© Lufthansa

Germany, Austria and Luxembourg have opened a joint €2.1bn funding mechanism designed to close the price gap between producers and buyers of electricity-based sustainable aviation fuel (e-SAF), marking the first concrete project under the “eSAF Early Movers’ Coalition” founded in December 2025.

A test case for Europe’s hydrogen-to-fuel pipeline

The scheme lands at a moment when Europe’s e-SAF project pipeline is struggling to convert ambition into financed capacity. The European Union Aviation Safety Agency (EASA) has said roughly 50 synthetic aviation fuel projects across the EU are currently awaiting final investment decisions, underscoring the gap between policy targets and bankable projects that this coalition is attempting to bridge.

How the funding is structured

Germany is providing the bulk of the capital, with up to €2bn available, while Austria and Luxembourg have each committed up to €60m. Subsidized e-SAF volumes will be allocated to each country in proportion to its funding contribution, and the programme still requires approval from the European Commission under state aid rules.

The double auction mechanism

The scheme works through a double-sided auction: an intermediary runs separate competitive processes for producers and buyers, then uses state funding to cover any gap between the two clearing prices. The mechanism targets a specific structural mismatch — producers need long-term offtake agreements to justify investment decisions, while airlines and fuel buyers have historically preferred short-term contracts and have been reluctant to lock in prices without greater certainty. Dagmar Fehler, chief executive of NOW GmbH, which is supporting the German transport ministry on the scheme, described the mechanism as the link between long-term investment security for producers and the shorter procurement cycles buyers typically use.

Political framing

Austria’s mobility minister, Peter Hanke, said the joint funding was “sending a strong signal in favour of establishing a European market for renewable fuel,” adding that the scheme was “creating long-term prospects for producers, promoting transparent price signals and helping to ensure that e-SAF will also be available in Austria.”

Regulatory backdrop

The initiative sits within the EU’s ReFuelEU Aviation framework, which requires SAF’s share of fuel supplied at EU airports to rise from 2 per cent in 2025 to 6 per cent by 2030 and 70 per cent by 2050. EASA data show suppliers delivered 39.3 million tonnes of aviation fuel at EU airports in 2025, of which 1.1 million tonnes — 2.8 per cent — was SAF, exceeding the first mandatory threshold. But the market remains dominated by conventional feedstocks: used cooking oil made up 80 per cent of SAF supplied, and 85 per cent of feedstocks originated outside the EU, leaving e-SAF, produced from renewable hydrogen and sustainable carbon via electrolysis, a marginal contributor so far.

Implications

For hydrogen producers and electrolyzer suppliers, the scheme offers a rare price-risk backstop in a market where offtake uncertainty has repeatedly delayed final investment decisions. For policymakers, it functions as a live test of whether coordinated, cross-border state aid can substitute for the EU-wide financing mechanism the European Commission is separately studying. Given the reliance on imported, conventional feedstocks documented in EASA’s own data, the scheme’s success will hinge on whether it can meaningfully shift SAF supply toward domestically produced, hydrogen-based volumes rather than simply subsidizing existing supply chains.