Opening Speech by Senior Minister of State for Transport and National Development Ms Sun Xueling, at the Second Reading of the Civil Aviation Authority of Singapore (Amendment) Bill

1.     Mr Deputy Speaker, on behalf of the Acting Minister for Transport, I move, “That the Bill be now read a second time”.

Introduction and Singapore’s climate commitment

2.     Aviation is a critical sector for Singapore. It connects us to the world and anchors our status as a global hub.

3.     Prime Minister Lawrence Wong just broke ground on Terminal 5, which will increase Changi’s capacity by about 50 million passengers a year. As we continue to grow, we want to do so sustainably, so that future generations of Singaporeans can also experience the joy of air travel and Singapore can continue to serve as the premier air hub for the region and the world.

4.     The International Civil Aviation Organization, or ICAO, has set a Long-Term Aspirational Goal of net zero carbon emissions for international aviation by 2050. As a member of the international civil aviation community and an ICAO Council Member, we are committed to working towards that goal. We will do so in a practical manner, advancing both sustainability and competitiveness, not one at the expense of the other.

5.     The Singapore Sustainable Air Hub Blueprint was launched last year, and sets out Singapore’s approach. Within this, the implementation of sustainable aviation fuels, or SAF, is a critical pathway for us to realise our aviation decarbonisation goals. This Bill provides the legislative framework to enable its adoption in Singapore.

SAF is key to aviation decarbonisation

6.     SAF is the most practical way to decarbonise aviation today. It is a drop-in fuel that can be blended with jet fuel, for use with existing aircraft and refuelling infrastructure, without the need for costly modifications. SAF is expected to contribute around 65% of the carbon emission reduction needed by aviation to achieve net zero by 2050.

7.     Recognising the importance of SAF to aviation decarbonisation, ICAO and its Member States have agreed to a collective global aspirational vision to reduce international aviation emissions by 5% by 2030 through the use of SAF and other cleaner energies.

8.     However, there are challenges in the adoption of SAF.

a.     Global supply remains limited, with production capacity only gradually scaling up.

b.     On the demand side, uptake is uneven and often concentrated in regions with strong mandates or subsidies.

c.     The sector is still nascent, and the costs remain high and volatile. Currently, SAF costs about three to four times more than conventional jet fuel.

International Approaches

9.     Countries around the world have taken different approaches.

10.    Some jurisdictions adopt mandates. They require fuel suppliers to blend SAF into conventional jet fuel.

a.     The EU’s ReFuelEU Aviation Regulation, for instance, requires a 2% SAF blend by 2025, rising progressively to 70% by 2050.

b.     The UK’s SAF mandate targets a 10% blend by 2030. They are exploring a revenue certainty mechanism to encourage investment in SAF production. This includes a guaranteed minimum level of revenue for SAF producers, even when market prices fluctuate.

11.    Other jurisdictions use incentives.

a.     In the United States, federal incentives as well as state-level programmes help to lower the cost of SAF and encourage domestic production.

12.    We have studied these approaches for Singapore carefully. Both have their merits, but they also come with trade-offs.

a.     Due to price volatility, mandates create significant cost uncertainty for airlines and passengers. In adopting SAF, we want to provide cost certainty to airlines and passengers and ensure that the cost is manageable.

b.     Subsidies, on the other hand, require large and recurring fiscal commitments, which are not fiscally sustainable for Singapore. 

Singapore’s pragmatic and balanced approach

13.    Singapore has therefore chosen a pragmatic and balanced approach, calibrated to our circumstances. We do this in three ways – through a SAF target, fixed cost envelope model and centralised procurement approach.

SAF target

14.    To anchor supply resilience, Singapore has set a 1% SAF uplift target by 2026, with the goal to raise this to 3 to 5% by 2030, subject to global developments and the wider availability of SAF. We have consulted the industry and assessed that starting with a 1% target is manageable; it will not increase air ticket prices significantly.

