Airlines urge EU to review carbon rules to protect competitiveness

The European Union should review its emissions trading system to avoid undermining the competitiveness of its aviation sector as airlines decarbonise, the International Air Transport Association (IATA) said on Monday.

It also urged Brussels to align more closely with global rules and channel more carbon revenues back into the industry.

The airline body said the review of the EU Emissions Trading System (EU ETS) should focus on four areas.

These include the full implementation of the global CORSIA carbon scheme for all international flights, the introduction of a sustainable aviation fuel (SAF) book-and-claim mechanism, greater reinvestment of ETS revenues into aviation decarbonisation, and a broader effort to balance climate ambition with the sector’s economic resilience.

Its call comes as concerns grow in Europe over the impact of high energy costs, complex regulation and weak investment on the bloc’s competitiveness, a debate that has intensified following the findings of Mario Draghi’s report on Europe’s economic resilience. 

“European aviation policy must bolster competitiveness as it advances decarbonisation,” IATA Director General Willie Walsh said.

“Reviewing the EU ETS offers a critical opportunity to refocus efforts on cost-effective emission reductions. The priority must be the full implementation of CORSIA, the reinvestment of EU ETS revenues into SAF and other credible decarbonisation solutions, and the elimination of overlapping measures that add cost and complexity without environmental gain,” he added.

He said this would help protect European air connectivity, which he described as a strategic asset underpinning trade, commerce and EU integration, at a time of wider economic strain and geopolitical uncertainty. 

IATA said aviation, as a global industry, should remain subject to a single international market-based mechanism under the International Civil Aviation Organisation’s Carbon Offsetting and Reduction Scheme for International Aviation, known as CORSIA. 

According to the association, the EU should apply CORSIA fully to all international flights, including intra-EEA routes, rather than layering regional measures on top of the global framework.  

It warned that overlapping rules create extra costs and administrative burdens without delivering additional environmental benefits, while also risking fragmentation of the regulatory system. 

The association also called for the EU to introduce purchase-based claiming for sustainable aviation fuel under the EU ETS through a so-called book-and-claim system. Such a mechanism would allow airlines to claim the environmental benefits of SAF based on their purchases, regardless of where the fuel is physically uplifted. 

IATA said this would improve investment certainty, support a more transparent SAF market and help create a more level playing field for carriers across Europe, including those operating far from major fuel hubs.  

It added that this would require targeted amendments to the ETS directive, as well as an expanded Union Database capable of tracking both the physical movement of SAF and its environmental attributes. 

At the same time, the body said Brussels should return a greater share of aviation’s ETS contributions to the sector to support the transition to cleaner operations, particularly as the financial burden has increased since the 2024 phase-out of free allowances. 

It said the existing SAF Allowance scheme covers only a small share of expected demand, estimated at around 4 to 5 per cent of the industry’s total allowance needs between 2026 and 2030, and argued that both its size and duration should be expanded. 

Citing the Sustainable Transport Investment Plan, IATA said investment needs to meet the EU’s SAF targets were estimated at between 57 billion euros and 67 billion euros by 2035, rising to between 268 billion euros and 376 billion euros by 2050. 

The aviation sector is expected to surrender nearly 330 million allowances between 2026 and 2030, generating billions of euros in revenues for member states, it added, but said only limited amounts had so far been reinvested through the EU Innovation Fund. 

Future support, it said, should focus on emerging SAF technologies, helping airlines absorb the high cost of early-stage solutions and restoring free allowances to protect competitiveness and prevent investment from being diverted away from green projects. 

More broadly, IATA said the EU needed to avoid a sharp rise in compliance costs at a time when geopolitical instability is already putting pressure on connectivity and passenger choice. 

“A sudden increase in compliance costs, especially in a fragile geopolitical and economic context, risks weakening connectivity, reducing consumer choice, and diverting resources away from decarbonisation investments,” it said.

Finally, IATA said the EU ETS could still play an important role in aviation’s transition, but only if climate policy remains grounded in scientific evidence, aligned with international standards and designed in a way that does not impose disproportionate costs on airlines and passengers.