Civil Aviation Authority of Singapore establishes SAFCo to centrally procure sustainable aviation fuel

The Civil Aviation Authority of Singapore announced Oct. 30 that it has set up the Singapore Sustainable Aviation Fuel Company Ltd. (SAFCo) to centrally procure sustainable aviation fuel (SAF) for the Singapore air hub and support the implementation of Singapore’s national SAF policy.

SAFCo is set up as a nonprofit wholly owned by CAAS.

Han Kok Juan, director-general of CAAS, will chair SAFCo’s board.

Tan Seow Hui, a seasoned leader in the energy and aviation industries, has been appointed as its founding CEO.

The setting up of SAFCo follows the passing of the CAAS bill in parliament Oct. 14, which allows for the implementation of SAF policies for air transport in Singapore and empowers CAAS to collect a levy on SAF, to set up a fund for SAF and to procure, manage and allocate SAF and SAF environmental attributes (EAs) or to establish and appoint a central-procurement entity to carry out these functions.

More details on the SAF levy amounts will be shared later.

Through SAFCo, CAAS said it seeks to build a transparent and integrated SAF demand market that brings together airlines, corporate buyers of SAF, fuel producers, carbon market platforms and stakeholders across the aviation fuel chain in Singapore to aggregate demand, stimulate investment and accelerate the use of SAF.

SAFCo will centrally procure SAF using the SAF fund to achieve the 1 percent SAF target in 2026 for flights departing Singapore.

The amount of SAF procured by SAFCo will increase accordingly when the SAF target is raised to 3 percent to 5 percent by 2030, subject to global developments and the wider availability and adoption of SAF.

SAF and SAF EAs will be sourced through a transparent competitive tender process from SAF suppliers that meet international sustainability standards like CORSIA.

With predictable cashflows from the SAF levy, SAFCo will be able to go into longer-term, competitive price agreements to secure a more stable and affordable SAF supply.

Beyond the regulated demand from the SAF levy, SAFCo will also aggregate voluntary SAF demand from organizations seeking to purchase SAF to reduce their air travel or supply-chain carbon footprint credibly and cost effectively.

The demand from the SAF levy forms a scalable baseload, enabling SAFCo to negotiate attractive pricing for SAF and SAF EAs, and to anchor long-term supply agreements.

Businesses that participate in SAFCo’s voluntary SAF purchases can leverage this baseload to unlock economies of scale.

They can also gain access to competitively priced and verified SAF and SAF EAs through SAFCo and avoid the need to set up their own procurement systems.

As a new entity, SAFCo’s immediate priorities will be to establish robust governance and procurement frameworks, set up levy-collection systems and processes and build manpower and procurement capability, while engaging stakeholders on the implementation ahead of the first SAF procurement in 2026.

SAFCo will also build a scalable voluntary demand program for SAF and SAF EAs as a complement to the SAF levy.

SAFCo will reach out to businesses and airlines to encourage them to partner with SAFCo and use its central-procurement mechanism for voluntary SAF purchases.

Conversations are ongoing and CAAS said SAFCo will provide more details on the side of the Singapore Airshow in February.

SAFCo will also support the development of the SAF supply ecosystem in Singapore and the region.

With predictable and stable cashflows, SAFCo can sign longer and larger contracts with SAF suppliers, providing demand certainty in a still-nascent SAF market.

This approach aims to encourage investment in SAF production capacity and the development of SAF-related carbon markets in Singapore and the region.

“Singapore is taking a pragmatic, balanced and action-oriented approach to advancing sustainability in the aviation sector,” CAAS Director-General Han said. “The setting up of SAFCo is another concrete step forward. Through SAFCo, we want to get the best value for the SAF levy collected and activate the SAF ecosystem, which will help advance sustainable aviation and create new economic opportunities for Singapore and beyond.”

SAFCo CEO Tan added, “I am honored to lead SAFCo at this pivotal stage. My priority will be to put in place credible and scalable frameworks, partnerships and processes to ensure that SAFCo delivers on its mandate to aggregate demand, procure SAF efficiently and manage SAF EAs transparently. By working closely with airlines, businesses and suppliers, we aim to facilitate greater SAF adoption in the region and contribute to the decarbonization of aviation.”