Cover Story: How Gutter Oil Became a Prized Fuel for International Airlines

1. Once considered a severe public health issue in China due to its illegal recycling for human consumption, used cooking oil (UCO)—often called “gutter oil”—has become a valuable global commodity. Now a crucial feedstock for sustainable aviation fuel (SAF), UCO’s value has surged, with prices in 2025 sometimes surpassing those of traditional jet fuel and even olive oil, reflecting immense demand from airlines seeking to reduce carbon emissions and comply with international regulations. [para. 1][para. 2][para. 3]

2. China occupies a pivotal position in the global UCO market, accounting for over 40% of the world’s traded UCO. The country has undertaken measures like scrapping export tax rebates and implementing quotas to retain more of this resource for domestic SAF production. The International Air Transport Association (IATA) projects that China could represent about 13% of global SAF capacity by 2030. Once a source of illegal, hazardous fuel, UCO is now upgraded through scientific processes to power aircraft, producing up to 80% lower lifecycle emissions compared to fossil jet fuels. [para. 4][para. 5]

3. The initiation of mandatory SAF blending in major markets from 2025 has caused UCO prices in China to climb to $1,160 per ton (up 17.2% year-to-date), with SAF made from UCO fetching as high as $2,642 per ton—almost four times the price of conventional fossil fuel alternatives. Despite this price surge, the sector still faces significant hurdles, including feedstock scarcity, immature technologies, and fragmented supply chains, resulting in inefficiencies and high costs for airlines. [para. 6][para. 7][para. 8]

4. The drive for greener aviation fuel is driven by both environmental and regulatory imperatives. Aviation is responsible for 2-3% of global carbon emissions and is widely considered one of the hardest sectors to decarbonize—without action, these emissions could more than double by 2050. The EU has set aggressive SAF blending requirements, starting at 2% in 2025 and rising to 70% by 2050, with similar frameworks established or planned in Britain, Singapore, Japan, South Korea, and India. [para. 9][para. 10][para. 11]

5. The International Civil Aviation Organization's (ICAO’s) global carbon reduction scheme (Corsia) will begin enforcement in 2027, meaning airlines without sufficient SAF usage or verified carbon offsets will face penalties. IATA projects that meeting net-zero targets by 2050 would require about 358 million tons of SAF per year globally, vastly more than current production. In 2025, even as SAF output nearly doubled, it remained a fraction of the industry’s needs, with airlines paying a $2.9 billion premium for SAF. [para. 12][para. 13]

6. Europe’s SAF shortfall is acute. Current EU annual production capacity just tops 1 million tons, enough for the 2030 6% target but far from the 50 million tons needed by 2050. Worldwide, there were 559 SAF projects in operation or development across 63 countries as of 2026, with possible capacity above 37 million tons, yet constrained resources and limited policy support will keep supply tight and prices high. [para. 14][para. 15]

7. China has rapidly increased both UCO supply and SAF production. Restaurant-sourced waste oil can now fetch up to 5,000 yuan per ton as it’s converted into aviation fuel; despite theoretical recoverable UCO of 10 million tons yearly, only about 5 million tons is collected. Half of China’s UCO was exported in recent years, but a scrapped export rebate and new EU anti-dumping tariffs (excluding SAF) led to more local processing and selective export focus. In 2025, Chinese SAF output reached 1.375 million tons, triple the 2024 figure and with capacity expansions underway. [para. 18][para. 19][para. 20][para. 21]

8. Most SAF production is still exported, and the sector is now strictly regulated with new quotas and bespoke customs codes. By 2030, China may see SAF making up 3% of its aviation fuel demand, but growth hinges on clearer domestic policy and upcoming decisions, including a rumored merger of state fuel giants that could reshape market dynamics for private producers, who currently generate 90% of SAF capacity. [para. 22][para. 23][para. 24]

9. The high cost of SAF—the “green premium”—remains a critical challenge, with SAF costing two to five times more than standard jet fuel. Proposals include passing some costs to passengers (e.g., an 11-yuan surcharge per ticket for a 2% SAF blend). The sector also faces feedstock constraints and technological limits: current HEFA-based SAF production depends on finite supplies of waste oil. [para. 25][para. 26][para. 27][para. 28]

10. China is pursuing multiple alternative SAF technologies, including Alcohol-to-Jet and Power-to-Liquids, the latter of which could use abundant renewable resources and carbon capture. Large-scale deployment of these solutions is planned over the coming decades. As China navigates its global SAF leadership ambitions, balancing rapid decarbonization with economic viability will become increasingly urgent as the 2027 ICAO compliance deadline approaches. [para. 29][para. 30][para. 31][para. 32]