Commission proposes a limited extension of the ETS to international departing flights from Europe

In its wide-ranging review of the EU Emissions Trading System (ETS), the European Commission has proposed expanding the scope of the ETS to cover all flights departing the European Economic Area (EEA) and landing in third countries no further than 5,000 kilometres from the “largest aerodrome in the geographical centre of the Union”. The Commission says this expansion is as a result of its impact assessment finding ICAO’s CORSIA carbon offsetting scheme for international aviation is not as yet sufficiently robust. It says it will carry out a new assessment in 2032 on CORSIA implementation, which could lead either to the ETS reverting back to the current intra-EEA scope or expanding it to include all departing flights. The Commission pledges to significantly reinforce ETS-funded support for sustainable aviation fuels, cleaner propulsion technologies, hydrogen and electrification.

“The proposal strengthens the EU ETS for aviation to advance the decarbonisation of the sector towards climate neutrality, through targeted reforms for a stronger carbon price signal while maintaining a level playing field and supporting international cooperation,” says the Commission in its EU ETS Review Q&A published today, alongside the full proposal and impact assessment.

The Commission was required to submit a report to the European Parliament and Council (EU member states) that assessed whether CORSIA’s environmental integrity and ambition were in line with the Paris Agreement and that countries covered by CORSIA represent more than 70% of international aviation emissions. The Commission has concluded the criteria has not been met “and CORSIA has not been strengthened”.

The EU Directive that brought aviation into the scheme was intended to cover all international flights to and from EEA countries. However, as a result of international pressure and to allow states at ICAO to negotiate an agreement of a market-based measure to limit the growth of CO2 emissions from international aviation, the EU agreed in 2012 a time-limited halt to the full scope, known as ‘stop-the-clock’. The deferral remains in effect until 31 December 2026.

The Commission argues its proposal to extend the coverage still maintains close alignment with CORSIA. It would continue to implement CORSIA in law for 2027 to 2035 (when CORSIA is designed to end), it says, “and supports multilateral action by introducing a deduction mechanism for costs incurred under CORSIA, avoiding double carbon pricing.”

By the time of its next assessment in 2032, the Commission says functioning of CORSIA in terms of offsetting “will be apparent”.

“In the event that CORSIA is proving to be ambitious, efficient and successful, the scope of effective carbon pricing under the EU ETS will be reduced to flights within the EEA and departing to the UK, Switzerland, to and from Gibraltar and other countries taking advantage of ETS as a service,” it says.

“On the contrary, if CORSIA still does not deliver by then, the Commission may consider extending the scope to full departing flights.”

Taking Frankfurt as the largest airport in the centre of the European Union, flights to Istanbul and Dubai would be included in the new-scope ETS, whereas flights to the Far East and the United States would be excluded. Also out of the proposed scope would be flights to Brazil, India and China, countries that have so far not joined CORSIA.

A central objective of the Commission’s overall proposed reforms, it says, is to strengthen the ETS as an “investment engine for industrial decarbonisation”, to provide a more stable and predictable framework for long-term investment, as well as reinforcing EU-level investment instruments through the ETS.

These include providing €100 billion in funding through the Industrial Decarbonisation Bank and continued support for the Innovation Fund, which aids the commercialisation of first-of-a-kind low-carbon technologies like new generation SAF production plants.

Member states, who since 2023 must spend their share of ETS revenues on climate and energy related projects, will also be required to spend proportionately more of their national ETS revenues on investments to decarbonise ETS sectors. Under the proposal, member states will be required to allocate at least 50% of ETS revenues to priority areas, including aviation.

It says the availability of reserved ETS allowances for the use of SAF and other non-fossil fuels should be extended until 2040.

“The extension of the geographic scope of the EU ETS for aviation, in combination with the corresponding increase of the total amount of allowances to be allocated in respect of aircraft operators, enables an increased number of allowances for supporting alternative propulsion technologies and fuels,” it adds.

EU ETS support for alternative fuels and for action in relation to contrails should be available to all airlines on routes covered by the 5,000km scope, it clarifies, with the coverage applying from 2029 rather than 2027, for a period of four years and be dependent on the review in 2032.

