The European Commission and EU consumer authorities have written to 20 European airlines notifying them of potentially misleading green claims being made over carbon offsetting or through the use of sustainable aviation fuels. The issue was raised after a complaint by BEUC, an umbrella group of European consumer organisations, which initially identified 17 airlines including Air France-KLM, Lufthansa Group airlines, Finnair, TAP, Norwegian and large low-cost carriers such as Ryanair and Wizz Air. The airlines have been “invited” to respond within 30 days and to bring their marketing practices in line with EU consumer law. The Commission and the network of Consumer Protection Cooperation (CPC) authorities accuse airlines of misleading consumers by informing them that the CO2 emissions caused by a flight could be offset by climate projects or through the use of SAF, to which they could contribute by paying additional fees.

“If we want responsible consumers, we need to provide them with accurate information. More and more travellers care about their environmental footprint and choose products and services with better environmental performance,” said Vĕra Jourová, the Commission’s Vice-President for Values and Transparency. “They deserve accurate and scientific answers, not vague or false claims. The Commission is fully committed to empowering consumers in the green transition and fighting greenwashing. We expect airlines, as well as any other industry operator, to make a responsible use of environmental claims.”

The Commission and CPC authorities say they have identified six types of what they consider are misleading practices among the airlines involved:

• Creating the false impression that CO2 emissions of a flight can be reduced or fully counterbalanced by paying an additional fee to finance climate projects with less certain environmental impact or the use of alternative aviation fuels;
• Using the term ‘sustainable aviation fuels’ without clearly justifying the environmental impact;
• Using the terms ‘green’, ‘sustainable’ or ‘responsible’ in an absolute way or use other implicit green claims that can mislead consumers on the environmental impact of the “highly polluting” aviation industry;
• Claiming that the airline is moving towards net zero greenhouse gas emissions or any future environmental performance without clear and verifiable commitments, targets and an independent monitoring system;
• Presenting consumers with a calculator for the CO2 emissions of a specific flight without providing sufficient scientific proof on whether such calculation is reliable and information regarding the elements used for the calculation; and
• Presenting consumers with a comparison of flights as regards their CO2 emissions without providing sufficient and accurate information on the elements of the comparison.

“This action aims at aligning the commercial practices of all companies in the air travel sector with EU consumer legislation, by attaining the required level of substantiation and communication of voluntary environmental claims,” say the consumer authorities, which coordinate their investigation and enforcement actions with the Commission. Under the Consumer Protection Cooperation Regulation, they can take action to address cross-border issues at EU level.

Consumer protection against misleading green claims can also be found in the Directive on empowering consumers for the green transition, which the Commission says explicitly bans claims, based on the offsetting of GHG emissions, that a product has a neutral, reduced or positive impact on the environment in terms of GHG emissions, as well as claims based on future environmental performance.

In this airline greenwashing action, the CPC authorities are lead by the Belgian Directorate General for Economic Inspection, the Netherlands Authority for Consumers and Markets, the Norwegian Consumer Authority and the Spanish Directorate General of Consumer Affairs.

After receiving replies from the airlines written to, the Commission says it will organise meetings with them and the CPC network to discuss solutions, with the Commission then monitoring the implementation of the agreed-upon changes.

“If the airlines involved do not take the necessary steps to solve concerns raised in the letter, CPC authorities can decide to take further enforcement actions, including sanctions,” warns the Commission.

Brussels-based BEUC, which launched the initial complaint in June 2023, is the umbrella group for 45 independent consumer organisations from 31 European countries.

“It is great news that authorities from across Europe acknowledge consumers have been fooled by airlines’ greenwashing,” commented Monique Goyens, BEUC’s Director General. “It is unacceptable that airlines have freely lured consumers into offsetting their flight’s emissions, sometimes at a high price. One can never be sure that the trees planted to compensate a flight’s high emissions will capture the carbon back into the ground – if they are planted at all.

“The fact that European consumer protection authorities are calling on airlines to get their act together shows there’s a wind of change. Greenwashing is no longer acceptable, and the fact that aviation is one of the most highly polluting sectors makes it even more intolerable. This crack-down on greenwashing is encouraging at a time when consumers are expected to shift to more sustainable lifestyles.”

Responding to the action, a statement by Airlines for Europe (A4E) said that although proposed EU legislation on green claims aimed to establish a clear legal framework for sustainability communications across all sectors, the current regulations varied significantly between countries and were still evolving.

“We recognise the importance of clear, transparent information about sustainability and our efforts towards achieving net zero carbon emissions. This clarity benefits consumers, regulators, fuel suppliers, NGOs and other key stakeholders involved in our transition,” it said. “A4E is engaged in ongoing discussions fostered by EU bodies to develop a common methodology for airlines to effectively communicate our sustainability efforts and progress.”

The trade body said it had already outlined an independently-produced roadmap to achieving net zero, with many airlines’ interim targets verified by SBTi. It added that it was, however, “particularly concerned” over the complaint concerning sustainable aviation fuels and the requirement for a clear justification of their environmental impact. “The EU has implemented an ambitious SAF mandate, supported and endorsed by the European Commission, and the science supports that this is a more sustainable alternative to regular jet fuel.”

The Commission has not named the 20 airlines it has written to, although BEUC listed 17 in its submission: Air Baltic, Air Dolomiti, Air France, Austrian, Brussels Airlines, Eurowings, Finnair, KLM, Lufthansa, Norwegian, Ryanair, SAS, SWISS, TAP, Volotea, Vueling and Wizz Air.

Following a greenwashing lawsuit brought by German environmental group Deutsche Umwelthilfe in March, the Cologne Regional Court found against Eurowings on claims that passengers could neutralise their flight emissions through paying a small sum towards forestry protection and cookstove projects. That same month, a group of environmental NGOs similarly won a lawsuit against KLM in a Dutch court after alleging the airline’s sustainability marketing breached the EU Unfair Commercial Practices Directive.

Photo: Brussels Airport

Christopher Surgenor

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After two decades of attempts to improve the performance of Europe’s fragmented air traffic network through better airspace integration, the EU’s legislative bodies have reached a provisional agreement that could finally lead to the substantial carbon emission savings, by as much as 10%, offered by the reform. First launched by the European Commission in 1999, the Single European Sky initiative has faced procrastination and delay, not least by a number of EU member states seeking to maintain their national interest, particularly over air navigation charges. Under the agreed reform, the aim is to increase Europe’s constrained capacity, lower navigation costs and increase the adaptability of the airspace system, while also reducing aviation’s climate impact. The agreement has been welcomed by air navigation service providers but representatives of Europe’s airline industry fear the reform will not go far enough.

