Why the cheap fuel wins

Picture an airline's fuel buyer with two prices. Ordinary jet fuel. SAF at roughly two to five times the price, depending where it is bought. Both go in the same tank and fly the same plane. Nobody bills the airline for the smoke. On price alone, the cheap fuel wins every time.

This is the lesson 1 problem again. The cost of the smoke lands on everyone and appears on no invoice. So a market left alone picks the fuel with the lower invoice. To change that, somebody has to write a rule, or move money. In the UK, both happened.

Without any rule, which fuel does the airline buy, and why?

• Jet fuel, because it is cheaper and nobody charges for the smoke.
• Half and half, to be fair.
• SAF, because it is better for the planet.

The rule is called a mandate. The word just means a share that is now the law. From 2025 every big fuel seller in the UK must make 2 in 100 of its jet fuel SAF, rising to 10 in 100 by 2030 and 22 by 2040. Falling short costs £4.70 for every missing litre, about £5,875 a tonne.

Set the SAF price and the help from the airport. Jet fuel is set at £700 a tonne, a made-up round price; the rest follows from it.

Move both controls.

That help is real money. In 2025 Heathrow set aside £86 million for airlines that bought SAF, paid for from the landing fee every airline pays. So each airline that does not buy SAF is paying a little towards those that do. It is a price put on the smoke, by the airport, inside its own fees.

Heathrow's 2025 aim was 3 in 100 SAF: 187,000 tonnes. The law's share was 2 in 100, about 125,000 tonnes. If none of the law's share were supplied and the £5,875 a tonne penalty paid instead, what would that cost in millions of pounds?

Here is the shape to remember. A cost with no bill does not stop anything, so a rule invents a bill. The mandate says a share; the penalty says a price; the airport's fund moves money from the airlines that do not buy to the ones that do. None of it makes SAF cheap. It makes not buying it dearer.

A country wants lorries to use a cleaner diesel that costs twice as much. Hauliers keep buying the cheap kind. Which of these is a mandate?

• A new, cheaper way to make the cleaner diesel.
• A law that 5 in 100 of all diesel sold must be the cleaner kind, with a fine per missing litre.
• An advert asking hauliers to do the right thing.