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.

Editor’s note: Reaction to the Review to follow.

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