“I am delighted with this result, concluded under our presidency, which will enable major progress to be made in reducing CO2 emissions from the aviation sector, and will also give member states more tools to limit the nuisance generated by aeronautical activity,” commented Belgium’s mobility minister, Georges Gilkinet, in a Council statement. “Although much remains to be done to help the sector achieve carbon neutrality, and we will continue to work towards this, the efforts made by all parties to bring this new legal framework for Europe’s skies to a successful conclusion are to be applauded.”

The text agreed by the Council, representing EU member states, and the European Parliament provides for binding targets and incentives to make flights more efficient and climate friendly, with an independent and permanent advisory Performance Review Board (PRB), set up under the regulatory EU Aviation Safety Agency (EASA) and funded by the EU, to help the Commission and states take decisions on the implementation of these plans. The Commission will adopt EU performance targets on airspace capacity, cost efficiency and climate and environmental factors for air navigation services, with performance reviewed at least every three years.

The Commission will also be required to conduct a cost-benefit study to help define how charges levied on airspace users – airlines or private aircraft operators – for the provision of air navigation services could encourage them to use the most fuel-efficient routing available and/or clean propulsion technologies. Mandatory modulation of en route charges will be introduced to encourage users to support improvements in environmental and climate performance.

The deal also provides the potential for more competition in the air navigation services market. It also requires member states to designate a national supervisory authority (NSA) to assess compliance of air navigation service providers (ANSPs) with economic requirements, such as financial sustainability and organisational structure, in cooperation with the national competent authority in charge of ANSP certification. The NSAs and the Commission are together to assess the performance of air navigation services “in accordance with the subsidiarity and proportionality principles”.

Following the introduction of the Single European Sky (SES) initiative in 1999, two legislative packages were adopted: SES I in 2004 and SES II in 2009. The Commission presented a revision in 2013, the SES 2+ package, which was adopted by the Parliament in a first-reading position in 2014, but the Council could not agree a complete position and an upgrade was subsequently proposed by the Commission in 2020.

The new provisional agreement is now subject to approval by member state representatives through the Council, the European Parliament’s transport committee and the full Parliament before the draft legislative acts are formally adopted by the co-legislators.

“The deal signifies a shift towards efficiency and sustainability in air traffic management. The current nationalistic airspace architecture hampers progress, leading to longer flights, increased emissions and unnecessary costs,” said Marian-Jean Marinescu, the Parliament’s lead rapporteur on the SES file, in a statement. “It’s high time to finally prioritise efficiency over nationalism, to pave the way for safer, more cost-effective and environmentally-friendly air travel in Europe.”

The agreement has been welcomed by CANSO, the trade body for ANSPs, which said it hoped the legislation would help the EU achieve its “seamless skies” ambition.

“We note that SES 2 will introduce mandatory modulation of en route charges to encourage airspace users to follow fuel-efficient routings, subject to a cost-benefit analysis,” said CANSO. “We call for this to encompass the principle of revenue neutrality for ANSPs, so that they receive the same fees for the provision of their services. It will be important for ANSPs to be able to balance offering environmental routings with the provision of capacity to airspace users.”

Added CANSO Director Europe Affairs Tanja Grobotek: “We look forward to receiving and analysing the final text. CANSO stands ready to provide support to the EU institutions when they draw up the implementing legislation to ensure there is a common interpretation, legal certainty and efficient implementation.”

However, Ourania Georgoutsakou, Managing Director of Airlines for Europe (A4E), expressed doubts over the package. “We are currently digesting the final agreement. We have been consistent in calling for a SES that delivers for airlines, passengers and the planet. On first look, it seems this agreement is still some way off this,” she said. “This will not be the end of A4E’s efforts to achieve a seamless, digital and a truly Single European Sky that will reduce delays, improve efficiency and reduce carbon emissions.”

A4E has concerns over the scope and independence of the PRB, with states potentially having the opportunity to influence the body and reduce the chance of actual improvements. It questions whether the PRB and/or NSAs will have enforcement powers and whether states can determine and also deviate from targets as they wish.

The European Regions Airline Association (ERA) described the provisional agreement as disappointing and a missed opportunity. “Based on ERA’s initial assessment, and subject to a detailed and thorough review, it is understood that this agreement does not go far enough to address the needs of Europe’s regional airlines, the needs that ERA has consistently advocated for since the Commission published to recast proposal in 2020,” it said.

Added ERA Director General Montserrat Barriga: “At first glance, several concessions appear to have been made that unfortunately reduces the likelihood of the substantial improvements that we have pushed for in terms of airspace capacity, operational efficiency and sustainability. It’s clear that further efforts will be required to address today’s aviation challenges effectively.”

Eurocontrol’s latest flight trends forecast shows the number of flights in the 44-state ECAC region is likely to reach 10.6 million in 2024, a growth of 4.9% compared to 2023 and accounting for 96% of 2019 levels. It expects this trend to continue, with an increase to 10.9 million (99%) in 2025, and further to 11.2 million (101%) by 2026. Beyond 2025, and subject to political and economic uncertainties, flight growth is expected to average 2.0% per year, rising to over 12 million flights in 2030.

Photo: The Bremen air traffic control centre (© DFS Deutsche Flugsicherung GmbH) 

A European aviation industry coalition has welcomed the inclusion of sustainable aviation fuel as a ‘strategic net zero technology’ under the EU Net-Zero Industry Act (NZIA), which has received provisional agreement between the European Parliament and Council. The Act is a central part of the EU’s Green Deal Industrial Plan, which aims to follow the example of the United States’ Inflation Reduction Act in stimulating domestic manufacturing capacity in clean energy technologies, with the intention of reaching at least 40% of expected EU demand by 2030. The European Commission says the Act will create the regulatory conditions necessary to attract and support investment, and help build more production facilities in a faster manner. The Commission has also recommended an EU-wide 90% net GHG emissions reduction target by 2040 compared to 1990 levels and put forward a series of measures to achieve it, including through the use of SAF. The industry alliance said while the inclusion of SAF in the NZIA would pave the way for the development of a strong EU SAF market, further policy action was needed to meet the updated 2040 climate ambitions.

The NZIA will enhance the competitiveness and resilience of the European cleantech industry and support the creation of green, quality jobs as the EU seeks to reach climate neutrality by 2050, claims the Commission. The regulation identifies a broad set of net zero technologies that can be supported through strategic projects such as solar photovoltaic, onshore and offshore wind, fuel cells, electrolysers, batteries, grid technologies and sustainable alternative transport fuels, including SAF.

“The NZIA political agreement is a significant stride towards realising our ambitious climate and economic objectives,” said the Commission’s President, Ursula von der Leyen. “It demonstrates our collective commitment to build a more sustainable, resilient and competitive industrial sector in Europe. Together, we are making the EU a global frontrunner in the clean energy transition.”

