The aviation industry has been trying to crack sustainable flight for decades. Sustainable aviation fuel (SAF) is currently the most promising pathway, acting as a drop-in fuel with no need for expensive retrofits, new pipelines or new planes. 

But adoption has been slow. New technologies to produce SAF haven’t yet come down the cost curve, and supply is still scaling up to meet demand. SAF can cost anywhere from 2x – 10x more than fossil jet fuel to produce and is typically seen as a financial burden for airlines.  

That may look different in the coming years. Advanced SAF can decouple from the global market forces that drive fossil jet fuel supply and demand - a meaningful hedge for an aviation industry that generates over $82 billion in GDP for Canada each year.  

That vulnerability is tangible: Canada imports about 35% of its jet fuel, and global supply chains have already shown how exposed that leaves the industry. The Strait of Hormuz closure alone disrupted close to a quarter of global supply and drove up prices. Long term, SAF isn't just a climate solution. It's protection against that exposure. 

SAF is a strategic opportunity for Canada to expand fuel production in a growing market, generate $32B in GDP, and meet climate objectives while adding new revenue streams for forestry and farming. By leveraging natural resource strengths and building on existing policy and infrastructure, Canada could become a global player in the only ready-to-deploy decarbonization solution for aviation.  

In this memo, we map the companies building across Canada’s SAF supply chain, what’s driving procurement decisions, and what it’ll take for SAF to lift off in Canada. 

Sustainable aviation fuel (SAF) is chemically almost identical to fossil jet fuel and can be used in standard jet engines. Standard fossil jet fuel is currently approved to be blended with up to 50% SAF without changes to the physical setup of aircraft.

SAF is made from sustainably sourced hydrocarbons and once combusted results in lifecycle emissions that are typically 50-80% lower than fossil jet, depending on the source materials. For some advanced SAF technologies, emissions reduction can even exceed 100%.  

SAF can be made from sustainable biomass – think forestry residues, canola, used cooking oil – or from captured carbon, water and renewable electricity. Canada has all these ingredients in abundance. 

There are multiple pathways for producing SAF, each with different TRL levels, emissions profiles, and inputs. 

SAF is scaling fast. Mandates that require SAF use and incentives that reward SAF use are together driving demand. Global demand for SAF is expected to reach 13 million tonnes (4% of global jet fuel use) by 2030 and 200 Mt (40% of global jet fuel use) by 2050.  

This demand pull is driving supply, supplemented by incentives that improve SAF production economics. Global production capacity could reach 18 Mt by 2030, in line with demand. But this depends on announced projects converting into realised capacity. Much of the pipeline is still pre‑financial close and exposed to financing, policy and execution risk. 

SAF can serve as a price and fuel security hedge. Fossil jet fuel prices nearly doubled between February and June 2026. SAF from domestic feedstocks like CO2, canola and waste biomass would be less exposed to the market forces triggering these price spikes. For airlines, the impacts are material: high fuel prices with no hedge helped put Spirit Airlines out of business. 

Jet fuel is also becoming an energy security question. South Korea rerouted jet fuel exports from the US to Japan for higher prices, and Europe is expanding domestic production. Canada currently imports about a third of its supply despite being a major fuel producer. Domestic SAF production could reduce this dependency.  

Adoption is policy-led. High production costs and price uncertainty mean SAF relies heavily on policy to kickstart adoption.

Layered federal and state-level policies make the US one of the most affordable places in the world to produce and use SAF. In Canada, BC is a world leader in bringing jet fuel into the scope of its Low Carbon Fuel Standard, providing a clear demand signal.

But without globally competitive policies and significant domestic investment, most of the SAF used in Canada will be made elsewhere. 

SAF needs both supply- and demand-side policy to go from small-scale production to commercial adoption: 

Critically, disjointed policy will lead to a disjointed outcome. Where policy mostly favours supply, like in the US, production thrives but SAF use remains low compared to mandated markets like the EU and UK. Similarly, demand-side policies alone aren’t enough to get projects to financial close – that’s why so much capital has been flowing to US production facilities, even when the clearest demand signals are in Europe. 

So how does Canada’s policy landscape stack up? 

The federal Clean Fuel Regulations (CFR) and the British Columbia Low Carbon Fuel Standard (BC LCFS) are the two key policies driving SAF adoption in Canada. 

Both programs work by attaching a cost to supplying higher carbon-intensity fuels and creating financial incentives to supply low-carbon fuels like SAF. Fuels above a baseline carbon intensity create deficits that suppliers must offset using credits from fuels below the baseline. The credits and deficits are created when fuel is supplied into the energy system.  

In the BC LCFS, fossil jet fuel creates deficits; in the CFR, it doesn’t. But lower-carbon fuels, including SAF, can earn credits in both systems. Those credits can be sold, narrowing the price gap with fossil jet fuel. 

BC LCFS and CFR credits are also stackable, so companies producing and supplying SAF in BC can generate both. This, combined with BC’s requirement for a minimum volume of SAF to be blended into jet fuel, makes BC a more attractive place to produce and supply fuel than anywhere else in Canada. The impact is in the numbers: BC has already exceeded its 2030 target of 3% SAF use, achieving 3.9% in 2025. 

The door is open for other provinces to follow the example set by BC or even introduce their own support for local production of SAF. Several provinces, including Ontario and Québec, have already set their own mandates or production incentives for renewable road fuels. SAF could easily follow. 

