Two draft reports on European Commission proposals to amend the Aviation EU ETS directive and introduce a regulation to kickstart large-scale use of sustainable aviation fuels in the EU have been presented to European Parliament committees by their respective rapporteurs. The Commission is proposing a phasing out over three years of free allowances granted to aircraft operators under the EU ETS, with a transition to full auctioning in 2027, but the EP rapporteur calls for an accelerated transition. The amendments also take into account the introduction of the ICAO CORSIA international carbon offsetting scheme and the temporary geographic scope of the EU ETS, currently limited to intra-EEA flights under a ‘stop the clock’ measure, which is due to expire at the end of next year. The second proposal before the Parliament relates to the RefuelEU Aviation initiative that introduces a SAF blending mandate in the EU. The rapporteur calls for a flexibility mechanism for fuel suppliers and airlines to meet their obligations over a transitional period and the setting up of a new Sustainable Aviation Fund.

Both proposals are based on aviation’s expected contribution to the Union’s economy-wide emission reduction target laid out in the ‘Fit for 55’ legislative package published in July 2021, which envisions Europe becoming a climate-neutral continent by 2050 and reducing emissions by 55% in 2030 based on 1990 levels.

Opening a debate (recording here at 10:37:24) held by the Parliament’s environment committee (ENVI), the rapporteur responsible for the Aviation EU Emissions Trading System (EU ETS) legislative proposal by the Commission, Croatian MEP Sunčana Glavak, said “concrete and appropriate” measures were needed to reduce aviation emissions in line with EU climate law and commitments under the Paris Agreement.

Phasing out free allowances to aircraft operators one year earlier than proposed by the Commission, transitioning instead to full auctioning by 2026, would generate additional allowances to be auctioned in the period up to 2030, she said. The Commission puts the number of aviation allowances (each allowance gives the holder the right to emit one tonne of CO2) issued for 2021 at around 24.5 million, with 20.7 million issued for free and 3.8 million auctioned.

Volumes of EU ETS allowances are made available to the EU’s Innovation Fund, which is expected to provide around €25 billion ($28bn) of support over the period 2020-2030 for innovative low-carbon technologies. Glavak proposes in her draft report a “significant” amount of the fund should be earmarked for projects in the aviation sector, particularly those involving sustainable aviation fuels.

“It is important to consider instruments to help foster innovation and manufacturing inside the EU and to create a business ecosystem that would attract investment and result in new jobs,” said Glavak in the report. “This presents an opportunity for the EU to set the foundation for innovation breakthroughs in the global aviation industry.”

She said the EU was a global leader in the fight against climate change but it could not achieve the Paris Agreement commitments and environmental ambitions alone, and emphasised the need for a stronger CORSIA “fit for purpose” as part of the solution.

“Therefore, it is important to achieve the highest possible number of participating countries and to ensure that CORSIA is implemented in those countries by 2027 at the latest,” she said, adding that reported emissions data per airline should be published in a “user-friendly manner” by EU member states and the European Commission.

The original scope of the Aviation EU ETS, which was to regulate the emissions of all flights to and from airports in the European Economic Area (EEA), was curtailed shortly after the aviation sector entered the EU ETS in 2012 as a result of international pressure and to allow ICAO to agree a global market-based measure. Known as ‘stop the clock’, only flights within the EEA are currently subject to the EU ETS directive. However, this exemption ends automatically on 31 December 2023. The Commission proposal is to maintain the current coverage of intra-EEA flights, including departing flights to Switzerland and the UK (which have their own ETS schemes that include departing flights to EEA airports), and to apply CORSIA to flights to third countries that are participating in the ICAO scheme.

The rapporteur has agreed with the Commission’s proposal. However, there are some MEPs, such as Green MEP Bas Eickhout, who would like to see a reinstatement of the full scope.

Also calling for all flights to non-EEA destinations to be included in the EU ETS are four European low-cost carriers – easyJet, Ryanair, Jet 2 and Wizz Air – and European NGO Transport & Environment (T&E). They argue the proposal by the Commission fails to address the bulk of EU aviation emissions that take place on extra-EU flights, with departing long-haul flights alone representing just 6% of all flights but generating 51% of the emissions from European aviation.