The Act aims to create a simplified and enabling regulatory environment that will reduce the administrative burden for cleantech manufacturing, accelerate CO2 capture and storage in the EU, facilitate market access for net zero products and support the development of net zero skills and innovation. It also foresees the creation of a ‘Net-Zero Europe Platform’ to serve as central coordination hub, fostering information and exchange to facilitate the implementation and supporting investment of initiatives throughout the EU.

Renewable hydrogen is seen as one of the key technologies of the NZIA and indispensable in reaching the EU’s 2030 climate targets and 2050 climate neutrality. “By scaling up its production, we will reduce the use of fossil fuels in European industries and serve the needs of hard-to-electrify sectors,” said the Commission. To this end, it is to set up the European Hydrogen Bank to support the uptake of renewable hydrogen within the EU, as well as imports from international partners, and unlock private investments in hydrogen value chains.

The EU has a legal target to reduce GHG emissions by 55% by 2030 compared to 1990 levels and has adopted a ‘Fit for 55’ legislative package to accomplish this goal, including the ReFuelEU regulation on mandating SAF uptake at EU airports. The new recommendation for a 90% reduction by 2040 target will help European industry, investors, citizens and governments to make decisions in this decade that will keep the EU on track to meet its climate neutrality objective in 2050, says the Commission.

“It will send important signals on how to invest and plan effectively for the longer term, minimising the risk of stranded assets,” it said on announcing the target. “With this forward-planning, it is possible to shape a prosperous, competitive and fair society, to decarbonise EU industry and energy systems, and to ensure that Europe is a prime destination for investment, with stable future-proof jobs.

“The EU will continue to develop the right framework conditions to attract investment and production. A successful climate transition should go hand-in-hand with strengthened industrial competitiveness, especially in cleantech sectors. Public investment should be well targeted with the right mix of grants, loans, equity, guarantees, advisory services and other public support. Carbon pricing should continue to play an important role in incentivising investments in clean technologies and generating revenues to spend on climate action and social support for the transition.”

Achieving the target would require both emissions reductions and carbon removals, added the Commission, with the deployment of carbon capture and storage technologies, as well as the use of captured carbon in industry. Carbon capture should be targeted to hard-to-abate sectors where alternatives are less viable and carbon removals will also be needed to generate negative emissions after 2050.

Under the ReFuelEU Aviation regulation, aviation fuel suppliers are obligated to ensure that all fuel made available to aircraft operators at EU airports incorporate 6% SAF in 2030, with 1.2% of fuels in 2030 being synthetic fuels. From 2040, the minimum share of SAF rises to 34%, of which a minimum share of 10% of synthetic fuels, reaching 70% and 35% respectively by 2050.

The 2040 recommendation will be followed by a legislative proposal made by the next Commission, after the European elections in June.

The inclusion of SAF in the NZIA is only the first step in developing a world-leading SAF industry in Europe, said the Destination 2050 cross-industry alliance of European airline, airport, civil aeronautics industry and air navigation service providers, which came together in 2021 to commission and then publish a decarbonisation roadmap for the European aviation sector.

“The Commission’s communication recommending the new 2040 target expressly recognises the need to address barriers to SAF deployment at scale, giving the aviation sector priority access to feedstocks and putting incentives in place to close the price gap between SAF and conventional kerosene. SAFs are a crucial component that will enable European aviation to accelerate its decarbonisation, in full alignment with the bloc’s ambitious climate agenda,” said a statement by the five members of the alliance – Airlines for Europe, ACI Europe, ASD, CANSO Europe and European Regions Airline Association.

“The international race to become a SAF leader has started and further policy incentives to scale up the production and uptake are required for Europe to become a leader in the global competition for SAF. These include the extension of the SAF flexibility mechanism beyond 2034; the extension of the current 20 million allowances threshold and 2030 time-limit under the SAF allowances mechanisms; and increased financial support for development of SAF, including through the Innovation Fund, as well as simplifying the administrative procedure for accessing these funds.”

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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

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The EU’s Council and Parliament have reached a provisional agreement on revisions to the EU Emissions Trading System (EU ETS) rules applying to the aviation sector. A proposal by the Parliament, and backed by environmental groups and major European low-cost airlines, to include all international flights departing the European Economic Area (EEA) within the EU ETS was blocked by the Council, which represents EU member states. As a result of the trilogue talks, the EU ETS will apply only for intra-European flights – including departing flights to the UK and Switzerland – while ICAO’s CORSIA will apply to extra-European flights to and from third countries participating in the global scheme from 2022 to 2027. The two institutions agreed that after the next ICAO Assembly in 2025, the Commission will assess if CORSIA implementation is sufficient to reduce aviation emissions in line with Paris climate objectives. The co-legislators also agreed to fully phase out free emission allowances for aircraft operators between 2024 and 2026 but also set aside 20 million free allowances to incentivise the uptake of eligible SAF and to transfer 5 million allowances to an innovation fund. The agreement, which also addresses non-CO2 effects for the first time, has been both welcomed and criticised by the European airline sector.

Revisions to the Aviation EU ETS were first proposed by the European Commission in July 2021 as part of its ‘Fit for 55’ package to reduce overall EU emissions by at least 55% by 2030 compared to 1990 levels and to achieve climate neutrality in 2050. EU member states and the Commission have shown strong support for CORSIA, which was considered necessary to secure international backing for an agreement to adopt the Long-Term Aspirational Goal (LTAG) at the ICAO Assembly in October. The inclusion of emissions from extra-European flights into the EU ETS also risked confrontation with third countries, including the United States, which has legislation in place to prohibit US airlines from compliance with the EU scheme. An agreement was also reached at ICAO during the Assembly to strengthen the CORSIA baseline, despite initial opposition from the airline industry not to change the baseline that had been altered during Covid-19 to help airlines deal with the added financial burden of CORSIA offsetting compliance.

However, CORSIA is criticised as an ineffective scheme by environmental groups and others, who do not see it in step with the Paris Agreement 1.5C climate target and the net zero by 2050 goal for aviation emissions adopted by both ICAO and the industry. Under the scheme’s rules, it will not be reviewed again until 2025.

European NGO Transport & Environment said the failure to include long-haul flights in the EU ETS would result in 58% of Europe’s aviation emissions being unaccounted for and accused EU governments of cowardice. The trilogue outcome would also make international aviation one of the only sectors of the EU economy that will not fall under an emissions cap, it added.

“EU governments lacked the grit to push through a deal that was good for the climate and social justice,” said Jo Dardenne, Aviation Director at T&E. “Average European families will continue to pay much more for their CO2 emissions than frequent long-haul flyers. We are about to see another lost decade of climate inaction.”

