The shift to SAF is crucial for the aviation sector to reach its goal of net zero carbon emissions by 2050.

But barriers including high costs and uncertain raw material supply could stand in Singapore's way.

SAF is an alternative fuel made synthetically from hydrogen or from biological materials such as used cooking oil or wood chips.

But it can cost five times as much as conventional fuel, and accounts for just 0.2% of the jet fuel market.

That's a relatively small percentage compared to the global size of the biofuel market, according to Sami Jauhiaine, Asia Pacific's Vice President in Renewable Aviation Business at Finnish fuel refinery Neste.

"Well, what is good to recognize is how early stages the whole sustainability aviation fuel market is, and also in how early stages the aviation industry is in employing such solutions for emission reduction."

Singapore's authorities announced they will initially require flights to use 1% SAF, possibly rising to between 3% and 5% by 2030 depending on wider availability and adoption.

This will be paid for by a levy on tickets, according to Singapore's transport minister.

At the current rate of global production, analysts believe there isn't enough SAF to keep up with demand or policy.

Based on Singapore's targets, consultants Wood Mackenzie estimate its SAF demand will rise to about 2,000 barrels per day in 2026, increasing up to 10,000 bpd in 2030.

Neste recently expanded its renewable fuels plant in Singapore, which the company says could meet the SAF demand.

But Jauhiaine says the current demand for SAF just isn't driving producers to ramp up production.

"All of this we have been so far lacking in aviation, so and that's explaining why the production and the volumes and the availability (of SAF) up until now has been so limited. I think to solve this situation we need to tackle the demand side of the problem first, and then the investments will follow."

There are also concerns that the contents of SAF itself are not entirely made from sustainably sourced materials. Palm oil is an example.

The EU does not consider palm oil to be a sustainable fuel because of deforestation in top palm oil-producing countries in Southeast Asia.

Jauhiaine says Neste has "completely" moved away from the use of palm oil to produce renewable fuels.

In response to questions to Reuters on Singapore's new SAF policy, Shell said SAF is the only scalable in-sector option to help materially reduce emissions from flights by 2050.

But it requires greater availability of raw materials, better supply chains, improved production technologies, stronger demand and clearer policies.