LONDON—Airlines participating in the EU emissions trading scheme (EU ETS) are being encouraged to claim up to €2 billion ($2.1 billion) in EU ETS allowances aimed at mitigating the price difference between sustainable aviation fuels (SAF) and traditional kerosene.
“In two months’ time, €2 billion will be available to airlines for alternative fuels,” European Commission Director General CLIMA senior advisor Damien Meadows told delegates at the Aviation Carbon conference being held at London Heathrow Nov. 6-7. “I think that will be a total gamechanger, because it covers 100% of fuel supply at some airports.”
SAF is already zero-rated under the EU ETS, but this initiative means airlines will be able to claim back some of the price premium for SAF, funded by the proceeds of the EU ETS. Any airline that is covered by the EU ETS can apply and the amount that can be claimed will vary by airport.
The initiative takes effect from January 2024, and will run until 2026. Airlines will still need to fund their upfront SAF costs, but they will be able to reclaim up to 100% of the price difference when they report their 2024 emissions in September 2025. This cost gap will be repaid through EU ETS allowances, worth around €2 billion, on a first-come first-served basis.
“It’s a top up, but it’s a huge top up,” Meadows said.
Over 300 airports will be included in the initiative and smaller, more remote airports will have the highest available reclaim percentages. This is aimed at encouraging more widespread SAF use, beyond the major hubs. Interestingly, supersonic flights have been excluded, even though there are no supersonic-capable commercial aircraft in production.
The EU will review the SAF funding support in 2028, with the potential to extend it to 2034. “The €2 billion is for three years. If it works well, it can be continued,” he said. There is also potential for the funding to be increased, if there is substantial interest.
Beyond this SAF price gap support, a further €40 billion is being made available to EU ETS participating industries through the Innovation Fund. This takes the form of cash grants for sustainability projects and is also funded by the EU ETS. Up to 60% of the grant is available up front.
Meadows voiced surprise that the aviation industry is not taking advantage of this funding, which could be used to set up SAF facilities, or by airlines to fund sustainability projects, such as mitigating the non-CO2 effects of aviation.
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