Fixing EU carbon market crucial to airlines ‘building back better’

Capping the number of EU pollution permits that airlines can buy, and abolishing the permits that they get for free, will be necessary to drive the uptake of cleaner technology in aviation, a new study finds. EU lawmakers will overhaul the bloc’s aviation carbon market next summer, and Transport & Environment (T&E) - which commissioned the study - said airlines should not resist these necessary reforms if they want to make good on their pledge to ‘build back better’ from the Covid crisis.

Jo Dardenne, aviation manager, said: “If the aviation sector is serious about greening its recovery, now is the moment to use the EU carbon market to lock in the emissions reductions seen during the pandemic. Once the crisis recedes, airlines need to pay a real price for their carbon emissions, one that ensures new technologies like e-fuels can come to the market.”

Abolishing airlines’ free pollution permits could help raise €1 billion per year, the study finds. The funds generated could be used to support the development of green e-fuels for aircraft. EU regulators could also apply a multiplier to increase the amount of carbon allowances that airline polluters would need to surrender each year, the report said. These measures would send a sufficient price signal to drive emissions reductions by airlines.

However, reforming the EU emissions trading system for aviation would not be enough on its own to achieve significant emissions reductions, T&E cautioned. It said the EU and governments would also need to mandate the use of sustainable e-fuels by airlines while also taxing the kerosene they burn.

Jo Dardenne concluded: “Right now airlines have little incentive to start the transformation to cleaner technology. A higher carbon price for airlines post-crisis must also come with a requirement to start using e-fuel as well as a tax on the kerosene they burn.”

Earlier this month all European airlines signed a pledge to significantly cut CO2 emissions by 2030 - as part of its recovery from the pandemic crisis. The European Commission has said it will propose reforms of the ETS for aviation in June 2021.

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