How SAF Co-Processing is Muddying the Waters of Renewability

The recent expansion of co-processing in Europe, driven significantly by the Renewable Energy Directive III (RED III) and its flexible mass balance rules, is beginning to reshape the landscape for Sustainable Aviation Fuel (SAF) and renewable diesel (HVO) production. Co-processing, where renewable feedstocks such as used cooking oil or animal fats are introduced alongside fossil crude oil in traditional refineries, has quickly emerged as a favored pathway for rapidly scaling SAF production with minimal infrastructure investment.

RED III's mass balance rules allow refineries considerable latitude in attributing renewable content proportionally based on renewable inputs, without necessarily physically segregating renewable molecules. This accounting method significantly reduces the barriers for conventional refiners to enter the renewable fuels market, resulting in numerous co-processing announcements and pilot projects across Europe. For example, TotalEnergies plans to produce around 40,000 tonnes per year of SAF at its Gonfreville refinery in France starting in 2025, while Phillips 66’s Humber refinery in the UK has already produced thousands of tonnes of SAF.

The appeal of co-processing lies in its relatively low cost and ease of implementation. While dedicated SAF and HVO facilities require significant upfront investments—often involving new facilities or extensive retrofitting—co-processing leverages existing refining infrastructure, requiring moderate modifications such as catalyst upgrades and operational adjustments. Industry-wide adoption at the current ASTM-approved 5% renewable feedstock ratio could enable European refineries to collectively produce up to approximately 1.7 million tonnes of SAF per year, dramatically influencing the renewable fuels market.

If ASTM standards are adjusted to permit higher renewable feedstock ratios—potentially increasing from the current 5% limit toward a 30% blend—Europe's co-processing capacities could expand significantly, potentially adding up to 10 million tonnes per year of additional renewable fuel production. Such growth would greatly exceed the mandated SAF volumes outlined by the EU and UK, creating substantial surplus capacity and profoundly reshaping both regional and global renewable fuel markets.

In contrast, the United States’ Environmental Protection Agency (EPA) under the Renewable Fuel Standard (RFS) applies much stricter requirements to co-processing. The EPA demands molecular-level verification of renewable content through Carbon-14 testing or detailed engineering assessments, making co-processing far more complex and less attractive for refiners. This has resulted in far slower adoption of co-processing in the U.S. compared to Europe.

Interestingly, despite the start of the 2% SAF mandate on January 1, 2025, the price of SAF in Europe has actually fallen sharply compared to a year ago. In early 2024, SAF was trading near $3,000 per metric ton, reflecting fears of extreme scarcity. However, with the rapid expansion of co-processing, the commissioning of new dedicated biorefineries, and early-stage imports being prepared, SAF prices have dropped to around $1,800 per metric ton today. This demonstrates that market adaptation—especially the ability to flexibly increase supply through co-processing—has prevented a price spike and stabilized the market even in the face of tighter regulation.

However, the rapid and widespread adoption of co-processing also poses risks. The flexibility afforded by mass balance may obscure the true environmental and sustainability benefits, as renewable feedstocks become increasingly diluted in final fuel products. Regulators and market participants will need to carefully manage and verify renewable content claims, ensuring that the credibility and environmental integrity of Europe’s ambitious SAF and renewable diesel goals are maintained. Ultimately, while co-processing promises accelerated renewable fuel volumes, maintaining rigorous oversight will be essential to ensure genuine contributions to Europe’s decarbonization objectives.