CFR and BC LCFS don't operate alone: 

Canada’s current policies are a step in the right direction, but they’re not yet globally competitive. Parkland’s refinery in Burnaby, BC, is the only facility currently producing SAF in Canada. Tidewater Renewables is targeting FID in 2026 for a 6,500-barrel-per-day SAF project in Prince George. 

In the US, the stack of incentives available for SAF can amount to several dollars per gallon, bringing SAF close to parity with fossil jet fuel. The total value of Canada’s policy stack does not compete, partly because there are fewer incentives available in Canada, and partly because the total value of those incentives – being based on the value of tradeable credits – is volatile and therefore risky for investors. 

On the supply side, Canada’s SAF production base and tech ecosystem is small but growing. Startups are building across fuel production, upstream feedstock production and the equipment supply chain.  

On the demand side, fuel suppliers, airlines and aviation infrastructure owners are moving on SAF.

Fuel Suppliers

Airlines

Airports

Canada has five key strengths that make it a compelling place to build and scale SAF projects: 

If Canada gets this right, the returns span energy, economy, and climate. 

Energy security. Fuel supplies for critical transportation can be disrupted by war half a world away. Domestic SAF production helps break that link. Fuel made from Canadian forestry residue, canola, and captured carbon doesn't sit exposed to a shipping lane in the Persian Gulf.

Moving up the value chain. Much of the renewable fuel used in Canada is produced in the US using Canadian raw materials. Bringing production onshore would capture more of that economic value in Canada and build stronger domestic supply chains. 

Supporting forestry and farming. SAF production opens a new market for Canada’s forestry and canola industries at a time when both are facing challenges. Canola is already a proven, high-TRL feedstock for HEFA. BC alone generates 3.5 million tonnes of forest residue a year that currently just decomposes or gets burned – enough to meet 20% of the province’s projected liquid fuel demand by 2050. 

Future-proofing aviation, at home and abroad. Long-haul passenger and freight aircraft are unlikely to go electric due to limits in battery energy density. Drop-in fuels are a politically and economically easier transition than replacing fleets. At scale, a Canadian SAF industry would cut emissions for domestic flights while exporting advanced fuels to international markets.

Recent analysis by Airbus and ICF shows that a domestic SAF industry in Canada could generate up to $32B in GDP by 2040.

Policy is a key lever in SAF adoption, but it’s not enough on its own. Strong feedstocks, a skilled workforce, and tax credits haven't yet translated into financial close. Closing that gap requires three key strategies from investors and startups.

The capital stack. SAF projects need to bring together multiple sources of capital – equity, project debt, investment tax credits, and revenue from tradeable credits under CFR and BC LCFS. Few Canadian lenders have underwritten a first-of-a-kind SAF project. Teams that pair project finance, policy expertise and technical credibility - and can adapt as mandates and credit markets shift - will have an edge. 

Project design. Commercial-scale SAF projects can be capital-intensive and complex. Teams can offset this risk by designing lower-complexity and modular systems, using commercially available components, and leveraging talent with experience building refining and fuels projects.  

Bankable offtakes. Today's SAF offtake agreements signal demand but are rarely firm enough to be bankable. They’re often short, offtakers have weak creditworthiness (airlines typically carry weak credit ratings), and terms aren’t binding enough. Offtake structures also need to move beyond fossil-jet-plus-a-fixed-premium pricing to capture SAF's value as a hedge against fossil jet volatility. Teams with strong deal-making ability and experience structuring innovative commercial contracts will have an edge.  

For policymakers, industry leaders, and ecosystem players, we see three key levers to expand SAF production:

Make the policy stack globally competitive. CFR and BC LFCS are strong starts but aren’t enough in isolation. Production incentives comparable to the US 45Z, mechanisms for long-term price certainty, and domestic production requirements can close the gap – without requiring a SAF mandate that could impact consumer prices. These align with policy options supported by Canada’s cross-government Biofuels Working Group.

Unlock financing with revenue certainty. Carbon Contracts for Difference are an underused tool. A mechanism modelled on the UK Revenue Certainty Mechanism could move projects from pre-FID to shovel ready. De-risking the market could open opportunities for oil and gas operators to expand into SAF. 

Build platforms, not just projects. Governments and regional ecosystems can create more leverage by building shared hubs: coordinating shared infrastructure where multiple producers can access CO2 pipelines, green hydrogen supply, and port access. BC and Atlantic Canada have abundant feedstocks, clean energy and port infrastructure. Alberta pairs existing refinery infrastructure and canola supply.  

Close information gaps through assumption modelling, tracking offtake agreements, and policy modelling. Look to other sectors like carbon removal’s CDR.fyi or Carbon Removal Canada’s Carbon Console.

The energy security case for SAF is no longer theoretical. The Hormuz disruption has demonstrated, in real time, the cost of aviation's dependence on global fossil fuel markets. A domestic SAF sector doesn't just decarbonize Canadian aviation, it reduces exposure to exactly this kind of supply shock. 

Companies are building today, taking big swings on production, building out flexible platforms for SAF inputs, next-gen electrolysis, carbon capture, and more.  

Canada has both short-term and long-term cards to play. Canola-based HEFA is low-cost with a proven track record. Forestry-based fuels and eSAF will define the future of the industry but rely on more expensive feedstocks and earlier-stage technology. Building a thriving Canadian SAF industry will require three things in sequence: policy that competes globally, financing tools that get first-of-a-kind projects to financial close, and leadership to coordinate infrastructure at platform scale. 

A big shout out to Grace Field for co-authoring this piece and sharing a wealth of insight on SAF policy. Thanks to the many folks who reviewed and contributed to this piece.

Further reading:

Sources for TRL and emissions intensity: