The European Union Emissions Trading System (EU ETS) is the cornerstone of the EU’s climate policy and the world’s first major carbon market, introduced in 2005. It is designed to reduce greenhouse gas emissions through a market-based “cap and trade” approach. The system sets a cap on the total amount of greenhouse gases that can be emitted by installations covered by the system, including the aviation sector.

Scope and Coverage
The EU ETS covers all flights within the European Economic Area (EEA)—including EU member states, Iceland, Liechtenstein, and Norway. While international flights departing from or arriving at EEA airports were initially included, this was later adjusted to avoid conflicts with international agreements, leaving only intra-EEA flights fully covered under the EU ETS.

 Obligations for Airlines
– Emission Monitoring: Airlines must monitor fuel usage and calculate CO₂ emissions for each covered flight, following strict EU monitoring and reporting guidelines.
– Allowance Trading: Airlines are allocated a certain number of free allowances annually but must purchase additional ones if emissions exceed their allocation. These allowances can be bought through auctions or the open carbon market.
– Annual Reporting: Each year, airlines must submit a verified report detailing their total emissions and surrender allowances equal to their emissions.

 Compliance and Monitoring
Robust compliance frameworks ensure accuracy in emissions reporting. Third-party verifiers audit annual reports before they are submitted to national authorities. Non-compliance can result in heavy fines—up to €100 per tonne of CO₂ not covered by allowances.

Recent Developments
The European Commission’s “Fit for 55” package, aimed at reducing net greenhouse gas emissions by at least 55% by 2030, has tightened EU ETS rules. This includes phasing out free allowances for aviation by 2026 and incorporating non-CO₂ effects such as contrail formation into future emission accounting.

Impact on Airlines
The EU ETS significantly impacts airlines’ operational costs, incentivizing them to invest in more efficient aircraft, improve operational procedures, and explore Sustainable Aviation Fuels (SAFs) to reduce emissions.

Source: https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-aviation_en

The United Kingdom Emissions Trading Scheme (UK ETS) was launched on January 1, 2021, following the UK’s departure from the EU. It mirrors many elements of the EU ETS but has been designed to align with the UK’s independent climate targets, including the legally binding goal of achieving net-zero emissions by 2050.

Scope and Coverage
The UK ETS applies to domestic flights within the UK, flights between the UK and the European Economic Area (EEA), and flights between the UK and Gibraltar. It excludes international flights outside the EEA, which may instead fall under global schemes like CORSIA.

Obligations for Airlines
– Emission Monitoring and Reporting: Airlines are required to monitor and report their CO₂ emissions for all covered flights, adhering to the UK’s Monitoring, Reporting, and Verification (MRV) standards.
– Allowance Trading and Surrender: Each airline is allocated free allowances but must purchase additional ones if needed. These can be obtained through UK government auctions or traded on the open market. Airlines must surrender allowances equivalent to their total annual emissions.
– Verification Requirements: Emission reports must be verified by accredited third parties before submission to the UK Environment Agency.

Compliance and Monitoring
Non-compliance can result in significant penalties, including fines and the mandatory purchase of extra allowances. The UK government also conducts periodic reviews to ensure accurate reporting and to adjust the cap in line with national climate goals.

Recent Developments
The UK has announced plans to tighten the emissions cap to make it compatible with its net-zero ambitions. Consultations are underway to expand the scope of the UK ETS to include non-CO₂ pollutants and to potentially link the system with other international carbon markets.

Impact on Airlines
The UK ETS presents both challenges and opportunities for airlines. While it increases operational costs, it also incentivizes the use of more efficient aircraft, SAFs, and innovative technologies.

Source: https://www.gov.uk/guidance/uk-emissions-trading-scheme-for-aviation-how-to-comply

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a global initiative developed by the International Civil Aviation Organization (ICAO) to stabilize international aviation emissions at 2020 levels. Adopted in 2016, CORSIA is the first market-based measure specifically targeting international aviation emissions on a global scale.

Scope and Coverage
CORSIA applies to international flights between countries that have opted into the scheme. Domestic flights are excluded, as they fall under national regulations. CORSIA operates in multiple phases:
– Pilot Phase (2021–2023): Voluntary participation by member states.
– First Phase (2024–2026): Continued voluntary participation with increased global uptake.
– Second Phase (2027 onwards): Mandatory for most ICAO member states, with exemptions for least-developed countries, small island developing states, and landlocked developing countries.

