Emissions trading system. The Parliament and the Council reach a provisional political agreement

On 7 December 2022, the European Parliament and the Council reached a provisional political agreement on the revision of the European emissions trading system (EU ETS) rules applying to aviation, in order to ensure that the sector contributes to the emission reduction objectives under the Paris Agreement.

In the first place, while the EU ETS will apply for intra-European flights, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will apply for flights to and from third countries from 2022 to 2027, and when they reach levels above 85% of the 2019 ones, emissions from flights to and from outside the European Economic Area (EEA) will have to be offset with corresponding carbon credits, invested in emissions reductions in countries participating in CORSIA.

In the second place, the agreement aims at gradually phasing out free emission allowances for the aviation sector by 25% in 2024, 50% in 2025 and 100% from 2026. In this regard, the Council and the Parliament agreed to transfer 5 million of allowances from the aviation sector to the innovation fund, and to set aside other 20 million to incentivise the uptake of fuels representing a promising path for the decarbonisation aviation in the short term.

Finally, all fuels eligible under the “RefuelEU” initiative, except those derived from fossil fuels, will be eligible for the sustainable aviation fuels (SAF) allowances until 2030. More particularly, 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, instead, the coverage of the price differential will be modulated according to the type of fuel, that is i) 95% for renewable fuels of non-biological origin (RFNBOs), ii) 70% for advanced biofuels, and iii) 50% for other eligible fuels.

Marco Stillo