12 December 2022: The European Council and Parliament reached an agreement on the EU ETS rules applying to the aviation sector on 7 December.

There was no decision to change the scope of the regulation for the time being: EU ETS rules will apply for intra-European flights (including departing flights to the United Kingdom and Switzerland), while CORSIA will apply to for extra-European flights to and from third countries participating in CORSIA from 2022 to 2027.

At that moment, the European Commission will assess if the implementation of CORSIA by operators is sufficient to reduce aviation emissions in light of the objective of the Paris Agreement. If participation in CORSIA has not reached 70 per cent and improved to credibly achieve the zero aviation emissions target by 2050, the Commission will make a proposal to extend the scope of ETS to all flights departing from the EEA. If the conditions are met, a proposal to keep the current EU ETS scope should be published instead.

The Council and Parliament agreed to gradually phase out free emission allowances for the aviation sector as follows: 25 per cent in 2024, 50 per cent in 2025 and 100 per cent from 2026 (full phase out).

However, €20m of SAF allowances will be given to airlines in 2024-2030 to cover part of the price difference between SAFs which will provide an incentive for the uptake of fuels that are in the short term a promising path for the decarbonisation of aviation. All fuels eligible under ReFuelEU (except fuels derived from fossil fuels) will be eligible for the SAF allowances.

Small islands, small airports and outermost regions will be able to cover the price differential between kerosene and eligible fuels with 100 per cent of the SAF allowances to ensure the availability of the eligible fuels in these locations with specific supply constraints.

Finally, airlines will have to report on their non-CO2 emissions as of 2026. A possible regulation of these pollutants by the Commission for 2028 is foreseen.

In terms of next steps, the agreement will now be formally adopted by the Council and the Parliament.