Obligations for Airlines
– Monitoring, Reporting, and Verification (MRV): Airlines must monitor and report their CO₂ emissions annually for covered routes, following ICAO’s standardized MRV system.
– Offsetting Requirements: Airlines must purchase carbon offsets to cover emissions exceeding baseline levels. These offsets must come from ICAO-approved projects, which include renewable energy, forestry, and carbon capture initiatives.
– Compliance Reporting: Airlines are required to submit offsetting compliance reports to national authorities, who in turn report to ICAO.

Compliance and Monitoring
ICAO enforces stringent verification requirements to ensure transparency and integrity. Airlines failing to meet their obligations face reputational damage and potential regulatory action from their home countries.

Recent Developments
CORSIA continues to expand its network of approved offsetting projects, focusing on ensuring high environmental integrity. In 2024, ICAO updated its guidelines to include more robust sustainability criteria for offset projects.

Impact on Airlines
CORSIA introduces additional operational costs but also encourages airlines to invest in fuel-efficient technologies and SAFs to reduce the need for offsets. Airlines participating in CORSIA are also exploring more efficient routing and flight planning to minimize emissions.

Sources: https://www.icao.int/environmentalprotection/CORSIA/Pages/default.aspx

The Swiss Emissions Trading System (Swiss ETS) has been operational since 2008 and was linked to the EU ETS in 2020, allowing cross-border trading of emission allowances. The system is central to Switzerland’s strategy for meeting its carbon reduction commitments under the Paris Agreement.

Scope and Coverage
The Swiss ETS covers domestic flights and flights departing from Swiss airports to destinations within the European Economic Area (EEA). By linking with the EU ETS, the Swiss system ensures a unified carbon market, allowing for mutual recognition of allowances.

Obligations for Airlines
– Monitoring and Reporting: Airlines must monitor and report their CO₂ emissions for all covered flights, following Swiss MRV protocols.
– Allowance Trading and Surrender: A portion of emission allowances is allocated for free, but additional allowances must be purchased if emissions exceed these allocations. Airlines can trade allowances within the broader EU-Swiss carbon market.
– Annual Compliance: Airlines must surrender allowances equivalent to their annual emissions by April 30 of the following year.

Compliance and Monitoring
Stringent compliance rules are in place, including third-party verification of emission reports. Fines for non-compliance are severe, at CHF 125 per tonne of CO₂ not covered by allowances.

Recent Developments
Switzerland continues to align its ETS with EU climate policy, recently updating regulations to include new aircraft types and incorporating more comprehensive emission data. The government is also considering expanding the scheme to include non-CO₂ aviation impacts.

Impact on Airlines
The Swiss ETS increases operational costs for airlines but provides flexibility through access to the broader EU carbon market. Airlines are incentivized to invest in fuel-efficient aircraft and SAFs to reduce emissions and minimize compliance costs.

Source: https://www.bafu.admin.ch/bafu/en/home/topics/climate/info-specialists/reduction-measures/ets/aviation.html

ReFuelEU Aviation is part of the European Union’s “Fit for 55” package, aimed at decarbonizing the aviation sector by promoting the use of Sustainable Aviation Fuels (SAFs). Launched in 2021, ReFuelEU Aviation mandates the gradual incorporation of SAFs into aviation fuel supplies, reducing lifecycle emissions from air travel.

Scope and Coverage
ReFuelEU Aviation applies to all flights departing from EU airports, including both intra-EU and international flights. The regulation covers fuel suppliers, airports, and airlines, ensuring a coordinated approach to SAF adoption.

Obligations for Airlines and Fuel Suppliers
– SAF Blending Mandates: Fuel suppliers are required to blend increasing percentages of SAF into aviation fuel, starting at 2% in 2025 and rising to 63% by 2050.
– Airline Refueling Requirements: Airlines must refuel with SAF at EU airports and provide annual reports detailing SAF usage and related emissions reductions.
– Incentives and Penalties: The EU offers financial incentives for early adopters of SAF but imposes penalties for non-compliance.

Compliance and Monitoring
Airlines and fuel suppliers are subject to strict reporting requirements, with annual audits to verify SAF blending ratios and emissions reductions. Non-compliance can result in fines and potential restrictions on airport access.

Recent Developments
ReFuelEU Aviation has spurred significant investment in SAF production facilities across Europe. The EU is also exploring advanced biofuels and synthetic fuels as part of its long-term aviation decarbonization strategy.

Impact on Airlines
The adoption of SAFs presents both challenges and opportunities for airlines. While SAFs currently cost more than conventional jet fuel, regulatory incentives and consumer demand for sustainable travel are driving broader adoption. Airlines that lead in SAF integration may benefit from competitive advantages and enhanced brand reputation.

Source: https://transport.ec.europa.eu/transportmodes/air/environment/refueleu-aviation_en