15.    On the other hand, the 1% target will send a firm demand signal to the market to spur production and industry development in Singapore. It allows us to do our part to support aviation decarbonisation, while laying the groundwork for broader adoption in the future.

Fixed cost envelope model

16. At the same time, cost certainty is critical. SAF is still a nascent product that is subject to high price volatility. Unlike fossil jet fuel, airlines cannot hedge the price of SAF. Simply mandating the use of SAF would impose unpredictable and unsustainable costs on airlines and passengers as SAF prices may vary significantly.

17.    This is why Singapore will adopt a fixed cost envelope model, funded through a SAF levy.

a.     Under this model, the total amount spent on SAF each year will be pre-determined based on our SAF target and the projected SAF premium.

b.     The amount needed will be collected upfront via the SAF levy. Importantly, the levy quantum for that year will not change even if the actual SAF premium differs from our projection. Instead, SAF uplift volumes will be adjusted accordingly.

18.    This ensures cost certainty for airlines, passengers and shippers.

a.     Airlines can plan with confidence, and passengers and shippers can expect predictable and stable charges, instead of facing sharp and unpredictable fluctuations.

Centralised procurement

19.    We will also aggregate SAF demand across airlines, and centrally procure SAF using the SAF levy collected. This allows us to secure better commercial terms with fuel suppliers and ensures that the levy proceeds are used in an accountable and effective manner.

20.    Our approach balances ambition with pragmatism. It helps to encourage SAF production through clear demand signals, while ensuring that costs remain contained, predictable and fairly shared. These in turn allow us to meet our environmental responsibilities while safeguarding the competitiveness of our air hub.

Key features of the Bill

21.     Mr Speaker, I will now go into the key features of the Bill, which proposes to make amendments to the Civil Aviation Authority of Singapore Act 2009.

SAF Levy and SAF Fund

22.    Clause 9 of the Bill provides for the SAF levy to be payable in respect of passengers, cargoes and flights departing from an airport in Singapore to land in a place outside Singapore. The airports in Singapore that require the payment of SAF levy will be as specified in an order made by the Minister for Transport.

23.    Clause 9 also provides that the SAF levy is payable to CAAS. The amount or rate will be prescribed in the order and must be paid into the SAF Fund. The order may also provide for other details, such as different amounts or rates that may be imposed in respect of different classes of passengers, cargoes, airports or aircraft.

24.    Clause 3 of the Bill amends section 7(1) to create a new function for CAAS.

a.     CAAS may procure, manage, account for and allocate SAF and SAF environmental attributes, or establish and appoint a company to carry out these functions.

b.     SAF environmental attributes, or SAF EAs, represent the difference in carbon dioxide emissions between the same quantities of SAF and conventional aviation fuel throughout their respective life cycles.

c.     Under the Bill, the SAF and SAF EAs may be allocated to persons who pay SAF levies or any other person as prescribed in an order.

25.    Clause 5 of the Bill inserts new sections 25C and 25D.

a.     The new section 25C establishes the SAF Fund, which comprises, among other moneys, all the SAF levies collected, and all interests and penalties imposed in relation to the SAF levies.

b.     The new section 25D sets out an exhaustive list of the purposes of the SAF Fund, which includes procuring SAF and SAF EAs and paying for the costs of procuring, managing and allocating SAF and SAF EAs.

Miscellaneous amendments

26.    Clauses 6, 7 and 8 make miscellaneous amendments to sections 86, 87 and 87A to align the provisions on the aviation levy and airport development levy with the new section 87B for consistency.

Conclusion

27.    This Bill is an important enabler of Singapore’s aviation decarbonisation journey. It reflects Singapore’s commitment to international decarbonisation goals and our determination to pursue a pragmatic and balanced approach that supports the competitiveness of our Singapore air hub.

28.    We will continue to work closely with the aviation industry and stakeholders to ensure the smooth implementation of this Bill.

29.    Sir, I beg to move.