Free allowances will continue to be phased out, and rising carbon cost exposure reinforces the importance of emissions efficiency and SAF-usage.
A central pillar of the UK framework is the SAF Revenue Certainty Mechanism (RCM), slated for implementation by the end of 2026. Under this system, SAF producers will sign contracts with a government-backed counterparty that sets a strike price for SAF. If market prices fall below that level, producers receive compensation; if prices rise above it, they return the surplus. By stabilizing prices and reducing investment risk, the RCM aims to unlock private capital and accelerate domestic SAF production, supporting the UK’s 2050 net-zero aviation target.
Negotiations to link the UK and EU ETS began in 2025 and will continue this year, with a possible operational start in January 2027. A linked system would align carbon prices and reduce administrative complexity for operators subject to both schemes, while requiring closer alignment of MRV, registries, and verification processes.
Passenger & Aviation Taxes: In 2026 and beyond, passenger and aviation taxes across Europe are expected to increase significantly, with business aviation facing the steepest increases. In the UK, Air Passenger Duty reforms will raise rates from 2026 and broaden the Higher Rate in 2027. In Belgium, planned reforms from 2027 are expected to raise the tax burden on departing flights, including business aviation. The Netherlands is moving toward a taxation model similar to the French Aviation Solidarity Tax, with charges linked to factors such as destination and aircraft characteristics
These developments suggest that national passenger tax regimes will play a growing role in business aviation planning, with operators increasingly factoring taxation into routing decisions, airport selection, and long-term fleet strategies.
Additional SAF Mandates: Several non-EU jurisdictions will begin implementing SAF mandates from 2026, particularly across Asia and other global aviation hubs, starting with low blend requirements (around 1%). Singapore’s mandate launches in 2026 with a mandatory Green Fuel Levy on departing flights. South Korea is expected to transition from voluntary uptake to a mandatory SAF requirement from 2027 for international flights operated by domestic carriers. India continues to progress toward indicative SAF targets from 2027 onward, while countries such as Brazil, the UAE, and parts of Southeast Asia are expected to finalize and implement national SAF frameworks during the second half of the decade.
2026 is expected to usher in additional environmental taxes, expanded SAF mandates, and heightened disclosure requirements across aviation. Operators should plan proactively, align with ESG teams, and monitor evolving policies. Environmental compliance is now core to operations—stay updated through 4AIR's PolicyWatch tool and newsletter.