Two years after the European Commission’s proposal in July 2021, the legislative process concerning the revision of the Emission Trading System (ETS) as regards aviation has come to an end with the official entry into force of Directive (EU) 2023/958 on 5 June 2023. Member States will now be required to transpose the Directive into their national legislation by 31^st of December, 2023.

The revision introduces several noteworthy changes to the ETS for Aviation, which are set out below.

One of the key modifications involves the gradual phasing out of free ETS allowances (NB: one allowance represents 1 tonne of CO₂ emitted). Starting in 2024, the ETS allowances will be gradually reduced ultimately to reach a full auctioning regime from 2026. While some may perceive the phasing out of free allowances as a challenge, it is also important to note that the revised scheme will reserve 20 million allowances, from January 2024 to December 2030, specifically to support the purchase of sustainable aviation fuels (SAF). EBAA welcomes this reservation of SAF allowances, as it should assist operators in mitigating the price differential between conventional jet fuel and SAF, therefore reinforcing the industry’s commitment to reach net zero carbon emissions by 2050.

Another development is the introduction of a new obligation for operators to report non-CO₂  aviation emissions stemming from their flights. These non-CO₂ emissions include oxides of nitrogen (NOx), soot particles, oxidised sulphur species, and effects from water vapour, including contrails. Beginning in 2025, operators will be required to incorporate these non-CO₂ effects into the Monitoring Reporting and Verification (MRV) framework. While this addition demonstrates the EU’s commitment to comprehensive emissions monitoring, EBAA expresses concerns about the logistical and administrative burdens it may place on operators, particularly due to the complex nature of quantifying some of these effects such as contrails.

Lastly and relating to the alignment of the EU ETS with ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), EU policymakers decided that the EU ETS will continue to apply (only) to flights within the EEA and departing flights to Switzerland and the United Kingdom. However, this decision remains open to potential adjustments in the future – by the end of 2026, the Commission is due to conduct an assessment based on the level of convergence of CORSIA with the goals set up by the EU ETS. This assessment should ensure that potential risks such as double counting or increased administrative burdens on operators are addressed. EBAA will continue to closely monitor any future revisions of the legislation in this respect.

The revised ETS for Aviation is another step in the journey toward reducing aviation emissions. It is important to stress, however, that other measures could be enacted by EU policymakers to further reduce emissions rapidly. For instance, the implementation of the Single European Sky initiative (SES) would make European air traffic management more efficient and reduce emissions by up to 10%, while R&D incentives would facilitate more rapid development of zero or low-emissions aircraft.