Low-cost airline Ryanair, Europe’s biggest carrier, also condemned the decision not to include departing international flights in the EU ETS, which it blamed on the Commission.

“The Commission’s failure to support the Parliament vote means that Europe’s most polluting flights – long-haul and transfer passengers – that create the majority of EU aviation emissions, will continue to be exempt from paying their fair share of ETS taxes,” commented Ryanair CEO Michael O’Leary. “While the richest Americans, Europeans and Asians on long-haul flights pay zero environmental taxes, Europe’s most price sensitive passengers and their families travelling on short-haul flights, many to peripheral member states and who have no alternative to flying, are forced to pay all of Europe’s ETS taxes, while they generate less than half of EU aviation emissions. This is clearly unfair.”

In actual fact, when emissions from flights to and from outside the EEA reach levels above 85% of 2019 levels (the revised baseline agreed at the ICAO Assembly), they will have to be offset with corresponding eligible carbon credits purchased by the flight operator to be invested in emissions reduction projects. Of ICAO’s 193 members states, 118 have agreed to participate in the voluntary pilot and first phases (2021-2026) of CORSIA. Major aviation players China and India have yet to join though, so flight emissions between the two countries and the EEA will not be covered by CORSIA during this period.

After the next ICAO Assembly in 2025, the Commission will carry out an assessment of CORSIA as to whether it is meeting the objectives of the Paris Agreement. If it is then the Commission will make a proposal to the Council and Parliament to extend the “clean cut” between the two schemes. If deemed insufficient, the Commission says it will make a proposal to extend the scope of the EU ETS to all flights departing from the EEA.

“The deal reached on the scope of the ETS shows that work towards an effective global carbon price for aviation has only started,” said a statement from trade association Airlines for Europe (A4E), whose members include both low-cost and long-haul airlines. “This will build on the outcome of the ICAO Assembly in October. We must not forget that airlines have been paying for their emissions through the EU ETS since 2012. The cost of compliance for the ETS is likely to have increased five times in size by 2025 to over €5 billion ($5.3bn) annually.”

A4E expects the annual cost of compliance to both the EU ETS and CORSIA schemes to rise from €0.95 billion in 2019 to €7.6 billion in 2030 and €9 billion by 2035.

Another conflicting position between the Council and Parliament was over the phasing out of the free allowances granted annually to aircraft operators under the EU ETS. The Commission proposed all free emission allowances be phased out by 2027, to be replaced by full auctioning of allowances, a position backed by the Council. Parliament, on the other hand, voted for a faster phase out by 2025. The trilogue produced a compromise of 2026, a year earlier than proposed, with a phase-out of 25% in 2024 and 50% in 2025.

“A4E is extremely disappointed about the decision to phase out by 2026 free ETS allowances currently granted to airlines,” said the A4E statement. “This is well before truly effective decarbonisation solutions will be available at the scale needed for them to be effective.”

On the other hand, A4E welcomed an agreement on a new system of sustainable aviation fuel allowances under the EU ETS to help stimulate the deployment of SAF and also the transfer of 5 million allowances from the aviation sector to the EU’s Innovation Fund, which uses EU ETS revenues to support innovative low-carbon technologies.

The co-legislators also agreed to set aside 20 million free allowances to further incentivise the uptake of fuels that are deemed to be in the short-term a promising path for aviation decarbonisation by aiming to bridge the price gap with conventional jet fuel. All fuels eligible under ReFuelEU, except those derived from fossil fuels, will be eligible for the SAF allowances under a mechanism to 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 the availability of the eligible fuels in these locations with specific supply constraints.

For all other airports, the coverage of the price differential will differ according to the type of fuel: 95% for renewable fuels of non-biological origin (RFNBOs); 70% for advanced biofuels; and 50% for other eligible fuels.

The agreement also provides for the implementation of a monitoring, reporting and verification (MRV) system for non-CO2 effects in aviation from 2025. By 2027, the Commission is required to submit a report based on the MRV and by 2028, after an impact assessment, the Commission will make a proposal to address non-CO2 effects.

“I’m glad that we have found an agreement that effectively paves the way for meeting our objective of reducing transport emissions by 90% by 2050,” said Marian Jurečka, the Czech Minister of the Environment, which currently holds the EU presidency. “It will allow us to address aviation emissions within the EU but also outside by appropriately aligning the EU ETS with CORSIA and to ensure that all airlines operating flights on the same routes are treated equally.”

The provisional agreement now requires formal adoption by the Council and the Parliament.

Meanwhile, the UK has signed a Memorandum of Understanding with Switzerland that states the UK’s intention to include flights from the UK to Switzerland in the UK ETS “as comprehensively as possible” by 1 January 2023. The UK ETS, which replaced the UK’s participation in the EU ETS on 1 January 2021, covers domestic flights, flights between the UK and Gibraltar, and flights to the EEA. It is likely the UK will mirror the EU Council and Parliament agreement to apply CORSIA to all other countries that have joined the ICAO scheme.

A plenary session of the European Parliament has voted to adopt a report aimed at increasing the uptake of sustainable aviation fuels in the EU but with elements that go further than those proposed by the European Commission, including an accelerated introduction of SAF that should be made available at EU airports. Both sides agree that the minimum share of SAF should be 2% from 2025 but the Parliament is pushing for 37% share in 2040, compared to the Commission’s 32%, and increasing to 85% by 2050, as opposed to 63%. Other positions adopted include the expansion of the definition of SAF to include, for example, renewable electricity and green hydrogen. However, MEPs excluded food and feed crop-based fuels and those derived from palm fatty acid distillates (PFAD), intermediate crops and palm or soy-derived distillates, a move welcomed by both European airlines and environmental NGOs. The decision comes shortly after another vote in the Parliament to extend the scope of the EU ETS to include all EEA outgoing flights, a move now opposed by the Council of EU member states that supports the Commission’s proposal to restrict the scope to intra-EEA flights and apply CORSIA to other international departing flights. The co-legislators will hold trilogue negotiations to find common positions on both regulations.

The proposed regulation adopted by the Parliament last week looks to ensure the pool of eligible sustainable feedstock be as inclusive as possible “in order to maximise the potential for scaling up the production of sustainable aviation fuels at affordable costs”, and calls on the Commission to review the list of eligible feedstocks every two years.

Sustainable aviation fuels are generally considered to be liquid, drop-in fuels, fully fungible with conventional aviation fuel, compatible with existing aircraft engines and largely produced, at least currently, from used cooking oil, agricultural or forestry residues, bio-waste and animal fats. As well as synthetic fuels produced from green hydrogen and renewable electricity, which MEPs consider “very promising”, the proposed definition is extended to include recycled carbon fuels produced from waste processing gas and exhaust gas deriving from the production process in industrial installations. Fuels produced from animal fats could also be included in the aviation fuel mix until 2034.

