Sustainable Aviation Fuels:
A 30,000 Foot Perspective
Chapter 5
Regulatory and Policy Frameworks
Section 5.5
EU Emissions Trading System: Transforming Aviation Emissions

The EU Emissions Trading System (EU ETS), established in 2005, is a major element of the EU’s climate strategy and the world’s leading carbon market. It sets emission caps for airlines, allowing the trading of allowances to incentivize emission reductions. Covering intra-EEA flights, the system mandates a decreasing cap on allowances, promoting ongoing reductions.

The EU Emissions Trading System (EU ETS) stands at the forefront of the EU’s climate strategy, operating as the world’s premier carbon market since 2005. With aviation incorporated in 2012, the EU ETS has become a significant force in guiding the industry towards a greener trajectory.

Cap-and-Trade Mechanism:

  • Emission Caps: The EU ETS sets an upper limit on emissions, allotting a specific number of allowances to airlines.
  • Trade Flexibility: Airlines report their emissions and surrender allowances accordingly, with the option to trade (buy or sell) allowances on the market.

Encouraging Emission Reductions:

  • Market-Driven: The system encourages airlines to reduce emissions to sell surplus allowances or to avoid purchasing additional ones.
  • Tech Adoption: This market mechanism naturally drives the adoption of cleaner technologies and the integration of SAFs.

EU ETS’s Scope in Aviation:

  • Intra-EEA Flights: Covers flights within the European Economic Area, propelling airlines towards fuel efficiency and emission reduction.
  • Diminishing Allowances: The cap on allowances decreases over time, ensuring an ongoing reduction in total emissions.

Harmonization with Global Efforts:

Complementary Role: Aligns with and complements global initiatives such as CORSIA, contributing to a broader international push for sustainable aviation.

Stimulating Innovation:

Investment in Sustainability: Revenue from the auctioning of allowances is reinvested into low-carbon aviation technologies and the scaling up of SAF production.

By enforcing actual emission reductions within its regional scope, the EU ETS represents a concrete and impactful measure, setting a benchmark for carbon trading and emission management globally. It’s an emblematic example of policy-driven environmental change, illustrating the potential for regional action to inspire and shape the international landscape toward sustainable aviation.