Business aircraft operators will also be affected by the proposed reforms. Emissions from such flights have largely been exempted from the EU ETS because they generally operate fewer flights or emit less than the exclusion thresholds. Aircraft operators having yearly emissions on international flights less than 10,000 tonnes/CO2 are also not subject to CORSIA.

“In order to ensure that all aircraft operators contribute to climate action, it is therefore appropriate that the number of flights be no longer a criterion for exemption from the EU ETS and the emissions threshold is reduced and simplified by having one single threshold for all types of aircraft operators,” says the Commission.

It also proposes the limited integration of domestic high-quality permanent carbon removals certified under the Carbon Removal Certification Framework into the scheme.

The proposals will now be discussed within the European Parliament and by member states, who must agree the changes. Appointed as the Parliament’s rapporteur on the file, German MEP Peter Liese has previously said he was opposed to an extension of the ETS to all departing flights.

Aviation’s share of EU transport emissions is currently 14%, or around 4% of the EU’s total CO2 emissions. By 2050, this share is expected to grow to around 90%, mostly fuelled by long-haul flights, says the Commission.

Commenting on the proposals to extend the scope, Wopke Hoekstra, the European Commissioner for Climate, Net Zero and Clean Growth, said: “Aviation is the only major sector where emissions are going up rather than down. At the same time, the EU faces a level playing field issue: currently the ETS only covers the EEA and quite a few countries subsidise their airlines in ways we do not.”

He said the plans also included channelling more money back to the sector – €15 billion between 2029 and 2040, as opposed to €1.5 billion currently over an eight-year period. “Just as we have done for the maritime sector, we’ll give the aviation sector a huge boost – as they have rightfully asked for – for sustainable aviation fuel.”

On the extension of the EU ETS to cover all private jets, he said: “Why should a family flying from Brussels to, for example, Benidorm pay ETS charges for the tickets of two adults and two kids while a private jet user can go back and forth and not pay one single time. That should be changed and stopped.”

Reaction to the Commission’s proposals has been largely negative:

ICAO:

The UN international civil aviation agency responsible for CORSIA expressed its concern over the proposal to extend the scope of the EU ETS, warning it would undermine the scheme and result in duplicative measures.

“While ICAO recognises the efforts made by the EU to support CORSIA, a unilateral expansion of the EU ETS for aviation as proposed by the European Commission would be inconsistent with CORSIA’s objective,” said ICAO in a statement. “It has been approved by ICAO member states since 2016, with the European Union and its member states playing an instrumental role in building consensus towards the globally harmonised solution.

“Expanding the EU ETS for aviation would introduce the potential for double charging for CO2 emissions from international aviation, with implications for the effective implementation of CORSIA. The proposal also risks fragmenting global aviation decarbonisation efforts and jeopardising the achievement of ICAO’s collective global aspirational goals for the international aviation sector.

“ICAO is encouraging all [its] member states to continue their strong support for CORSIA. Member states must maintain their collaborative engagement with ICAO to advance aviation environmental protection in a pragmatic and harmonised manner, grounded in cooperation and multilateralism. In this way, member states will accelerate progress towards achieving net zero carbon emissions from international aviation, in line with ICAO’s strategic vision for 2050.”

Transport & Environment:

“The revision of the EU ETS for aviation falls short of driving the robust climate action needed for the sector,” said Brussels-based campaign group T&E. “Extension of the ETS to some international flights and private jets are steps forward but an overall weakening of the ETS undermines European climate action

It assessed around 21 million tonnes of CO2 would be covered under the 5,000km radius proposal and said this still left 47% of European aviation emissions exempt from carbon pricing.

While assessing CORSIA was not a credible alternative to the EU ETS, the Commission’s proposal did not reflect this and the compromise fell short of its own science-based recommendations, said T&E.

“For the first time ever, international flights are regulated by the EU. But due to industry pressure, only a proportion of journeys will be covered and the longest, most polluting flights will remain exempt. This must only be a starting point,” said T&E’s Aviation Director, Diane Vitry. “The ball is now in the member states’ court. They must, at the very least, support this commitment while pushing to gradually expand the coverage before the next review. Aviation must pay for all its emissions, just like any other sector of the economy.”