MEPs agreed with the Commission’s proposal that for sustainability reasons, feed and food crop-based fuels should not be eligible because of high indirect land-use change risk. Specifically excluded by the MEPs are fuels made from palm fatty acid distillates (PFAD) and all palm and soy-derived materials, and soap stock and its derivatives.

“By explicitly excluding certain feed and food crop-based fuels, MEPs have further instilled legitimacy in the SAF system,” said a statement by trade association Airlines for Europe, which welcomed the PFAD exclusion. “Passengers can now trust that the ramp up of sustainable fuels in the coming years will not occur at the expense of food supplies for people or animals, nor damage our environment.”

Before the vote, European low-cost carrier easyJet and NGO Transport & Environment (T&E) published a joint letter calling on MEPs to exclude “problematic” feedstocks such as palm oil derivatives, which they said lead to deforestation. The letter quotes calculations by the International Council on Clean Transportation that the lifecycle direct and indirect GHG emissions of PFAD is more than 2.5 times worse than that of fossil fuel. They also argue that category 3 animal fats are used in food and feed and to make soaps and cosmetics. “If used for other purposes such as aviation fuels, then palm oil, being the cheapest alternative, would be the most likely substitute,” they said.

After the vote, with the eligibility of animal fats still included, T&E urged the Parliament, Council and Commission “to keep the momentum going by excluding the last remaining problematic feedstock” in their negotiations.

The European green group welcomed though the Parliament’s preference for synthetic fuels over biofuels. “They are the only fuels that can be sustainably scaled up to reduce aviation’s climate impact,” it said. “Lawmakers tripled the synthetic fuel volumes proposed by the Commission for 2030 and decided that in 2050, half of the total jet fuel use in Europe will be synthetic. The main synthetic fuel available now is e-kerosene, generated by combining green hydrogen and carbon dioxide. An ambitious mandate for e-kerosene will spur investment in the fuel, in a market where Europe is already a leader.”

T&E observed that mitigating the non-CO2 effects of aviation had made it into the final text, with the Parliament “paving the way to finally regulate the quality of fuel to ensure it has lower aromatic concentrations and sulphur content.”

A4E welcomed the possible introduction of a flexibility mechanism to supply SAF “in a cost-efficient way across the Union” through a book-and-claim system and also the Parliament’s support for the single aviation market through a single EU SAF mandate that would supplant national mandates and harmonise relevant legislation.

The flexibility mechanism proposed by the Parliament would have a 10-year transitional period from the start of the regulation, with elements of a book-and-claim system that would allow aviation fuel suppliers to use fuel containing higher shares of SAF to compensate for lower shares elsewhere or for the reduced availability of conventional aviation fuel at minor or logistically constrained airports, and for aircraft operators to buy a certificate linked to the amount of SAF acquired. After the transitional period, to prevent competitive distortions, all Union airports would have to be supplied with uniform minimum shares of SAF.

However, A4E remains concerned that proposed SAF blending targets, particularly for e-kerosene, could lead to high prices for customers, especially in the peripheral regions, because of the significant higher costs of these fuels. “It is key that targets remain reasonable and that policymakers work to limit the cost of the energy transition for passengers,” it said. “Mechanisms such as a system of SAF allowances through the ETS will help bridge the price gap between SAF and conventional fuels, but risk falling short if not designed to offset and the full loss of competitiveness and potential carbon leakage.”

MEPs also proposed the creation of a Sustainable Aviation Fund from 2023 to 2050 to accelerate decarbonisation of the aviation sector and support investment in SAF, innovative aircraft propulsion technologies that included hydrogen and electricity, research for new engines and direct air capture technology. The Fund would be supplemented by penalties generated by enforcement of the regulation and managed centrally through a Union body, with public transparency on investment decisions.

The report adopted by the Parliament also tasks the European Aviation Safety Agency with developing an EU labelling system for the environmental performance of aviation “to provide users of aviation services clear, transparent, comprehensive, user-friendly and easily understandable information.”

Commenting after the vote, the Parliament’s rapporteur on the regulation, Søren Gade, said: “Aviation is one of the hardest sectors to decarbonise. Today, we showed how to do this and sent a strong and ambitious signal to the citizens of Europe. We heard you when you called for climate action and we are working as hard as we can to achieve a truly green Europe.”

The SAF regulation is part of the ReFuelEU Aviation initiative under the EU’s Fit for 55 package that has the goal of reducing GHG emissions by at least 55% by 2030 compared to 1990 levels.

Fit for 55 also includes measures to strengthen the EU’s flagship climate mechanism, the EU Emissions Trading System (EU ETS). Last month, the Parliament diverted from the Commission’s proposals by voting to apply the scheme to all flights departing the European Economic Area (see article). While being welcomed by environmental groups and European low-cost airlines, the decision was greeted with anger from the wider airline industry, notably IATA.

However, a Council meeting of EU environment ministers has sided with the Commission by agreeing to continue with applying the EU ETS to EU operators for intra-European flights (including flights to Switzerland and the UK), while applying CORSIA to extra-European flights to and from third countries participating in the ICAO carbon offsetting scheme.

The Council also approved the phasing out free emission allowances for the aviation sector gradually by 2027 and also to set aside 20 million of the phased-out free allowances to compensate for the additional costs associated with the use of SAF. The agreement takes into account specific geographical circumstances and, in that context, proposes limited transitional derogations, said a statement.

T&E, which says the move would exempt 60% of the EU’s aviation emissions from the EU ETS, described the Council’s decision as “a step back for European aviation, as they continue to exempt huge chunks of emissions in this industry.”

The files will move to trilogues between the Council, Parliament and Commission.

Photo: European Parliament building in Strasbourg

To coincide with the European Commission’s ‘Connecting Europe by Air: the Green Transformation’, event held in Lyon, France, ten flights operated by six European airlines departed Lyon Saint Exupéry Airport fuelled with a 30% blend of sustainable aviation fuel produced and supplied by TotalEnergies. A number of incoming flights to Lyon followed unrestricted, fully-optimised routings to demonstrate fuel and emissions savings as part of the European SESAR’s ALBATROSS project. As well as the flights, the airlines showcased other sustainability measures including reduced single-use plastics, crew uniforms made from recycled plastic bottles, sustainable catering and offsetting of emissions through certified climate projects, while trade body Airlines for Europe (A4E) promoted the industry’s Destination 2050 roadmap to net zero emissions. Lyon Airport has a goal to become the first commercial airport in France to reach net zero carbon emissions by 2026 within the scope of its business. During a high-level debate at the event, Transport Commissioner Adina Vălean reiterated the EU’s strong support for ICAO’s CORSIA carbon offsetting scheme.

