EU member states and Parliament reach agreement on SAF mandate and adopt ETS Aviation reform

Political progress has been reached on two key pieces of legislation to bring the European aviation sector into line with the ‘Fit for 55’ goal to reduce net greenhouse gas emissions by at least 55% by 2030 and achieving carbon neutrality by 2050. After protracted negotiations, the European Parliament and the Council, representing EU member states, have agreed on the ReFuelEU Aviation proposal that will require fuel suppliers to blend sustainable aviation fuels with kerosene in increasing amounts from 2025. A more ambitious target than proposed by the European Commission was reached on the level of supply of synthetic fuels, or e-kerosene, from 2030. The Parliament and Council have also adopted rules on tightening the EU ETS Aviation that will see free allowances to airlines phased out by 2026, although 20 million free ‘SAF allowances’ will be set aside to incentivise the uptake of SAF in the EU and 5 million allowances will be transferred to the EU’s innovation fund for low-carbon technologies.

Aviation emissions in Europe increased by an average of 5% year-on-year between 2013 and 2019, and are expected to grow still further following the Covid-19 hiatus. “The increased climate ambition of the aviation sector will be crucial for the EU to reach its climate objectives under the Paris Agreement and make the European Green Deal a reality,” said the Commission.

Welcoming the agreement on its ReFuelEU Aviation proposal, the Commission said the measure on its own is projected to reduce aircraft CO2 emissions by around two-thirds by 2050 compared to a ‘no action’ scenario, as well as cleaner burning SAF providing climate and air quality benefits by reducing non-CO2 emissions. The Council said the proposal had aimed to increase both demand for and supply of SAF while ensuring a level playing field across the EU transport market. The mandate, it added, should provide a way out of the situation that was hindering SAF development and supply, and prices that were much higher than the fossil equivalent.

Under the mandate’s rules, aviation fuel suppliers must supply all flights departing from an EU airport from 2025 with fuel containing a minimum share of 2% SAF, rising to 6% in 2030 and gradually to 70% by 2050. The negotiators agreed to a 1.2% synthetic fuel mandate between 2030 and 2031, and 2% between 2032 and 2035, an increase from the Commission’s proposal of 0.7% between 2030 and 2035. Airports will be required to make sure their fuelling infrastructure is available and fit for SAF distribution.

“Since it will apply throughout the EU, the new mandate will ensure a level playing field within the EU internal market, provide legal certainty to fuel producers and help kick-start large-scale production across the continent,” said the Commission after the deal was reached by Parliament and Council negotiators. “It will also increase the EU’s energy security by reducing dependencies on third-country sourced energy products and create thousands of new jobs in the energy sector. The EU’s airlines will have access to increasing amounts of sustainable aviation fuel throughout the EU.”

Rules were also agreed in the trilogue negotiations to prevent aircraft operators deliberately carrying excess fuel on flights to avoid refuelling with SAF at EU destination airports, a practice called tankering. There will be an obligation for operators to ensure that the yearly quantity of aviation fuel uplifted at a given EU airport is at least 90% of the yearly aviation fuel required. However, exemptions from the tankering provisions could be granted in the event of serious and recurring operational difficulties or structural difficulties in SAF supply.

Reporting obligations for fuel suppliers and aircraft operators will also be enforced by designated competent authorities, with revenues from fines for non-compliance being directed to research and innovation into bridging the price differential between sustainable and conventional fuels. The data collection and reporting will be used to monitor the effects of the mandate regulation on the competitiveness of EU operators and platforms, and to improve knowledge of the non-CO2 effects of aviation emissions. The Commission is required to report in 2027 on the impact of the regulation on connectivity, on carbon leakage and distortions of competition, and on the future use of hydrogen and electricity.

Negotiators also agreed to extend the scope of eligible SAF and synthetic aviation fuels proposed by the Commission. For biofuels, the scope is extended to other certified biofuels complying with the Renewable Energy Directive sustainability and emissions saving criteria, up to a maximum of 70%, with the exception of biofuels from food and feed crops. The use of hydrogen and synthetic low-carbon aviation fuels has also been added to reach the minimum shares in the respective part of the regulation, although there are differing views among states on the role of low-carbon hydrogen, particularly nuclear-derived hydrogen.

Although controversial biofuel feedstocks such as food crops and palm oil by-products (PFADs) had been excluded, said Brussels-based NGO Transport & Environment (T&E), other “problematic” feedstocks had been kept in.

“Fuel suppliers will be able to meet targets with animal fats and used cooking oil (UCO), both of which are in limited supply,” it said. “Animal fats are by-products of the animal slaughter process and their inclusion risks creating shortages in other industries that already use them, like the pet food industry. Palm oil is very often used as a substitute for animal fats. Negotiators have not set a cap on the use of UCO, which could lead to a demand from European aviation outstripping what the continent can sustainably provide, leaving it reliant on imports and increasing the risk of fraud.”

In general though, T&E welcomed the trilogue outcome. “This pioneering deal is an unwavering endorsement of the world’s largest green fuel mandate for aviation. The EU doubled down on synthetic fuels, which are key to decarbonising the sector, and limited the use of unsustainable biofuels in planes,” said Aviation Manager, Matteo Mirolo.

It also welcomed the amendment to bring non-CO2 effects of aviation into the final agreement, following earlier failed legislation attempts. “ReFuelEU opens the door to regulating the quality of the fuel to ensure it has lower aromatic concentrations and sulphur content – this is a significant step,” it said.

