Latest developments on EU ETS and SAF
20/06/2022
On the 8th of June 2022, the European Parliament voted on several proposals concerning the EU’s Climate law. These proposals have wide-ranging implications across several industries. Many proposals were successfully voted in while others were defeated and slated for review. From an aviation standpoint, there was plenty of breaking news. The proposals that were adopted include the creation of a new SAF allowances pricing scheme under the EU ETS, changes to the scope of the EU ETS, references to non-CO2 emissions being included for aircraft operators, earlier phasing out of free allowances, and revisions to current ETS exemptions for flights to/from Europe’s outermost regions.
Change of the EU ETS scope:
Perhaps the most controversial proposal of the session, which was voted in with overwhelming support was the push to include flights originating in the EEA and terminating in any third country under the scope of the EU ETS. The motion passed with 478 votes in favor, 130 against, and 32 abstentions. This decision has been met with stiff criticism from certain industrywide organizations citing extra territorial regulatory imposition as well as concerns about double counting. It is worth noting that despite the criticism, the move was well-received by environmentalists, NGOs, and most notably, a group of airlines in Europe. They support the parliament’s decision on the grounds that the airlines with predominantly European operations have historically had to carry a bigger burden of carbon allowances since almost all of their emissions were subject to the EU ETS while other operators with long-haul flights outside the EEA region paid only a minuscule fraction for their emissions.
On the topic of double counting, the parliamentary proposal has further stated that considering the European union’s commitment to, and its simultaneous participation in, CORSIA, the financial value of expenditure on credits used for CORSIA for flights from the EEA to third countries that are implementing CORSIA should be deducted from the financial obligations under the EU ETS. This circumvents a potential double burden for carriers, who may have to pay for the same emissions twice (through both the EU ETS and the CORSIA).
The other contentious proposal sought to end the allocation of free allowances earlier than stipulated in the existing framework. The European Parliament has now decided that free emission allowances must disappear as early as 2025, against the wish of the European Commission which sought a gradual abolition of the free allowances distributed to aircraft operators from 2024 to 2026 (25%, 50%, and 75% respectively) and a complete abolition from 2027, whereas the European Parliament’s Environment Committee proposed 2026 for the abolition.
Some of the other proposals passed in the Parliament reference an end to the existing derogation from the EU ETS for emissions from flights between airports located in an outermost region and airports located in the EEA region, and flights between two outermost regions. This decision also received its fair share of criticism on the grounds of the outermost regions being dependent on air connectivity for access to goods, services, and education.
Based on the decisions arrived at on the 8th of June, final negotiations between the European Parliament and the European Council will have to wait however until other elements of the ‘Fit for 55’ package are approved by the European Parliament, such as the general ETS framework. More clarity can be expected on these in the coming months.
SAF:
As SAF are one of the key levers for the decarbonizing of aviation, the proposal aims to increase the supply and demand of SAF while ensuring a level playing field across the EU air transport market. These are the notable aspects of achieving this goal, which were adopted during the vote on 08 June 2022:
1) An obligation for fuel suppliers to ensure that all fuel made available to aircraft operators in EU Union airports* contains a minimum share of SAF from 2025, and a minimum share of synthetic fuels from 2030:
1) An obligation for fuel suppliers to ensure that all fuel made available to aircraft operators in EU Union airports* contains a minimum share of SAF from 2025, and a minimum share of synthetic fuels from 2030:
- 2025 – minimum 2% SAF.
- 2030 – minimum 6% SAF, of which a minimum of 0.7% synthetic aviation fuels.
- 2035 – minimum 20% SAF, of which a minimum of 5% synthetic aviation fuels.
- 2040 – minimum 32% SAF, of which a minimum of 8% synthetic aviation fuels.
- 2045 – minimum 38% SAF, of which a minimum of 11% synthetic aviation fuels.
- 2050 – minimum 63% SAF, of which a minimum of 28% synthetic aviation fuels.
2) A transition period that will allow fuel suppliers to reach the SAF blending mandate.
3) An obligation for Aircraft operators (AOs) to ensure that the yearly quantity of aviation fuel uplifted at a given EU Union airport is at least 90% of the yearly aviation fuel required. This aspect is designed to avoid tankering (avoid the burning of excess fuel due to higher TOW).
4) Rules on the competent authorities to enforce this regulation, in addition to rules on fines.
* A union airport is defined as one with passenger traffic exceeding 1 million passengers, or freight traffic exceeding 100,000 tonnes in the reporting period, and not situated in an OMR.
Reporting obligations for aircraft operators:
By 31st March of each reporting year, aircraft operators are required to report the following information:
1) Total amount of aviation fuel uplifted at each Union Airport, expressed in tonnes.
2) Yearly aviation fuel required per Union Airport, expressed in tonnes.
3) Yearly non-tanked quantity** per Union Airport. If it is negative or below 10% of the yearly required amount, then the reported quantity will be 0.
4) Total amount of SAF purchased, expressed in tonnes.
5) For each SAF purchase, the following information is required:
- The name of the aviation fuel supplier.
- The amount purchased, expressed in tonnes.
- The conversion technology.
- The characteristics and origin of the feedstock used for production.
- The lifecycle emissions of the SAF.
- If one purchase includes SAF with different characteristics, the operator is to provide this information for each type of SAF.
6) The reporting template (not final) for aircraft operators on required fuel and non-tanked fuel:
* Click here to find the source.
* The difference between the yearly aviation fuel required and the actual fuel uplifted by an aircraft operator before flights departing from a given Union Airport during the reporting year.
In addition, aircraft operators who wish to claim the use of SAF must ensure the following:
1) An identical SAF batch cannot be claimed under more than one greenhouse gas scheme.
2) In addition to the report mentioned above, operators are required to provide the following information:
- A declaration of greenhouse gas schemes they participate in and in which the use of SAF may be reported.
- A declaration that they have not reported identical batches of SAF under more than one scheme.
These regulations will come into force from 1st January 2023.
However, the obligation to fuel at least 90% of the aviation required from each Union airport and the regulations regarding the minimum share of SAF will be in force from 1st January 2025.
In addition, the reporting obligations will be in force from 1st April 2024, for the reporting year of 2023.
> Please click here to read the GreenAir's article on topic "European Parliament vote to extend EU ETS to all international flights risks global climate agreement, warns IATA."