“Despite the current challenges our sector is facing, operationally in the wake of the global pandemic, geopolitically and with rising costs – airlines’ commitment to sustainable air transport is stronger than ever,” said Thomas Reynaert, Managing Director of A4E.

Commenting on the Lyon flights, he added: “Under real operational conditions, we’ve demonstrated that increased SAF uptake and more efficient air traffic management in Europe can reduce CO2 emissions by more than 30% per flight.”

The SAF for the flights was produced from used cooking oil (UCO) at TotalEnergies’ La Mède biorefinery in southern France and, claims the company, reduces lifecycle emissions by 91.2% over its fossil-based equivalent. Briefing reporters at the event, Strategy & Sustainability Development Manager Stéphane Thion said worldwide feedstock supply for SAF was limited and production was reliant on imported UCO, mainly from Asia, and other wastes and fat residues. The transportation of feedstocks from abroad was taken into account when calculating lifecycle emissions reduction, he added.

Thion said SAF production would total around 100,000 tonnes in 2022, with a target of reaching 300 million tonnes, or 65% of total jet fuel consumption, by 2050. A big jump, he admitted, but could be achieved through the twin levers of legislation and incentives to reduce the four to five times price gap, together with the appetite and need by airlines to decarbonise their activities.

Fatima da Gloria, VP Sustainability at Air France-KLM, two of those airlines taking part in the SAF uptake at Lyon, said worldwide SAF supply was very low, given the problem of economic viability and a lack of availability of high-quality feedstocks that were not in competition with food. She thought that in time, bio-based SAF will come closer to price parity with conventional jet fuel but would be restricted by the availability of biomass, whereas advanced non-bio fuels will still be four to five times more expensive by 2030.

“We will need prioritisation of feedstocks for the hard-to-abate aviation sector as it is important to remember that every industry is going through decarbonisation,” she said, echoing the call for government and investor support to boost SAF production and narrow the price gap. She also expressed concerns over EU policies leading to carbon leakage and competitive distortions with airlines outside Europe, but welcomed moves to introduce SAF allowances, which could be granted to airlines through the EU ETS in return for uplifting SAF.

Other airlines taking part in the Connecting Europe industry showcase included Lufthansa, Transavia, Vueling and easyJet. Three of easyJet’s flights departing from Lyon uplifted SAF-blended fuel, with an incoming flight from Lisbon following a specifically designed, optimised flight plan to demonstrate the potential for significant CO2 savings if the Single European Sky was implemented. The flight used airspace normally reserved for military purposes to achieve a direct routing.

The SESAR ALBATROSS project is conducting hundreds of gate-to-gate flight trials across Europe to demonstrate how optimised ATM operations could reduce average CO2 emissions per flight by 5-10% (0.8-1.6 tonnes) by 2035 through enhanced cooperation. Although the Commission has pushed for a Single European Sky, a number of EU member states remain opposed to the move, largely on sovereignty grounds.

“Our airline has committed to net zero by 2050 when we joined Race to Zero last year. We also recently published our ‘35% by 2035’ interim target,” said Thomas Haagensen, Director Group Markets and Marketing at easyJet, who also oversees sustainability at the airline’s board level. “In order to reach this, different elements will play a role and some were showcased on our Lyon flights: we need airspace modernisation –  our SESAR-optimised flight showed what is possible – and we require affordable SAF at scale.

“Full decarbonisation cannot happen without government support, finally implementing the Single European Sky and incentivising new technologies.”

Speaking to GreenAir on the sidelines of the Lyon event, Haagensen said easyJet was supportive of SAF use in helping to reach its net zero target. “But we are quite different from other airlines, in particular the traditional and long-haul carriers,” he added. “For them, SAF is a long-term solution whereas for us, it is an interim solution. We know that by 2035 there will be net zero technology that we can transition to, which is the end game for decarbonisation. With hydrogen and electric for short-haul, we will have that as a feasible option.”

The low-cost carrier is working with a number of industry partners, including Airbus, Rolls-Royce, GKN Aerospace, Cranfield Aerospace Solutions and Wright Electric, to accelerate the development of zero carbon emission aircraft technology and the required infrastructure.

“These technologies are becoming much more tangible. We know they will come and we now need to prepare the supply chain and the infrastructure to make this happen, including the production of green hydrogen,” said Haagensen.

“We are not technology providers – our aim is to acknowledge our impact on the climate, support measures like the EU ETS and stimulate the industry, as we have with startups like Wright Electric. What we can provide is commercial expertise so that they focus on the right segments as well as providing, for example, the flying knowhow of our pilots and helping them to attract more investor funding. We don’t invest our own money but we do invest a lot of our time with them. That’s what our partners ask us for.”

Speaking in a high-level panel debate, EU Transport Commissioner Adina Vălean described the aviation sector as progressive and cutting edge. “There is a clear path to net zero that everyone involved is supporting and I’m sure the industry will achieve it,” she said. “While we will have to wait until 2035 for the disruptive technologies to arrive, sustainable aviation fuels will provide the low-hanging fruit, although we will have to work hard to create a market for them and for the prices to drop. We will also need a more efficient and optimised air traffic system.”

On global aviation issues, Vălean said it was difficult to convince international institutions like ICAO to be progressive. “What is important from my perspective right now, however, is that we must apply CORSIA because this is what we agreed at an international level. If everyone applies it, then it will be a success and we will see a reduction in global CO2. We are also engaged in supporting the international deployment of SAF, even though there are different interpretations of SAF around the world.”

In regard to reaching an agreement on a long-term decarbonisation goal at the ICAO Assembly in the autumn, Vălean said: “We will do our best to convince our international partners to raise the level of ambition. However, we have seen that even if commitments are not being signed, things are happening, for example around SAF, so we have to understand the different approaches on the international stage. We will step up our diplomacy at ICAO though to get a higher ambition agreed and supported.”

Photo (easyJet): Refuelling of easyJet Airbus aircraft at Lyon with SAF blend supplied by TotalEnergies

The EU’s ‘Fit for 55’ legislative package of proposals unveiled by European Commission President Ursula von der Leyen is likely to have long-term consequences for the aviation sector. Parts of the package have already been widely flagged, such as the introduction of an incremental blending mandate for sustainable aviation fuels and tightening of EU Emissions Trading System (EU ETS) provisions for intra-European flights. However, a proposal to remove the tax exemption on aviation fuel could have a major impact on the sector. The Commission is proposing a kerosene tax based on energy content be introduced linearly over a transitional period of 10 years from 2023, corresponding to minimum tax rates applicable to road transport fuels. Because of existing agreements with countries like the United States, the tax would not be applied to cargo-only intra-EU flights and a zero rate would be applied to aviation advanced biofuels and e-fuels for a limited period to allow production scale up. Airline industry body IATA said a reliance on taxation to cut Europe’s aviation emissions would be counter-productive to the goal of sustainable aviation.