T&E did, however, commend the Commission’s proposal to introduce free allowances that successfully avoid creating warming contrails.

Airlines for Europe:

The airline trade body said the Commission had opted to extend a regional system to a global problem, while not guaranteeing the money passengers paid for the ETS was reinvested into decarbonising aviation.

“Europe’s priority should be bringing down the cost of the ETS and the cost of SAF, with every cent raised through the ETS reinvested in reducing aviation emissions,” commented Ourania Georgoutsakou, Managing Director of A4E.”The EU needs to put ETS money passengers pay where its climate and competitiveness policies are; today’s reform doesn’t comprehensively deliver that.”

Our members are committed to decarbonising, added A4E. “Delivering that ambition requires policies that help manage the cost and make sure Europeans can continue to benefit from the same levels of connectivity and accessibility of air travel.”

Opportunity Green and SASHA Coalition:

“By excluding flights over 5,000km from the ETS … the Commission has given in to bullies, allowing the airlines doing the most damage – those flying the longest routes from Europe – to keep polluting with no consequences,” said Aoife O’Leary, CEO of Opportunity Green. “Meanwhile, North Africa is included in the scheme, despite relatively low traffic to and from Europe, showing clearly that this policy is not about climate at all but about who holds the power over EU aviation policy: the US and China.

“We call on the Parliament and the Council to rectify this inequity during the legislative process and extend the ETS to all departing flights.”

Added Aurelia Leeuw, Director of the SASHA Coalition: “Although we recognise the Commission’s efforts to move forward from the nearly 15-year stalemate since the initial exemption of international flights from the EU ETS, we believe that only including international flights within a 5,000km radius will barely dent the problem the ETS is meant to tackle.

“We look forward to interacting with the European Parliament and the Council to ensure a more ambitious stance emerges – one where pollution is adequately priced, where price parity between sustainable alternatives and fossil fuels becomes a realistic long-term outcome, and where a signification share of ETS revenues is reinvested into the sector’s decarbonisation.”

International Air Transport Association (IATA):

The global airline body said it was “deeply frustrated” with the proposed extension of the EU ETS beyond Europe’s borders, “an approach that was discredited over a decade ago”.

It added: “The EU is repeating an historic error. The consequences will be harmful – sowing acrimony over extraterritoriality, slowing global decarbonisation and sapping European competitiveness – with European travellers and businesses paying the price.”

The EU should focus instead on making CORSIA, “the agreed global mechanism”, even more successful, said IATA. It said proposals to increase SAF allowances and enabling a SAF book-and-claim system could be “promising steps, but the details are critical to success”.

“We will engage with European policymakers towards a more effective approach with no extraterritoriality, full support for CORSIA and effective SAF incentives,” said Willie Walsh, IATA’s Director General.  

Added July 29:

United States:

A Department of Transportation spokesperson told Reuters the US was “deeply concerned” by the Commission’s proposal to extend the scope of the EU ETS, despite the exclusion of flights to destinations over 5,000km away that would omit all US flights. The spokesperson said the proposal was being analysed but would “take appropriate steps as needed to protect American consumers and businesses”.

Association of Asia Pacific Airlines (AAPA):

While welcoming the proposal to maintain stop-the-clock on extended international flights and the additional support for SAF, AAPA said it shared the concerns raised by ICAO.

“AAPA believes that a unilateral, regional extension of the EU ETS risks setting a precedent for fragmented, extraterritorial climate measures that could undermine this multilateral framework over time,” it said in a statement. “We encourage the European Parliament, Council and Commission, as this proposal is negotiated in the months ahead, to reaffirm their support for CORSIA and the integrity of the global, consensus-based approach it represents.”

Photo (Fraport): Flights from Frankfurt to Istanbul and Dubai would be covered by an extension to the scope of the EU ETS but flights to the US and also to Brazil, India and China – which haven’t yet joined CORSIA – would remain exempted.

Christopher Surgenor
Editor