“No exemptions should be granted, especially not to airlines operating transfer and long-haul flights, as some long-haul airlines and associated hub airports have asked for,” they said in a statement. “Their requests to have ETS and sustainable fuel costs subsidised for long-haul flights are unreasonable and unjustified.”

A spokesperson for T&E told GreenAir: “The Commission’s own findings show that CORSIA is the worst option for the climate and can’t be used to regulate emissions on extra-EU flights. It is a cheap offsetting scheme that continues to allow emissions to grow. And while industry often voices unsubstantiated claims of carbon leakage and competitiveness issues, the Commission’s study found that adding all flights to the ETS has large environmental benefits, relatively low cost impacts and the greatest positive impact on employment and the economy. Limiting the scope to intra-EEA not only fails to address the majority of aviation emissions, it also creates an unfair advantage for airlines operating predominantly in Europe.

“ICAO has had a decade to come up with an effective measure to reduce emissions and they have failed on all accounts. We cannot wait another decade trying to improve something that is doomed to fail. It is time for the EU to take action and do what is best for the climate.”

In June 2020, as a result of the dramatic downturn in 2020 traffic because of the Covid pandemic, ICAO agreed to an industry request to replace CORSIA’s 2019-20 emissions baseline (above which airlines from participating countries are required to offset emissions) with emissions from 2019 only. The Commission, in its legislative proposal, says the 2019 baseline should only apply in respect of emissions during the 2021-23 pilot phase of CORSIA and then revert to 2019-20 levels for subsequent years, which is agreed by the ENVI rapporteur.

Offering his support, Dr Peter Liese, a former rapporteur on the Aviation EU ETS and now rapporteur on the overall EU ETS legislation, said some had criticised the Glavak report as being unambitious while others had found it too ambitious, “but that is the essence of a good compromise.”

It is high time for full auctioning as there was little risk of carbon leakage in the aviation sector, unlike with other stationary industries, Liese told the ENVI debate. He recounted a meeting that had just taken place with a European shipping industry representative who had told him the EU should lead the way on tackling emissions from his sector as IMO, the UN’s maritime agency, had missed every opportunity for collective meaningful climate action.

“This is a voice from the maritime sector strongly criticising IMO,” said Liese. “My clear position, knowing both industries and the regulations, ICAO is worse. They have only delivered words, with no progress and not realising the climate challenge. We need to consider broadening the scope [of the EU ETS] when the time is right and keep this option on the table.”

He agreed that a significant part of the Innovation Fund should go towards aviation sustainability although funding should also be directed towards modal shift, particularly from air travel to railways.

While agreeing the aviation sector should benefit from the Innovation Fund, Bas Eickhout, a long-standing critic of the industry and ICAO, said financial support should go towards breakthrough technologies, like fuels, that offered “real innovation”, rather than to large companies like Airbus.

He revealed it was the intention to send again a group of ENVI members to Montreal to attend the ICAO Assembly in October. “I’m sure this time they will welcome us with open arms, as they didn’t last time,” he said tongue in cheek. “I’m looking for a change of heart there. If the EU had not taken steps in 2012 [when aviation was included in the EU ETS] I’m sure there would not have been any international action. We have to take the next step now. CORSIA, which is a pretty useless offsetting mechanism to be very honest, will not be enough. That is why I expected more ambition from the Commission in its proposal, both within Europe and also on flights going in and out of Europe. This is the moment to do that. We have to be tougher on the scope and free allowances.”

Eickhout also called for action on aviation’s non-CO2 effects. “How long has the Parliament being asking for this? We haven’t seen much movement from the Commission,” he complained.

Responding in the debate for the European Commission, Beatriz Yordi, Director for European and International Carbon Markets, said aviation was a key element of the ‘Fit for 55’ package and welcomed the Glavak draft report. Bringing forward the phasing out of free allowances by a year was a political decision, she said, but supported aviation participation in the Innovation Fund. Regarding aviation’s non-CO2 impacts, she said the Commission was fully aware of the issue but was concentrating on the impact of CO2.

She revealed that an impact assessment of the carbon costs of the EU ETS on intra-European flights would be less than 1% of airline operating costs by 2030, leading to an average extra cost of €2 per ticket.