The ‘Fit for 55’ package is a response to the increased level of ambition, enshrined in a new EU climate law, that sees the previous target of reducing CO2 emissions by 40% by 2030 compared to 1990 levels being raised to 55%.

Unveiling what she described as a roadmap of legislative tools to achieving the new target and becoming the first climate-neutral continent in the world, von der Leyen said the current fossil fuel economy had reached its limits and needed to be replaced with a new model powered by clean energy. Carbon pricing would be the guiding and market-based instrument “with a social compensation,” she told a media briefing. “Emissions of CO2 must have a price that incentivises consumers, producers and innovators to choose clean technologies,” she said. “And we know that carbon pricing works. Our existing ETS has already helped significantly to reduce emissions in industry and in power generation.”

Under new proposals, the EU ETS will be extended to include shipping emissions for the first time and a separate new ETS set up for road transport and buildings. The Commission is also proposing to phase out free emission allowances for aviation and amend the EU ETS to align with the global ICAO CORSIA offsetting scheme.

In 2018, EU CO2 emissions from aviation made up 3.7% of the economy-wide total or 15.7% of CO2 transport emissions. The EU was responsible that year for 15% of global aviation emissions – with intra-EEA aviation representing 7.5% and departing flights to third countries another 7.5%. The Commission points out that departing flights are covered in the EU’s NDC under the Paris Agreement. Despite the fall in traffic caused by Covid-19, under the baseline scenario CO2 emissions from aviation are still forecast to increase by 24% by 2030 and by a further 27% by 2050 compared to 2005 levels.

EU ETS and CORSIA

In its proposed revision to the Aviation EU ETS directive, the Commission says in order to reach the increased climate target, “all sectors, including aviation, must adequately contribute to the required domestic emission reduction efforts.” Beyond the 2030 target, it quotes a previous communication that states: “In accordance with its international commitment to economy-wide action under the Paris Agreement, the EU should continue to regulate at least intra-EU aviation emissions in the EU ETS.”

Between 2013 and 2020, the Commission estimates net savings of 193.4 Mt CO2 were achieved by aviation through the EU ETS, although aviation CO2 emissions under the EU ETS decreased in 2020 by 64% compared to 2019, due to the pandemic. However, it says, the enhanced 2030 climate ambition requires the contribution from sector to be “significantly strengthened” and revisions to the EU ETS rules must be addressed.

The main legal amendments to the directive proposed are to:

• Consolidate the total quantity of aviation allowances at current levels and apply the linear reduction factor in accordance with Article 9 of the directive;
• Increase auctioning of aviation allowances;
• Continue intra-European application of the EU ETS while applying CORSIA as appropriate to extra-European flights; and
• Ensure that airlines are treated equally on the same routes with regard to their obligations with economic impacts.

In parallel to these amendments, and as a result of aviation emissions likely to not exceed their collective 2019 levels (the baseline year for CORSIA) in 2021 (the first year of CORSIA) due to the pandemic, a separate proposal is being made to implement Member States’ notification to EU-based airlines of zero CORSIA offsetting for the year 2021 “in a manner that minimises the administrative burden of national authorities and airline operators, and provides legal certainty as regards CORSIA offsetting by airlines based in Member States.”

Aviation fuel tax

However, says the Commission in its proposed revisions to the Energy Taxation Directive (ETD), the existing market-based instruments for aviation –the EU ETS and CORSIA – only partially internalise climate externalities. For intra-EEA flights, the climate change impacts are currently not fully internalised through the EU ETS as a significant proportion (44% in 2019) of total verified emissions are allocated for free to aircraft operators, although this is being reassessed in the proposed EU ETS directive revisions.

“As for extra-EEA flights, the price signal provided by CORSIA clearly falls below the EU ETS carbon price and would only marginally reflect the climate external costs generated by extra-EEA flights,” says the Commission.

It is therefore proposing that the current mandatory EU-wide fuel tax exemption accorded to aviation (and shipping) be removed. Although Member States may currently limit the scope of the exemptions by taxing these sectors domestically or after having entered into a bilateral agreement with another Member State to waive the exemption, “the reality is that exemptions remain,” says the Commission.

“The exemption offers these sectors a favourable tax treatment in the transport sector as road transport is not exempted and the exemption of rail transport is optional,” it says. “Moreover, the present situation substantially weakens the incentives for investing in more energy-efficient and less polluting crafts. The lack of proper differentiation between the different fuels in these sectors covered by the mandatory tax exemptions also does not facilitate reducing the significant price difference between fossil fuels and sustainable fuels. Properly designed taxation measures could support the uptake of sustainable fuels and at the same time their production could result in lower prices for these fuels.”

Removing the mandatory exemption would allow Member States to unilaterally tax the two sectors if they so wish but without obliging them to do so. However, with regard to aviation, international flights to third countries outside the EU would be excluded from the scope of the revised tax since, says the Commission, legal air services agreements with some third countries do not allow the taxation of fuel uplifted by the carriers of these third countries at EU airports.

Similarly, intra-EU cargo-only flights would also be excluded from the scope due to the special privileges granted to some third countries, for example the United States through the US-EU Open Skies agreement. Under Open Skies, US carriers have significant market share of the intra-EU cargo market and have current exemption from the taxation of aviation fuel uplifted in the EU.

The Commission says a possibility would be for Member States to tax fuel on domestic flights or through bilateral or multilateral agreements between them. Another possibility could in principle be to apply a fuel tax to international flights to those third countries that do not have air services agreements with the EU or are not prohibited by air services agreements. In any case, it adds, a passenger ticket tax may be an appropriate alternative to a fuel tax on international flights that would be outside the scope.

The proposal offers a number of options that could be applied to an aviation fuel tax, which include a transitional period of 10 years (2023-2033), increased in a linear way to the corresponding minimum tax rates applicable to motor fuels used in road transport. A zero rate would be applied for a limited period to advanced biofuels and e-fuels for aviation to help the uptake of these fuels until their production has been scaled up. This transition would also provide stakeholders with a clear price signal trend in order to adapt investments and technologies.

The Commission acknowledges a potential problem of an EU aviation fuel tax is carbon leakage due to tankering, whereby fuel is uplifted outside EU jurisdiction and used on subsequent intra-EU operations. However, it believes that due to the limited size of the fuel tanks on aircraft, the opportunities for tankering are limited. The collection of an aviation fuel tax is not expected to be a problem from an administrative perspective as they would be collected as in other transport modes by the fuel supplier and the funds transferred to the relevant tax authority.

