The EU Emissions Trading System (EU ETS) is the bloc's cap-and-trade scheme for greenhouse gases, launched in 2005. Aviation was brought into the system under Directive 2008/101/EC, with obligations beginning on 1 January 2012. Airline operators flying to, from, or within the European Economic Area must monitor CO₂ emissions, surrender allowances (EUAs or aviation allowances, EUAAs) equal to their verified emissions, and report annually.
The original scope covered all flights arriving at or departing from EEA airports, including those operated by non-EU carriers. This triggered strong objections from China, India, the United States, and others, who argued it breached the Chicago Convention and amounted to extraterritorial regulation. In response, the EU adopted a "stop-the-clock" decision in 2013, temporarily limiting the scope to intra-EEA flights while ICAO negotiated a global market-based measure. That measure became CORSIA, agreed at the 2016 ICAO Assembly.
Under the Fit for 55 package, the revised ETS aviation rules (Directive (EU) 2023/958) phase out free allocation of allowances to airlines between 2024 and 2026, so that from 2026 airlines must purchase 100% of their allowances at auction. The reform also introduces monitoring, reporting and verification of non-CO₂ effects (contrails, NOₓ) from 2025, and integrates CORSIA for extra-EEA flights to participating third countries.
Key features:
- Scope: intra-EEA flights, plus flights to Switzerland and the UK under linking arrangements.
- Cap: a declining sector-wide cap, tightened via the Linear Reduction Factor.
- Compliance: annual surrender by 30 September; penalties of €100/tonne (indexed) for non-compliance.
- Interaction with CORSIA: extra-EEA international flights fall under CORSIA offsetting rather than ETS surrender.
The system is the world's largest carbon market application to aviation and a recurring flashpoint in trade and climate diplomacy.
Example
In 2012, Chinese and Indian airlines refused to submit emissions data to EU regulators, prompting Brussels to suspend the ETS's extraterritorial application to non-EEA flights pending ICAO negotiations on CORSIA.
Frequently asked questions
Since the 2013 'stop-the-clock' decision, only flights within the European Economic Area (plus links to the UK and Switzerland) require surrender of ETS allowances. Extra-EEA international flights fall under CORSIA.
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