Key Takeaways
- The European Commission has proposed revisions to the EU Emissions Trading System (EU ETS) with significant implications for international aviation.
- The proposal would expand EU ETS to apply to some flights to outside of Europe but not to commercial aviation flights to and from many major aviation markets, including the U.S., India, Brazil, China, and Japan.
- Beginning in 2029, EU ETS would apply to all commercial aviation departures from airports in the European Economic Area (EEA) to airports within a 5,000 km radius of Frankfurt Airport, which includes Turkey, Saudi Arabia, and major aviation hubs in the United Arab Emirates (UAE). All private business jet operations to and from the EEA would also be included.
- Many aviation stakeholders view the proposal as challenging the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) status as the only market-based measure applicable to international aviation emissions.
- The Commission separately proposes to strengthen support for Sustainable Aviation Fuel (SAF) by providing increased SAF allowances and supporting a book-and-claim system.
- The proposal is far from final and represents only the beginning of “tripartite” negotiations among the European Commission, Council, and Parliament. Major aviation organizations, including the UN’s International Civil Aviation Organization (ICAO), the International Air Transport Association (IATA), and Airlines for America, have expressed strong opposition.
EU ETS Proposal Generally
On July 17, 2026, the European Commission proposed revisions to EU ETS, a cornerstone of the EU’s climate policies. EU ETS is a carbon pricing scheme based on greenhouse gas (GHG) emissions caps and allowances and sets a legally binding target of net-zero emissions in the EU by 2050. The Commission claims that EU ETS has generated more than €270 billion for decarbonization efforts since 2005.
Signaling a less aggressive approach intended to balance economic imperatives while maintaining the EU’s commitment to achieving GHG reduction goals, the Commission’s new proposal will slow the pace at which companies must reduce emissions. The previous model targeted a net-zero emissions goal by 2039; however, this proposal’s linear reduction factor, the rate at which pollution caps fall annually, will decrease from 4.4 percent to 3.7 percent between 2031 and 2035, then at a rate of 1.7 percent annually after 2036. In its press release, the European Commission explained these changes reflect “changing global realities” and will ease the burden on European industry as the EU continues its transition to clean energy and electrification.
Impacts on the Aviation Sector
Whether EU ETS should apply to flights beyond Europe has long been linked to the development of CORSIA. As originally adopted in 2008, EU ETS was designed to cover all international flights to and from the EEA. In 2012, however, the EU adopted its “stop the clock” decision, temporarily limiting the system’s application to flights within the EEA. The EU described this change as a way to support efforts to address international aviation emissions through ICAO. ICAO subsequently developed CORSIA as the sole global market-based measure for regulating CO2 emissions from international flights. In its current form, beginning in 2028, CORSIA will require carriers to purchase and retire carbon offsets for emissions exceeding 85% of their 2019 emissions levels.
The EU ETS Directive, however, required the European Commission to assess the “environmental integrity” of CORSIA and whether ICAO had sufficiently “strengthened CORSIA” by July 1, 2026, to support the EU’s climate commitments under the Paris Agreement. Under the Directive, a negative assessment would trigger an obligation for the Commission to propose legislation to extend EU ETS to include “as appropriate” flights departing the EEA to destinations beyond Europe. The European Commission found that CORSIA has not “yet” been sufficiently strengthened, indicating that the program is currently insufficient but may eventually be adequate.
As a result, the Commission did not propose to extend EU ETS to cover all flights departing the EEA for destinations beyond Europe. Instead, beginning in 2029, EU ETS would apply to flights departing from airports in the EEA to destinations within 5,000 km of Frankfurt airport (the largest airport in “the geographic centre of Europe”). Importantly, the proposal would not extend EU ETS to flights: (1) arriving from airports outside the EEA (except for airports in the UK, Switzerland, and Gibraltar) to airports in the EEA; or (2) departing to airports outside the EEA (except for airports in the UK, Switzerland, and Gibraltar), located more than 5,000 km from the geographic center of Europe. In other words, flights from the EEA to Northern Africa and most of the Middle East, including theUAE, Saudi Arabia, and Turkey, would be subject to EU ETS starting in 2029. Flights to and from the United States, Brazil, China, Japan, and other countries outside the 5,000 km perimeter remain excluded.
The Commission states this approach is intended “to ensure that aviation as a whole contributes its fair share to addressing climate change in line with the objectives of the Paris Agreement” while “maintain[ing] close alignment” with CORSIA by allowing it to apply, exclusive of EU ETS, to most international flights to and from EEA airports. The proposal provides for a new assessment by the Commission of CORSIA in 2032, stating that if CORSIA proves to be an effective tool for reducing emissions – i.e., it is “ambitious, efficient and successful” – the scope of EU ETS should then be retracted to cover only flights within the EEA. This implicitly acknowledges that the Commission could also recommend expansion of EU ETS to international flights involving EEA airports if its 2032 report concludes CORSIA is not “successful.”
Separately, the new EU ETS proposal aims to strengthen support for SAF by providing increased SAF allowances and supporting a book-and-claim system. The Commission states this support will rise to €15 billion from 2029-2040 compared with the current €1.5 billion over eight years. Book-and-claim systems are rapidly emerging across clean fuel markets, as they allow physical products and their environmental attributes to be transacted as separate commodities (read more about book-and-claim systems here). Developing a book-and-claim system could help bridge near‑term demand and longer‑term infrastructure build‑out for SAF.
Aviation Sector Reactions
The international aviation community’s response so far has been generally critical of the Commission’s proposal. ICAO released a statement expressing frustration with the proposal’s displacement of CORSIA within the 5,000 km perimeter and undermining of CORSIA’s status as the only market-based measure applying to international aviation emissions. According to ICAO, EU ETS expansion would introduce the potential for double charging for CO2 emissions from international aviation and possibly damage the implementation of CORSIA.
IATA also released a statement saying it is “deeply frustrated” with the proposal’s attempt to expand EU ETS beyond Europe’s borders and recommending the EU focus on making CORSIA more successful instead. IATA did recognize, however, that increasing SAF allowances and enabling a book-and-claim system for SAF could prove very helpful. Airlines for America’s statement also opposes the Commission’s proposal.
Next Steps
The proposal is far from final. The European Commission’s proposal still needs support from the 27 member states of the EU as well as from the European Parliament before finalization, meaning months of discussion lie ahead. In addition, while the proposal does not yet expand EU ETS to worldwide flights, non-EU countries currently encompassed in the proposal’s scope will likely push back against inclusion. Negotiations beyond the European approval process may thus further delay adoption.
[View source.]