Clean Aviation Coalition Pushes EU to End €26 Billion Airline Carbon Exemption
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A coalition of 28 clean aviation companies and e-fuel producers is urging the European Commission to remove international aviation’s exemption from the EU Emissions Trading System (EU ETS). The debate has become a key battleground in Europe’s aviation decarbonisation strategy, raising questions about carbon pricing, competitiveness, investment in sustainable technologies, and the future funding of aviation’s green transition.
Published: 4 July 2026
Written by: Shreya Majumder
The European Commission is being urged by a coalition of 28 clean aviation enterprises and producers of electro-fuel (e-fuel) to do away with one of aviation's most contentious policy benefits: the exemption of international flights from the European Union Emissions Trading System (EU ETS).
At the centre of the discussion is an issue that is becoming increasingly relevant to European aviation: should international airlines continue to benefit from exemptions from carbon pricing as the sector faces mounting pressure to decarbonise? According to the coalition, the answer is no.
The next EU ETS review is emerging as a crucial moment for the industry's industrial and climate policies, as the Commission must evaluate the continuation of the current exemption by 1 July 2026. There is a limited but important policy window because the current exemption for international flights is already scheduled to expire at the start of 2027.
The coalition claims that by 2035, expanding carbon pricing to flights arriving in and departing from Europe could generate up to €79 billion. They are advocating for a portion of those revenues to be reinvested directly into sustainable aviation infrastructure, domestic e-fuel production, and new electric propulsion technologies. Their core argument is that the issue is as much economic as it is environmental.
They argue that the market remains structurally biased in favour of fossil fuel-powered aviation. More than €8 billion in free ETS allowances have been granted to European airlines, while jet fuel continues to benefit from exemptions from fuel duty and VAT. According to analysis provided by the coalition, the EU lost nearly €26 billion in revenue between 2012 and 2023 by excluding international aviation from the ETS. Those funds, they contend, could have accelerated the industry's transition towards lower-carbon operations.
For sustainable aviation developers, this is not merely a taxation issue but one of capital allocation. By shielding conventional kerosene from its full environmental cost, policymakers may inadvertently be limiting investment in next-generation technologies such as synthetic fuels, battery-electric aircraft, hybrid propulsion systems, and direct air capture infrastructure.
Fair emissions pricing provides the regulatory certainty that investors require when committing long-term capital, according to Felix Leworthy, Chief Commercial Officer of ETFuels. In his view, stronger carbon pricing would not only improve market efficiency but also strengthen Europe's industrial competitiveness and energy security.
That argument is gaining momentum as European aerospace companies compete to commercialise cleaner regional aircraft expected to enter service during the 2030s. However, scaling these technologies requires significant levels of investment, particularly within the e-fuel ecosystem, where production remains heavily dependent on renewable energy availability, hydrogen supply, and carbon capture infrastructure. Industry leaders warn that Europe risks falling behind without stronger policy support.
Philip Duggan, CEO of Nordic Generation Fuels, described the upcoming ETS review as a critical opportunity for Brussels to demonstrate a meaningful commitment to sustainable aviation. Similarly, David Mulrooney of NEG8 Carbon argued that reforming carbon pricing could play a decisive role in determining whether Europe’s e-fuel industry reaches commercial scale.
Airlines, however, maintain a different perspective. Legacy carriers and industry bodies such as the International Air Transport Association (IATA) argue that international aviation is already covered by a global emissions framework through the International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The scheme requires airlines to offset growth in emissions on international routes and is expected to expand significantly from 2027.
From the airlines' perspective, adding EU-specific carbon pricing on top of CORSIA risks creating regulatory overlap, increasing compliance complexity, and raising operational costs.
Another concern is strategic competitiveness. Airlines warn that passengers could increasingly choose to connect through non-EU hubs such as Istanbul, Doha, or Dubai to avoid fare increases. Because the proposed carbon pricing measures would primarily affect flights departing from the EU, airlines argue that traffic leakage could weaken European hubs while delivering little reduction in global emissions.
Willie Walsh, outgoing Director General of IATA, has also warned that extending the ETS could ultimately increase ticket prices, suppress demand, and affect the competitiveness of European carriers already managing higher sustainability-related costs, including the requirements of ReFuelEU Aviation and increasing sustainable aviation fuel blending mandates.
Ultimately, the debate exposes a deeper policy divide. One side argues that existing frameworks underprice carbon and slow innovation. The other contends that fragmented regional taxation in a fundamentally global industry risks creating inefficiencies and competitive distortions.
The Commission’s July review is unlikely to trigger immediate policy changes, as any legislative adjustments would require lengthy negotiations. Nevertheless, it is expected to provide the clearest indication yet of Brussels’ long-term strategic direction.
The outcome will shape not only how aviation emissions are priced in Europe, but also who bears the cost of the industry's transition and who ultimately leads the next phase of sustainable aviation.
Key Facts
Coalition comprises 28 clean aviation companies and e-fuel producers
Calls for the EU to end international aviation's exemption from the EU ETS
Coalition estimates the policy could generate up to €79 billion by 2035
Claims the EU lost approximately €26 billion in revenue between 2012 and 2023
Supports reinvestment into e-fuels, electric propulsion, and sustainable infrastructure
Airlines argue international aviation is already covered by CORSIA
Concerns include higher costs, regulatory overlap, and traffic leakage
EU review could shape the future of aviation decarbonisation across Europe
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