Although the ramp-up of SAF could now start, there is still work to be done and ensuring the success of SAF will require industrial support policies for synthetic kerosene and stronger safeguards against unsustainable biofuels, said Mirolo.

With the first mandate of 2% SAF due by 2025, the agreement provides immediate certainty for airlines and the whole SAF industry, said Airlines for Europe (A4E). “EU policymakers should now turn their attention to ensuring Europe develops a strong SAF industry that can provide enough sustainable fuel for airlines to fulfil the mandates agreed,” said the industry body. “Widespread adoption of SAF is a critical component of European aviation’s roadmap for achieving net zero and policymakers need to throw their efforts behind building up Europe’s SAF industry.”

Laurent Donceel, Acting Managing Director of A4E, commented: “ReFuelEU is not the final destination for SAF in Europe. European policymakers need to ensure they now follow through and help build a world-leading SAF industry, strengthening fuel security and delivering sustainable jobs. The EU needs to think about SAF the way it thinks about wind turbines, solar panels and other sustainable technologies in order to support aviation’s energy transition whilst not pricing passengers out of the air.”

Some EU member states have already introduced SAF blending mandates, while other states have called for themselves to be granted differing SAF targets. However, agreement was reached on a uniform approach.

“The single EU-wide mandate for SAF will prevent fragmentation of the EU’s single market for aviation through differing national targets in different member states. The EU mandate should now supplant national mandates and harmonise all relevant legislation,” said A4E.

Parliament and Council also agreed on the creation of a Union eco-labelling scheme for flights from 2025 on environmental performance by aircraft operators “that will help consumers make informed choices and will promote greener flights.”

Responded A4E: “While we support providing consumers with information about their flights, we caution that any label should be based on a robust methodology and present an accurate depiction of the environmental impact of flights.”

A joint statement from A4E and four other European aviation associations (ACI Europe, ASD, CANSO and ERA) said: “The agreement marks an important and timely step necessary to the realisation of the ambitious targets of the decarbonisation roadmap to which the sector has committed. Sustainable aviation fuels play a decisive role in that endeavour and the agreement lays the foundation for all key stakeholders to move on in a concerted effort to reach the blending shares of SAF to kerosene agreed upon. This is expected to stimulate increased production and larger scale market uptake of SAF through to 2050.

“Through Destination 2050, announced in early 2021, the European aviation industry was the first in the world to commit to the realisation of a net-zero goal for all departing flights by 2050. Whilst the trilogue agreement is an important step into the right direction, further support is needed through complementary EU policies and initiatives.”

Speaking after the agreement had been reached, European Parliament rapporteur José Ramón Bauzá Diaz commented: “After months of intense negotiations, I am happy to conclude the ‘Fit for 55’ package. I am also proud to say the European Parliament has been successful in defending and advancing the ambitious development of sustainable aviation fuels across the EU. We have created a level playing field through harmonised rules and preserved EU air connectivity. With this regulation, the decarbonisation of aviation becomes closer.”

The agreement now requires formal adoption by the Parliament and the Council. Once this process is completed, the new legislation will be published in the Official Journal of the European Union and enter into force with immediate effect.

EU ETS reform adopted

This process has just been completed and adopted by both the Parliament and the Council in respect of revisions to the Directive for the EU Emissions Trading System for aviation. In December, they agreed more stringency of the existing system, which has covered aviation since 2012, to bring it in line with the ‘Fit for 55’ package and the Paris Agreement. The updated rules have just been adopted by both institutions.

The EU ETS will apply to intra-European flights, including departing flights to the UK and Switzerland, while the ICAO CORSIA carbon offsetting scheme will apply to extra-European flights to and from third countries participating in CORSIA from 2022 to 2027, a so-called ‘clean cut’ mechanism. If and when global aviation emissions under CORSIA reach levels above 85% of 2019 levels, European airlines will have to offset their proportionate share with corresponding eligible carbon credits.

The Council and Parliament agreed that after ICAO’s Assembly in 2025, the Commission is to assess whether CORSIA implementation is sufficient to reduce aviation emissions in line with Paris objectives. If deemed adequate, the Commission is required to make a proposal to extend the clean cut but if not, it is to make a proposal to extend the scope of the ETS to all flights departing the European Economic Area.

Free emission allowances will be reduced by 25% in 2024, 50% in 2025 and 100% from 2026, with all allowances fully auctioned from 2026. Five million allowances are to be transferred from the aviation sector to the EU Innovation Fund and 20 million free allowances set aside to encourage the uptake of SAF.

A4E said the SAF allowances would help stimulate and incentivise the rapid deployment of SAF in Europe. “Without them, the phase out of free allowances by 2026, well before truly effective decarbonisation solutions will be available at scale, could negatively impact air transport. This is because the cost of compliance for the ETS will likely increase fivefold by 2025, to over €5-6 billion annually, which would impact ticket prices, route availability and ultimately connectivity,” it said.

The co-legislators agreed that all fuels eligible under ReFuelEU, except fuels derived from fossil fuels, will be eligible for the SAF allowances and will be in place until 2030. Small islands, small airports and outermost regions will be able to cover the price differential between kerosene and eligible fuels with 100% of the SAF allowances in order to ensure availability in these locations with specific supply constraints. For all other airports, the coverage of the price differential will be modulated according to the type of fuel.

Under the legislation, the Commission is to improve transparency on aircraft operators’ emissions and offsetting, and also implement a monitoring, reporting and verification (MRV) system for non-CO2 aviation effects from 2025. By 2027, it will submit a report based on the MRV and by 2028, after an impact assessment, make a proposal to address non-CO2 effects.

Christopher Surgenor

Editor

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