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The EU’s “Fit for 55” Package: what does it mean for aviation?

27 October 2021

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Sustainability Issue 4 - Delivering the European Green Deal

A stronger EU Emissions Trading System to accelerate transition

With the “Fit for 55”package the European Union has unfurled its plans to reduce emissions by at least 55% by 2030 with the ultimate aim for Europe to become the world’s first climate neutral continent by 2050. While the proposals will affect a range of sectors such as construction, energy and transport, we have been looking at the potential changes most relevant for aviation: 1) the revision of the EU Greenhouse Gas Emissions Trading System - a carbon market-based measure, 2) the ReFuelEU Aviation proposal – a mandate accelerating the uptake of sustainable fuels, and 3) the revision of the Energy Taxation Directive introducing tax on fuel for business and leisure flights.

The revision of the EU ETS mechanism foresees a progressive phase-out of the free allowances distributed to aircraft operators from 2024 to 2026 (by respectively: 25%, 50% and 75%) and a complete phase-out from 2027 onwards. To meet the more stringent 2030 emission target, the Commission proposes to reduce the emissions cap by 4.2% annually, instead of the current 2.2% and encourages Member States to use the auctioning revenues for tackling climate change more strongly. In terms of scope, the EU ETS would continue to apply to intra-EEA flights as well as flights to the UK and Switzerland, exempting those flights from CORSIA offsetting requirements. For other international flights, EU airlines would be obliged to apply CORSIA.

Boosting sustainable aviation fuels: the ReFuelEU Aviation proposal

The ReFuelEU Aviation proposal is a clear signal to both the aviation and the energy sector, that EU policy-makers take the increased uptake of sustainable aviation fuels by 2050 seriously. In one of EUROCONTROL's recent sustainability-themed Stakeholder Forum webinars, Flor Diaz Pulido, Head of Unit Aviation Policy, Directorate-General Mobility and Transport, European Commission, said:

“We have had an economic and a regulatory issue: there is not enough demand because the prices were too high and there is not enough supply because there was not enough demand. Horizontal approaches have not worked until today due to the specificities of the aviation market, highly integrated and in need of very specific kind of liquid fuels. This is why we have come up now with a sectoral approach, to reach a strong business case for decarbonising aviation and producing SAF.”

Exploring the huge potential of SAFs for driving down aircraft emissions, whilst enabling business to grow sustainably.

Looking to ramp up the production, deployment and supply of affordable, high quality sustainable aviation fuels (SAF) in Europe, the ReFuelEU Aviation proposal would require fuel suppliers to blend an increasingly high level of sustainable aviation fuels into existing jet fuel uploaded at EU airports, including a minimum share of synthetic fuel (see chart on SAF share mandates).

There will also be an obligation on all airlines (EU and non-EU) departing from EU airports to uplift the jet fuel necessary to operate the flight prior to departure, to avoid fuel tankering. The proposal targets the cleanest advanced biofuels and novel electro-fuels, which meet the sustainability criteria set in the Renewable Energy Directive. It also calls for Member States to introduce penalties on aviation fuel suppliers and aircraft operators in case of non-compliance. To complement these measures promoting SAF, the European Commission announced it would create a zero emission aviation alliance by the end of 2021 to ensure market readiness for disruptive aircraft configurations (e.g. hydrogen, electric).

The proposed changes to the Directive aims at making cleaner fuels more attractive in all transport modes. For aviation, this means the end of all fossil-fuel subsidies and a revision of current tax exemptions for jet fuel on intra-EU flights. Concretely, this means that from 2023, the minimum tax rate for aviation fuel for intra-EU flights would start at zero and increase gradually over a 10-year period, until the full rate of EUR10,75/Gigajoule is imposed. SAF, including renewable hydrogen and advanced biofuels, would not face minimum EU taxes during that 10-year period and cargo-only flights would be exempted.

Last but not least, the “Fit for 55” package includes two more measures that would directly affect aviation: new electric infrastructure for airports are planned under an Alternative Fuels Infrastructure Regulation (AFIR) and a new Effort Sharing Regulation target could be set requiring Member States to prepare new national measures on binding annual greenhouse gas emissions reductions.

Funded by the new Emissions Trading System the social climate fund is set to support Members States in mitigating the packages’ social implications.

The legislative proposals will be scrutinized by the European Parliament and the Council with options for amendments. The full process until final adoption may take between 8 and 18 months.

The Commission has also called on the Council and the European Parliament to agree quickly on the updated Single European Sky regulatory framework, which could help cut aviation emissions by up to 10%.