The European Commission adopted a package of proposals on July 14 to make the EU's climate, energy, land use, transport and taxation policies “fit” for reducing net greenhouse gas emissions “by at least 55% by 2030”, compared to 1990 levels.
The Fit for 55 proposals, which the Commission states are essential to making the EU’s Green Deal to be a climate-neutral continent by 2050, apply emissions trading to new sectors and tighten the existing EU Emissions Trading System (ETS), and measures to encourage greater energy efficiency and a faster roll-out of low emission transport modes and the infrastructure and fuels to support them. The latter involves higher taxation as well as measures to prevent carbon leakage; and tools to preserve and grow natural carbon sinks.
The ETS cap on emissions will be reduced further and the rate of annual reduction will be increased under the proposals. Free allowances for aviation will also be phased out and align with the global Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The EU ETS will also include shipping emissions for the first time, while a separate new emissions trading system will be set up for fuel distribution for road transport and buildings.
The ReFuelEU Aviation Initiative will oblige fuel suppliers to blend increasing levels of sustainable aviation fuels (SAFs) in jet fuel taken on-board at EU airports, including synthetic low carbon fuels, known as e-fuels. There are similar requirements for shipping under the FuelEU Maritime Initiative.
The Commission proposes to revise its Energy Taxation Directive to promote clean technologies and removing outdated exemptions and reduced rates that encourage the use of fossil fuels.
President of the European Commission, Ursula von der Leyen, said: “The fossil fuel economy has reached its limits. We want to leave the next generation a healthy planet as well as good jobs and growth that does not hurt our nature. The European Green Deal is our growth strategy that is moving towards a decarbonised economy. Europe was the first continent to declare to be climate neutral in 2050, and now we are the very first ones to put a concrete roadmap on the table. Europe walks the talk on climate policies through innovation, investment and social compensation.”
Commissioner for Transport, Adina Vălean, said: “With our three transport-specific initiatives – ReFuel Aviation, FuelEU Maritime and the Alternative Fuels Infrastructure Regulation – we will support the transport sector's transition into a future-proof system. We will create a market for sustainable alternative fuels and low-carbon technologies, while putting in place the right infrastructure to ensure the broad uptake of zero-emission vehicles and vessels. This package will take us beyond greening mobility and logistics. It is a chance to make the EU a lead-market for cutting-edge technologies.”
The International Air Transport Association (IATA) has warned that the reliance on taxation as the solution for cutting aviation emissions in the EU’s ‘Fit for 55’ proposal is “counter-productive to the goal of sustainable aviation” and argues that taxes are not the answer. IATA states that EU policy needs to support practical emission reduction measures such as incentives for SAF and modernization of air traffic management.
“Aviation is committed to decarbonization as a global industry. We don’t need persuading, or punitive measures like taxes to motivate change. In fact, taxes siphon money from the industry that could support emissions’ reducing investments in fleet renewal and clean technologies. To reduce emissions, we need governments to implement a constructive policy framework that, most immediately, focuses on production incentives for SAF and delivering the Single European Sky,” said Willie Walsh, IATA’s Director General.
IATA argues that the supplies of SAFs, which reduce emissions by up to 80% compared to traditional jet fuel, are currently insufficient while high prices have limited airline uptake to 120 million litres in 2021 — a small fraction of the 350 billion litres that airlines would consume in a ‘normal’ year.
SAF is the most practical near-term solution to reducing aviation emissions but the cost needs to come down to make it more affordable for airlines.
“Making SAF cheaper will accelerate aviation’s energy transition and improve Europe’s competitiveness as a green economy. But making jet fuel more expensive through taxation scores an ‘own goal’ on competitiveness that does little to accelerate the commercialization of SAF,” said Walsh.
The lack of reference to the much-delayed Single European Sky (SES) initiative in the proposals is seriously misguided and smacks of the EU seeking to gloss over its dismay track record in getting this 20-year project off the ground. SES has the potential to cut aviation emissions by 6+10% but this project has been repeatedly delayed for years as national governments delay implementation.
“Europe’s national politicians are quick to lecture airlines on the efforts industry should be making on the environment. But they are silent when it comes to areas of their own responsibility. Just recently the European Council failed to show any leadership to cut emissions by harmonizing European air traffic management. Moreover, the constant absence of political support from states on the SES proposals undermines the credibility of the ‘Fit for 55’ proposal and the credibility of Europe’s determination to drive real solutions for sustainability,” said Walsh.
Commenting on the EU ETS changes, IATA has expressed its concern that overlapping this scheme with CORSIA can lead to double charging some airlines and adds it remains concerned about the proposal that European States would no longer implement CORSIA on all international flights severely distorting the competitive environment.
The EU proposals also include a promise to develop a policy framework for hydrogen as a replacement for fossil fuels, which will be completed in December, however for the aviation industry the use of hydrogen as a propellant is still some way off and as IATA states, needs investment and support to realise its potential.
easyJet has welcomed the aims of the package but presses home the need to better support the industry in achieving net zero targets while also ensuring air travel remains affordable for all, noting that any rises in taxation, increases fares.
easyJet says that it supports the “polluter pays” principle, suggested that the final measures should include long-haul flights in the EU’s Sustainable Aviation Fuel mandate and ensure all taxes are based on emissions. “Offsetting is the most effective interim solution until zero-emission hydrogen and electric propulsion is available starting in the 2030s,” states the airline.
The low-cost carrier has also called for more support for the development of truly zero carbon aviation in the EU through hydrogen and electric aircraft.
Commenting on the proposals, Christopher Jackson, a transportation partner who specialises in aviation at global law firm Reed Smith, argues that these proposals if accepted could sound the death knell for some airlines with mounting debt and outdated business models.
“If pushed through, the proposed measures will undoubtedly have a significant economic impact on the airline industry,” says Jackson. “In particular, airlines are expected to lose (i) the tax exemption for the aviation fuel that they burn and (ii) free allowances on the EU Emissions Trading System.
“These measures are intended to incentivise decarbonisation and the use of sustainable fuels (the uptake of which has been hampered by high costs). However, against a backdrop of the massive financial losses resulting from the Covid-19 pandemic, for many in the industry, such drastic changes could not come at a worse time.
“The resultant increased costs could be the final straw for airlines with mounting debt, old equipment and, now, outdated business models. You have to wonder, for example, whether this will ultimately be the death of the low cost carrier as we know it. German proposals for a minimum price for an airline ticket, and French moves to ban domestic flights where there is a rail alternative, suggest that this is where we might be heading.
“Whilst costs for all airlines would increase as a consequence of the proposed measures, perhaps new entrants will ultimately benefit. One thing is for certain, however, the airline industry will adapt and survive, but there are likely to be casualties along the way (including, for many, the dream of a cheap Summer holiday abroad).”