Climate consultancy South Pole has called on the European Union to provide greater regulatory certainty for airlines, amidst an ongoing review of the future scope of the EU Emissions Trading System (ETS) for aviation.
The European Commission recently recommended against extending the ETS to all flights beyond the European Economic Area (EEA), a move that South Pole described as a ‘constructive compromise’, albeit one that leaves more questions to be answered.
As Nadia Kaddouri, CEO of South Pole, commented, the recommendation “leaves airlines without the regulatory certainty and clarity they need and creates a two-tiered regulatory system for airlines to navigate. This is the opposite of the deregulation and competitiveness agenda rightly championed by the EU.”
‘Fragmented rules’
As South Pole noted, the proposed approach could lead to a system in which different carbon pricing rules would apply to comparable international routes.
“At a time of sustained fuel price volatility, a level playing field is crucial for competitiveness,” Kaddouri noted. “Applying the ETS to flights travelling up to 5,000km from Frankfurt, capturing major international hubs such as Dubai, risks creating fragmented rules for comparable routes – one regime applying outside the radius and one inside. These carbon costs are likely to be reflected in higher ticket prices and air cargo rates.”
CORSIA compliance
Alongside the ETS regulation, airlines are already obliged to comply with the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), established by the International Civil Aviation Organization (ICAO), which provides airlines with a “common compliance framework and enables them to address part of their emissions obligations through high-quality eligible carbon credits, directing climate finance to emissions-reduction projects today,” Kaddouri added.
“As the sector continues to scale longer-term solutions such as sustainable aviation fuels, more efficient aircraft and operational improvements, carbon credits remain an important near-term tool for meeting compliance obligations.”
South Pole added that any changes to the existing regulatory framework need to complement, rather than complicate, efforts to reduce aviation emissions globally.
“As the EU considers the evolution of its ETS, it is essential that any changes provide regulatory certainty, minimise unnecessary administrative burden for airlines, and support a globally coordinated approach to decarbonising the sector,” said Kaddouri.
Announcing a review of the ETS system, Wopke Hoekstra, European Commissioner for Climate, Net Zero and Clean Growth, said that the ETS has “proven that carbon pricing works. It has cut emissions, strengthened Europe’s energy security and mobilised investment across our economy. Today’s proposal on the ETS review brings together three key goals: climate action, competitiveness, and independence. It advances climate action, by also transforming the ETS into a genuine engine for innovation and investment.” Read more here and here.
