19 April 2023: Yesterday, the European Parliament plenary approved [1] the deal reached with EU Member States on the reform of the EU’s Emissions Trading System (ETS) for aviation and maritime, and agreed to the revision of the ETS for aviation [2]. This will phase out the free allowances to the aviation sector by 2026 and promote the use of sustainable aviation fuels.

Parliament and Council reached a provisional agreement on revising the EU Emissions Trading System for aviation. The agreement foresees:

• Aligning the aviation sector with EU and global climate goals.
• Phasing out free allocations for the aviation sector by 2026.
• Introduction of sustainable aviation fuels allowances.
• New mechanism for addressing non-CO2 emissions.

To ensure that the sector contributes to reaching EU and global climate targets, EU negotiators agreed to tighten the requirements for reducing carbon dioxide emissions from aviation. The new law will integrate, into the revised ETS, ICAO's agreed global market-based Carbon Offsetting and Reduction Scheme for International Aviation [3] (CORSIA). In case of a negative evaluation of CORSIA’s progress by 1 July 2026, the Commission would be required to make a proposal to include in the scope of the EU ETS emissions of flights departing from an airport located in the European Economic Area (EEA) to a third country. As of 2027, flights to third countries not applying CORSIA will fall under the scope of the ETS.

Phasing out of free allocations by 2026

The deal includes an end to free allocations of allowances to the aviation sector by 2026, one year ahead of the timetable proposed by the Commission. To ensure the gradual phase out, a decrease of 25 per cent in free allocations is foreseen for 2024 and 50 per cent for 2025.

Promoting the use of sustainable aviation fuels

Negotiators agreed to reserving 20 million allowances, between 1 January 2024 and 31 December 2030, for commercial aircraft operators that increase their use of sustainable aviation fuels (SAF), such as hydrogen from renewable energy sources, renewable fuels from non-biological origin and advanced biofuels.

Addressing the impact of non-CO2 aviation emissions

Parliament successfully negotiated a two-step approach to mitigate the impact of non-CO2 emissions, such as nitrogen oxides, sulphur dioxide and soot particles. Firstly, the Commission will establish and apply a framework for monitoring, reporting and verification (MRV) of non-CO2 aviation emissions as of 2025. Then, an evaluation will be made in 2027, followed by a legal proposal in 2028 extending the scope of the EU ETS to cover these emissions.

Other measures foreseen by the legislation:

• Revenues from auctioning 5 million allowances for aviation will be used through the Innovation Fund to support innovation, new technologies, including electrification in the sector.
• A derogation will be provided for emissions taking place until 2030 from flights between an airport located in an outermost region of an EU country and an airport located in the same country, and flights between airports located in an outermost region of the same EU country.
• As of 2023, aggregated annual emissions related data will be published in a user-friendly manner, in order to improve transparency.

Next steps

Parliament and Council will have to formally approve the agreement before it can come into force.