An independent study carried out for the Commission and quoted in the ETD proposal, modelled a number of tax rates applied to aviation fuel, ranging from €0.17 to €0.50 per litre and a central option of €0.33/litre, with the airline expected to pass the cost on to passengers by raising ticket prices, leading to a reduction in passenger demand and hence fuel consumption. Only to a limited extent does it expect the airline be incentivised to choose more efficient aircraft for their operations to reduce the fuel consumed. The modelling showed implementing a tax on fuel loaded for intra-EEA flights had noticeable impacts on CO2 emissions in the long term, with reductions of between 6% and 15% relative to a 2016 baseline.

In terms of tax revenue, the study showed that under the €0.33/litre option, the tax would contribute around €6.7 billion ($7.9bn) per year in 2050. The wider impacts on the economy from the reduction in aviation demand would then reduce the rise in total tax revenue over the baseline to €5.4 billion per year.

By 2025, the introduction of a €0.33/litre fuel tax, with no transition period, could lead to a reduction of 10% in the number of flights when compared to the baseline but the overall flight frequency on most routes would still be higher than it was in 2016, although some variations are expected and specific regions could see their connectivity reduced. EEA carriers could also suffer negative competitiveness impacts in relation to third country carriers which may be subject to a more lenient tax regime in their home countries. The implementation of a fuel tax on intra-EEA flights could also give rise to concerns over ‘hub switching’ as carriers change the connection, or hub, airport from an EEA airport to a non-EEA airport. This is more likely to impact traditional network carriers than low-cost carriers with their mainly direct flights.

Reaction

Reacting to the fuel tax proposal, the International Air Transport Association (IATA) said a reliance on taxation as a solution to cutting aviation emissions was counter-productive.

“Aviation is committed to decarbonisation as a global industry,” said IATA Director General Willie Walsh. “We don’t need persuading, or punitive measures like taxes, to motivate change. In fact, taxes siphon money from the industry that could support emissions reducing investments in fleet renewal and clean technologies. To reduce emissions, we need governments to implement a constructive policy framework that, most immediately, focuses on production incentives for sustainable aviation fuels and delivering the Single European Sky.”

IATA acknowledged that market-based measures to manage emissions were required until technology solutions had been fully developed and said it supported the CORSIA scheme as a way to avoid a patchwork of uncoordinated national or regional measures such as the EU ETS. However, said the trade body: “We are extremely concerned by the Commission’s proposal that European States would no longer implement CORSIA on all international flights.”

Added Walsh: “Aviation’s near-term vision is to provide sustainable, affordable air transport for all European citizens with SAF-powered fleets, operating with efficient air traffic management. We should all be worried that the EU’s big idea to decarbonise aviation is making jet fuel more expensive through tax. That will not get us to where we need to be. Taxation will destroy jobs.”

Trade body Airlines for Europe (A4E) said the ‘Fit for 55’ package included proposals that would significantly impact European airlines in the years to come and have a transformative impact on the sector. However, commented A4E Managing Director Thomas Reynaert, climate policy regulation could also be ecologically and economically counterproductive. “Badly designed European taxes will not reduce emissions,” he said. “By making flying more expensive, it may shift demand globally and reduce traffic locally but it will not tackle the source of the emissions. We need to invest in solutions that offer real reductions in CO2 emissions per aircraft. Increasing costs reduces our capacity to make these investments whilst CO2 emissions are potentially shifted to other regions.”

A4E said unilateral and double pricing of CO2 under several market-based measures would be economically counterproductive and if airlines paid for their CO2 under the EU ETS, for instance, they should not have to pay for it again.

“Inefficient policies leading to a disproportionate cost burden hamper aviation’s decarbonisation plans. As one of the sectors hardest hit by the pandemic and with an essential role in kick-starting societal and economic recovery, future EU policies must guarantee and support the sector’s competitiveness,” said A4E. “The ‘Fit for 55’ policies risk affecting this competitiveness and that of the entire aviation ecosystem, Europe’s tourism industry and the wider EU economy. Carbon leakage will need to be mitigated through appropriate measures, such as uniform regulations, carbon border adjustment or designated finance mechanisms preserving competition neutrality.”

A4E is one of the five European aviation industry associations that contributed to the Destination 2050 roadmap initiative launched earlier this year aimed at achieving net zero CO2 emissions from aviation by 2050. The five associations – including ACI Europe, European Regions Airline Association, Civil Air Navigation Services Organisation and Aerospace and Defence Manufacturers Association, as well as A4E – took the release of the ‘Fit for 55’ package to repeat their support for the Commission’s climate ambitions.

“Destination 2050 is our sector’s contribution to the implementation of those ambitions, but our roadmap shows we cannot do this alone. Achieving a net zero European aviation requires fully-aligned and enabling policy, regulatory and financial frameworks – both at EU and national level. For this reason, we call on the European Commission to support and take the lead in the development of an EU Pact for Sustainable Aviation to drive these proposals forward. We stand ready to engage with the European Commission to define such a Pact and hold regular exchanges to ensure its implementation,” they said in a statement.

European NGO Transport & Environment, which has long campaigned for an end to aviation’s fuel tax exemption, said the Commission’s plans would drive airlines to use cleaner, low-carbon fuels. However, it said, the tax reform would only apply to fuel used on private and commercial flights within Europe and exempt 60% of all fuel sales.

“Axing jet fuel’s tax exemption in Europe is a vital step towards ending decades of subsidised pollution, which even included fuel for private jets,” said Andrew Murphy, Aviation Director at T&E. “But by not removing the tax exemption for flights outside of the EU, it still lets the majority off the hook.”

The revisions to the EU ETS should drive up the price of credits and bring forward the date by when emissions from the aviation sector must reach zero, said T&E. “However, flights departing Europe – responsible for over 60% of emissions – will remain exempt,” it pointed out. “Instead, the European Commission proposes that these flights be covered by an industry-crafted offsetting scheme [CORSIA], despite the Commission’s own research finding that it is ineffective.”

Campaign group Stay Grounded, which represents 170 member organisations, also welcomed the plan to end the tax fuel exemption. However, said spokesperson Magdalena Heuwieser: “This package will not make Europe’s aviation sector fit for 55% emissions reduction by 2030. It’s important to finally get rid of the kerosene tax exemption but the plan is not strong enough and the rollout over 10 years is way too short. We have to fully tax aviation immediately.”

She expressed disappointment that flights to non-EU destinations and intra-EU cargo flights were not included in the kerosene tax proposal and called for an immediate end to free allowances to airlines under the EU ETS.

Editor’s note: The important RefuelEU Aviation proposal contained in the ‘Fit for 55’ package is covered in an article here

Top photo: The European Commission’s Berlaymont building lit in green to mark the European Green Deal (© EU 2021)