In a surprise move, the European Parliament and the Council of the European Union reached a provisional agreement on the revision of the aviation part of the EU Emissions Trading System (ETS) on Wednesday 7 December, after a negotiating session (‘trilogues’) that started the day before and ended at around 2.30am.
In particular, the agreement provides for a gradual reduction in the number of free emission allowances granted to the aviation sector (-25% in 2024 and -50% in 2025), with a view to abolishing them completely by 2026.
This is a compromise between the EU Council’s desired deadline (2027) and the Parliament’s position (2025).
Reacting to the decision, Airlines for Europe, an organisation representing European airlines, said it was “extremely disappointed” that the deadline was set “well before truly effective decarbonisation solutions are available on the scale needed”.
This view is not shared by Parliament’s rapporteur on this dossier, Sunčana Glavak (EPP, Croatian). In her view, the agreement “strikes the right balance between climate ambition in aviation and support for the sector in this transition”.
Quotas for sustainable aviation fuels
In particular, Glavak highlighted an element of the agreement that 20 million free allowances will be given to airlines over the period 2024-2030 as ‘contracts for differences’ for sustainable aviation fuels (SAFs).
“With this decision we are stating that we stand with the sector through the process of the green transition”, she told EUROPE.
The aim is to cover part of the price difference between sustainable aviation fuels and the kerosene used by airlines. According to the agreement, these allowances will cover 95% of the price difference in the case of renewable fuels of non-biological origin (RFNBOs); 70% of the difference for advanced biofuels and renewable hydrogen; 50% of the difference for all other fuels defined as SAFs under the ‘ReFuelEU’ legislative proposal, excluding fossil fuel-based fuels.
For airports in small islands and outermost regions, they will cover 100% of the price difference, regardless of the type of sustainable aviation fuel used.
Scope
On the scope, the co-legislators agreed to extend the ‘stop the clock’ derogation until 2027.
While flights within the EU are covered by the ETS, this derogation allows flights to and from countries outside the EU to escape the scheme, and thus the obligation to surrender emission allowances.
However, the agreement between the co-legislators provides for the possibility of extending the ETS to all flights departing from the EU if an assessment by the Commission shows that certain conditions are not being met.
Specifically, in 2026, the Commission will have to assess the effectiveness of the carbon offset and reduction scheme for international aviation (CORSIA) on the basis of two criteria: (1) has the International Civil Aviation Organization (ICAO) Assembly strengthened the CORSIA system by 2025 to achieve the objective of reducing net carbon emissions from international aviation to zero by 2050? (2) do the countries participating in CORSIA represent at least 70% of international aviation emissions?
If either of these two criteria is not met, the Commission will then be required to present a proposal to extend the ETS to international flights departing from the EU from July 2026.
If these criteria are met, the institution should propose to keep the current mechanism, i.e. ETS for intra-EU flights and CORSIA for international flights to and from the EU.
If no agreement is reached on either of these two proposals, the ETS will apply to all flights, both in and out of the EU, a source told us.
The co-legislators also agreed on the possibility of covering emissions other than CO2, as requested by the Parliament. From 2025, airlines will have to report on these emissions, based on a new monitoring, reporting and verification (MRV) system that the Commission will introduce in 2024. The institution will then produce a report in 2027 with a view to extending the ETS to these emissions in 2028.
Use of income
In contrast, the Parliament had to abandon its demands for the earmarking of revenues from the aviation ETS. It did however obtain the insertion of a declaration that €5 million will be devoted to decarbonising the aviation sector from the Innovation Fund. (Original version in French by Damien Genicot)