Europe is playing a key role at the international level, said Yordi, adding: “We are supporting wide participation and a high level of ambition in CORSIA, and I stress the importance of the ICAO Assembly this year.”

A final position on the Commission’s proposals is expected to be discussed and voted in a plenary session of the full Parliament in early June.

EU SAF regulation

Meanwhile, Danish MEP Søren Gade, as the rapporteur responsible for the file, presented his draft report to the Parliament’s Transport and Tourism Committee (TRAN) on the Commission’s proposals (here and here) around introducing a blending mandate regulation to incentivise the uptake of sustainable aviation fuels in the EU as part of the EU’s strategy to decarbonise the air transport sector.

The Commission recognises the introduction of SAF will represent an additional fuel cost for airlines as they are currently more expensive to produce. “This is expected to exacerbate the pre-existing issues of a level playing field on the air transport market as regards aviation fuel, and to cause further distortions among aircraft operators and airports,” it says. “This regulation should take measures to prevent the introduction of sustainable aviation fuels negatively affecting the competitiveness of the aviation sector by defining harmonised requirements across the Union.”

In his report, Gade said the creation of a sound EU SAF market “will greatly depend on the credibility and sustainability of the final provisions that will be adopted under this regulation.”

Because competition for feedstocks between the energy and transport sectors will increase, he said it will be important to maintain the same European blending mandates across the EU. “This is to avoid a fragmentation of the SAF market, as well as a competition for feedstock that would lead to a severe shortage of supply in certain regions of the Union, undermining the ability of aircraft operators from those regions to decarbonise,” said the report. “Moreover, the rapporteur considers that it is of the utmost importance to preserve the integrity of the SAF and aviation internal markets, and in this respect the current blending mandate targets should be kept as they are because they reflect this limited availability of feedstock.”

The mandate proposed by the Commission starts from 1 January 2025 with a minimum share of 2% of SAF and with a 0.7% sub-mandate for synthetic fuels starting in 2030. Gade proposes the sub-mandate should be introduced from the beginning, with a minimum share of 0.03% of synthetic fuels.

Responding to concerns raised by the industry on the physical supply and uplift of the mandated SAF volumes at EU airports under the Commission proposal, Gade proposes a ‘flexibility mechanism’ for an eight-year period after the introduction of the mandate obligations. “This should act as a transitional period to provide for the necessary flexibility for fuel suppliers and airlines to meet their obligations of providing and uptaking sustainable aviation fuels in the most cost-effective manner, and to avoid imposing undue burdens on air transport operations at small airports. After the eight-year period, SAF will be available in the lion’s share of Union airports and be uplifted by the majority of aircraft operating from the Union.”

To further boost the uptake of SAF, he proposes that a part of the overall amount of EU ETS allowances, within the limit of the cap, should be allocated for free to aircraft operators for uplifting SAF. To avoid tankering, the proposed regulation requires all aircraft operators, both EU and from third countries, to annually uplift at least 90% of the aviation fuel required in those EU airports they depart from. For safety reasons, the rapporteur proposes an exemption from administrative fines if the operator proves non-compliance was caused by exceptional and unforeseen circumstances.

As aviation is an integrated and competitive international market, the rapporteur proposes text in the regulation that the EU sustains efforts at ICAO for an ambitious global system to incentivise the uptake of SAF and provides for an international level playing field.

In addition to SAF and synthetic fuels, Gade proposes that new technologies including hydrogen and electric, along with the appropriate airport infrastructure, should be included in the regulation to encourage and accelerate their development. He also proposes the introduction of an EU-wide labelling system, to be developed and implemented by the EU’s aviation regulatory agency EASA, to help consumers make more informed choices around the environment when choosing flights.

“A labelling scheme, with clear and comprehensive information, could provide the needed transparency in the market in order to drive consumers’ choices and further incentivise the use of sustainable aviation fuels and other sustainability measures by aircraft operators,” he says.

Lastly, the rapporteur proposes the setting up of a centrally-managed Sustainable Aviation Fund to provide the appropriate resources to stimulate innovation, research and investment in zero-emission technologies and sustainable infrastructure, with the revenues coming from fines collected under the regulation.

Photo: European Parliament