EU ETS proposal: Aviation takes off, but misses key opportunities

This is the first in a three-part summer blog series unpacking the Commission's 17 July proposal to revise the EU Emissions Trading System (EU ETS). Next up: shipping, then a closer look at industry support through allowances.

First, EU transports’ fastest-growing source of emissions: aviation. In short: the extension of the scope is a step in the right direction, but leaving most emissions still unpriced means more must be done to deliver the support Europe's clean aviation industry needs.

A partial extension, on partial logic

The proposal would, from 2029, extend the ETS beyond intra-EEA flights to cover departures to destinations within a 5,000km radius of Frankfurt. The US, China, and other major and growing aviation markets would stay out of scope. The result is that the most polluting long-haul routes face no incentive to decarbonise, prioritising geopolitical caution over European industry and climate impact.

Even with the extension, this proposal would increase the share of Europe's departing aviation CO2 emissions covered by the ETS to a limited extent. This still leaves aviation with the largest amount of emissions unregulated of any ETS-covered sector.

It also misses a major opportunity to support Europe’s clean aviation industry. An extension to all departing flights would generate nearly €14bn in total annually for Member States by 2030. Significant portions of these revenues could be reinvested in decarbonising the sectors, while creating a level playing field for European innovators by narrowing the price gap between sustainable and polluting energy systems.

Still waiting on CORSIA

The decision to refrain from fully regulating aviation emissions has been justified for over a decade with the promise of CORSIA, the global offsetting scheme, meant to tackle international aviation emissions.

The Commission's own assessment now confirms CORSIA isn't delivering: both country participation and environmental integrity fall short. Yet rather than closing the gap itself, the proposal schedules another CORSIA review in 2032. The legal text leaves the door to any outcome to improve if it still falls short, but spells out only one concrete trigger: if the Commission were to consider CORSIA satisfactory, the ETS could be scaled back to intra-EEA flights only. This places significant reliance on a scheme that is structurally incapable of reducing international aviation's emissions in line with the Paris Agreement.

The perspective from European innovators

In sum, the proposal makes a move in the right direction, but does not yet make the ambitious choices to spur European leadership in clean aviation industry. Curbing ambition protects incumbent fossil business models while holding down investment in bold European companies pioneering clean technologies for Europe.

There is, however, a major positive step on revenues: the proposal sets out that half of Member State ETS revenues would now have to go toward decarbonising sectors covered by the system. This is a real shift given Member States have historically collected roughly 80% of ETS revenues while spending less than 10% on industrial decarbonisation.

But a bigger pot only delivers if it's earmarked to genuinely support technologies that deliver the most climate benefits and strengthen Europe’s industrial leadership, rather than being diverted to lower integrity alternatives such as biofuels.

As long as the greatest share of international flights remain without carbon pricing, these clean technologies continue to compete against fossil fuels that don't bear a carbon cost. The greatest risk to Europe's industrial leadership is not moving too fast: it is failing to move boldly enough.