The governments of Germany, Austria and Luxembourg announced the launch of a new electricity-based Sustainable Aviation Fuel (eSAF) funding scheme, which will see the countries working together to introduce a new auction mechanism aimed at bringing together buyers and sellers of eSAF backed by public funding, in order to help facilitate investment into new production facilities.
As part of the new initiative, Germany will provide up to €2 billion, and Austria and Luxembourg will each provide up to €60 million, to help bridge the price gap between buyers and sellers.
Fuel accounts for the vast majority of the aviation sector’s emissions. Generally produced from sustainable resources, like waste oils and agricultural residues, sustainable aviation fuel (SAF) is seen as one of the key tools to help decarbonize the aviation industry in the near- to medium-term. According to a recent report by the International Air Transport Association (IATA), however, while SAF production nearly doubled in 2025, it still accounted for just 0.6% of airlines’ total fuel consumption. Efforts to meaningfully increase the production of SAF face barriers including high initial costs and feedstock challenges.
eSAF, also known as power-to-liquid fuel, is produced from renewable hydrogen, produced by electrolysis using renewable electricity, and carbon providing an avenue to help address the industry’s feedstock challenges.
The industrial production of eSAF, however, requires substantial investment, with potential developers facing a structural problem, in which producers require long-term off-take agreements to secure investment decisions, while buyers typically enter into aviation fuel contracts covering significantly shorter timeframes.
Under the new double-sided auction mechanism, bids from eSAF producers and demand from buyers will be determined through a competitive bidding process, with the price gap between the two sides bridged using government subsidies.
Germany, Austria and Luxembourg are among the founding members of the eSAF Early Movers’ Coalition, which was launched in December 2025, with the aim of accelerating the market ramp-up of eSAF in Europe through cooperation, exchange of experience and joint financial support.The subsidized volumes of eSAF from the new program are to be placed on the market in each of the three countries in proportion to their respective share of contributed funding.
Steffen Bilger, Germany’s Federal Minister of Transport, said:
“When it comes to eSAF, Europe needs not only ambitious targets but also investment in industrial production. Germany, Austria and Luxembourg are jointly demonstrating how European cooperation works in practice. We are pooling our funding to create better conditions for investment decisions in a technology of the future.”
