Trillion-Dollar Green Fuel Boom: Policy Incentives Intensifying, Industry Already "Stirring"

Why is sustainable aviation fuel (SAF) a key pathway for reducing carbon emissions in aviation?

21st Century Business Herald Reporter Cao Enhui, Shanghai

The 2026 government work report opens a new chapter for the green fuel industry—“Accelerate the promotion of comprehensive green transformation. Establish a national low-carbon transition fund to cultivate new growth points such as hydrogen energy and green fuels.”

These few words instantly elevate the green fuel industry, which has often seemed somewhat “dull,” to a new policy height. According to reports from the 21st Century Business Herald, this is the first time “green fuel” has been included in a government work report, and it is listed alongside hydrogen energy as a “new growth point.”

Green fuels include multiple varieties, centered around green hydrogen, green ammonia, and green methanol, covering sustainable aviation fuels (SAF), biogas, and more. In March this year, the National Energy Administration held a special symposium on green fuel industry development, emphasizing that green fuel development is crucial for national energy independence and control.

“Policy strong statements increase certainty for the expansion of the green fuel industry. The national low-carbon transition fund strengthens price and cost support from the financial side, forming a dual drive of policy volume assurance and stable prices, accelerating the scale and commercialization of hydrogen energy and green fuels,” said the CITIC Securities research team.

Moving Toward a Trillion-Yuan Blue Ocean Market

Amid international geopolitical volatility causing increased fluctuations in oil and gas prices, green fuels are being assigned strategic value.

The green fuel industry development symposium organized by the National Energy Administration pointed out that developing green fuel industries helps replace oil, ensure energy security, reduce carbon emissions, promote green development, facilitate the utilization and absorption of new energy non-electrical sources, and enhance new growth drivers—an important direction for the development of new productive forces in the energy sector.

The 21st Century Business Herald noted that over the past two years, development related to green fuels has gradually appeared in key policy documents: from the State Council’s May 2024 “Energy Conservation and Carbon Reduction Action Plan for 2024–2025” to the National Development and Reform Commission’s July 2024 “Low-Carbon Transformation and Construction Action Plan for Coal Power (2024–2027),” policy groundwork for green fuels continues to advance.

Wu Yin, former deputy director of the National Energy Administration, told the 21st Century Business Herald: “Building a new energy system in China is a broad and profound systemic economic and social transformation. Improving electrification levels is the core path and main direction. The green and low-carbon transformation of energy consumption in key areas like industry and transportation is the key battleground of this transformation.”

Under the influence of policies, the industry is responding rapidly.

According to data from the “Blue Book on the Development of the Green Liquid Fuel Industry (2025),” by the end of 2024, the number of green ammonia and sustainable aviation fuel (SAF) projects worldwide reached 422 and 352, respectively. In China, there are 119 green ammonia, 165 green methanol, and 45 SAF projects. The potential capacities (including planned, under construction, and completed projects) for green ammonia, green methanol, and SAF in China are 20.1749 million tons/year, 52.57 million tons/year, and 8 million tons/year, respectively.

CITIC Securities estimates that by 2025, global demand for green methanol, green ammonia, and SAF could reach approximately 3 million tons, 2.5 million tons, and 2.5 million tons, respectively. By 2030, these could increase to around 36 million tons, 23 million tons, and 11 million tons, respectively. The industry is expected to double in the next five years, with the long-term market space reaching trillions of yuan.

However, industry insiders generally believe that most domestic green fuel projects are still in early development stages, facing issues such as unmet market demand and slower-than-expected capacity release.

In response, Wang Yao, director of the Green Finance International Research Institute at Central University of Finance and Economics, told the 21st Century Business Herald: “As an emerging field, the green fuel industry currently faces high R&D costs, high industrialization costs, and incomplete infrastructure. The funding gap mainly lies in technological R&D, capacity building, and infrastructure, requiring comprehensive financial support.”

The 2026 government work report explicitly proposes establishing a national low-carbon transition fund to support the development of green fuels and related industries.

“The composition of the national low-carbon transition fund has not been disclosed yet. It may follow the model of the National Green Development Fund, adopting a ‘government-guided, social participation, market-oriented operation’ approach. Funding sources could mainly include central and local government finances, while also attracting social security funds, insurance capital, public funds, and social capital, forming a diversified funding system,” Wang Yao said.

Tackling the Hardest Part of Aviation Decarbonization

As aviation is one of the most challenging sectors to decarbonize globally, sustainable aviation fuel (SAF) has attracted significant attention within the green fuel system.

According to the International Air Transport Association (IATA), global SAF consumption is expected to reach only 6 million tons in 2025, but as the decarbonization process accelerates, this figure could soar to 18 million tons by 2030. Meanwhile, policy mandates in international markets are expanding market demand gaps— the European Union has set a minimum blending ratio of 2% SAF in aviation fuel by 2025, increasing to 6% by 2030. Countries like the US and Japan have also introduced similar mandatory quotas.

Wu Yin told the 21st Century Business Herald: “In transportation, electric power substitution is progressing rapidly, but in aviation, due to technical bottlenecks like energy density of power batteries and airworthiness safety, short-term breakthroughs are unlikely. Sustainable aviation fuel (SAF) is an inevitable choice for decarbonizing aviation. It is not only the core path for the industry’s green transformation but also a strategic measure to reduce dependence on fossil jet fuel and enhance national energy supply resilience.”

Currently, global SAF industry technology routes are diverse. The ASTM recognizes 11 production technologies, including hydroprocessed esters and fatty acids (HEFA), gasification-Fischer-Tropsch (G+FT), alcohol-to-jet (AtJ), and others. However, projects with large scale, low cost, and market competitiveness remain scarce. Domestic industry competition has shifted from capacity alone to a comprehensive contest of “raw material control + technology conversion efficiency.”

Recently, a 1 million ton/year demonstration project for green jet fuel in Beijing, with a total investment of 2.3 billion yuan, was officially approved. The “Feasibility Study Report for the Capital Green Jet Fuel Supply Project” has also been successfully reviewed. This project marks a critical step for China from technological exploration to industrialization in the SAF field.

According to the 21st Century Business Herald, this is China’s first large-scale demonstration project for producing sustainable aviation fuel from agricultural and forestry waste. Fu Yuqing, president of Longi Energy Group, told the reporter: “To achieve the 3060 dual-carbon goal and fulfill the Paris Agreement commitments, sustainable aviation fuel (SAF) is the only way. It is also the industry’s recognized mainstream choice.”

“We chose the ‘biomass gasification—Fischer-Tropsch synthesis—hydrogenation’ route, which differs from the mainstream waste oil route in China,” Fu Yuqing explained. “The annual supply of waste oils in China is about 10 million tons, which cannot meet the growing market demand even if fully converted into SAF.”

“Biomass gasification and Fischer-Tropsch units are mature and reliable technologies. As long as we address differences in ash melting points and impurity compositions between biomass and coal, and optimize through adaptive design, the technology is fully feasible,” Wu Yin told the 21st Century Business Herald.

At this critical juncture, the development pace of green fuel industries represented by SAF is becoming clearer. But this is a long-distance race concerning energy security and industry future. “We hope to shift from passive adaptation to international rules to active participation and even key rule-making in the future,” Wu Yin expressed anticipation.

(Contributions by 21st Century Business Herald reporters Lei Ye and Li Deshang Yu.)