EUROPEAN COMMISSION Brussels, 14.7.2021 SWD(2021) 633 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the Proposal for a Regulation of the European Parliament and of the Council on ensuring a level playing field for sustainable air transport {COM(2021) 561 final} - {SEC(2021) 561 final} - {SWD(2021) 634 final}



Table of contents 1.Introduction 1.1.Political and legal context 1.2.Role of sustainable aviation fuels in the sector’s decarbonisation 1.3.Ramp-up trajectories for sustainable aviation fuels (SAF) 1.4.Coherence with the ‘Fit for 55’ initiatives 1.5.Effects of the COVID-19 pandemic on air transport 2.Problem definition 2.1.What are the problems? 2.2.What are the problem drivers? 2.3.How the problem will evolve 3.Why should the EU act? 3.1.Legal basis 3.2.Subsidiarity: Necessity of EU action 3.3.Subsidiarity: Added value of EU action 4.Objectives: What is to be achieved? 4.1.General objectives 5.What are the available policy options? 5.1.What is the baseline from which options are assessed?

5.2.Policy measures under consideration and approach taken 5.3.Description of the policy options (PO) 5.4.Common elements for all policy options 5.5.How do policy options differ? 5.6.Options discarded at an early stage 6.What are the impacts of the policy options? 6.1.Environmental impacts 6.2.Economic impacts 6.3.Social impacts 7.How do the options compare? 7.1.Effectiveness and efficiency 7.2.Coherence 7.3.Subsidiarity and proportionality 7.4.The impact of the Covid-19 pandemic 8.Preferred option 9.How will actual impacts be monitored and evaluated? Glossary Term or acronym Meaning or definition ICAO International Civil Aviation Organisation SAF Sustainable Aviation Fuels RFNBO Renewable fuels of non-biological origin, in the meaning of Article 2(63) of the Renewable Energy Directive, known as well as “synthetic fuels” HEFA Hydro-Processed Esters & Fatty Acids, a SAF conversion pathway Gas+FT Gasification + Fischer Tropsch, a conversion pathway used to produce SAF ATJ Alcohol-to-Jet, a pathway to produce SAF TRL Technology Readiness Level RED Renewable Energy Directive RED II 2018 Recast Renewable Energy Directive GHG emissions Greenhouse gas emissions Jet A and Jet A-1 (incl. certified SAF) Kerosene fuels types HVO Road transport biofuel Mtoe Millions of tonnes of oil equivalent ATAG Air Transport Action Group ASTM International American Society for Testing of Materials ILUC Non-negligible indirect land use change emissions CAPEX Capital expenditure OPEX Operating expense LCA Life-Cycle Assessment FQD Fuel’s Quality Directive EU ETS EU Emission Trading System CORSIA Carbon Offsetting and Reduction Scheme for International Aviation CAAF/2 Conference on Aviation and Alternative Fuels LTAG Long-term global aspirational goal for CO2 emissions reductions for international aviation PO Policy Option WTW Jet Emissions Well-to wing emissions WTT Emissions Well-to-tank (upstream or indirect emissions) NvPM Non-volatile particulate matter ECAC European Civil Aviation Conference CO2eq Equivalent Carbon dioxide, a measure to compare the emissions UCO Used Cooking Oil SCS Sustainability Certification Scheme LCA Life-Cycle Assessment

1.Introduction 1.1.Political and legal context This Impact Assessment accompanies a legislative proposal – hereby ‘ReFuelEU Aviation’ – aimed at maintaining a competitive level playing field in the air transport market while boosting the production and uptake of sustainable aviation fuels. An external support study has been carried out in 2020 and will be published alongside this report. The EU aviation internal market is essential for the mobility of European citizens and for the European economy as a whole. In 2018, the aviation and aeronautical industries employed an estimated 0.4 million people directly in the EU, and contributed to the EU’s GDP by an estimated 2.1% in 2017. Aviation is a strong driver for social and regional cohesion that boosts tourism, stimulates business and connects people. In 2018, over 1.2 billion passengers flew to and from more than 500 airports in Europe. The EU aviation sector contributes to European integration and reinforces the EU’s position as a geopolitical leader. Air connectivity and the air transport sector as a whole bring significant socio-economic benefits to EU citizens and businesses. It is essential to ensure a well-functioning EU aviation market where economic actors can operate on a competitive level playing field. Nevertheless, air transport has a significant and growing impact on the environment, notably in terms of greenhouse gas emissions but also aircraft noise and local air pollution. In 2018, aviation accounted for 3.6% of the EU’s greenhouse gas emissions (2% at global level) and for 13.2% of the emissions from EU transport. Aviation has been one of the fastest growing sectors in terms of CO2 emissions over the past decades. Looking into the future, EU CO2 emissions from the sector could further grow by 17% up to 2030, relative to 2015. This has caused public and political pressure to increase in the past years, asking for the sector to intensify its efforts to decarbonise. In December 2019, the Commission adopted the European Green Deal Communication, which emphasised the need to accelerate the transition to a climate-neutral economy, including through the shift to sustainable mobility. To achieve climate neutrality, a 90% reduction in transport emissions is needed by 2050. All transport modes, including aviation, will have to contribute to the reduction. In September 2020, the Commission adopted its proposal to cut greenhouse gas emissions by at least 55% by 2030 and put Europe on a responsible path to becoming climate neutral by 2050. The Communication on the 2030 Climate Target Plan clearly mentions: “Both the aviation and maritime sectors will need to scale up efforts to improve the efficiency of aircraft, ships and their operations and to increase the use of sustainably produced renewable and low-carbon fuels. This will be assessed in greater detail in the context of the ReFuelEU Aviation and FuelEU Maritime initiatives that aim to increase the production and the uptake of sustainable alternative fuels for these sectors. The necessary technology development and deployment has to happen already by 2030 to prepare for much more rapid change thereafter.” On 11 December 2020, the European Council endorsed the binding EU target of a net domestic reduction of at least 55% in greenhouse gas emissions by 2030 compared to 1990. The Commission adopted in December 2020 the Sustainable and Smart Mobility Strategy. This strategy sets the course of action for each mode of transport to decrease its carbon footprint in line with the objective of cutting greenhouse gas emissions by at least 55% by 2030 and reaching EU climate neutrality by 2050. It also sets a number of milestones for the transport sector, drawing on the common analytical work underpinning the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy, while considering deploying a broad mix of policy instruments including carbon pricing and moderate increase in the energy and transport sectoral regulatory policy ambition. Overall, the EU Emission Trading System (EU ETS) and the Effort Sharing Regulation (ESR) combined, provide the general framework and mechanisms to ensure that emission reductions are achieved in line with the 55% increased ambition by 2030 and an EU climate neutral economy by 2050. The flexibility of EU ETS ensures a central role in delivering the required level of ambition. The Commission will propose in 2021, as part of the ‘Fit for 55’ package, a revision of the EU Emissions Trading System Directive and of the Effort Sharing Regulation, along an amendment to the Renewable Energy Directive, the revision of the Energy Taxation Directive, the revision of the Alternative Fuels Infrastructure Directive, etc. Importantly, attainment of the EU’s climate targets is a joint effort between the EU and the Member States. As such, the basic legislative framework provide by the ETS and ESR needs to be supported by a set of Union level regulatory measures that complement action at national level. These measures will enable the various sectors of the economy, such as aviation to step up their efforts to decarbonise. The Commission will propose two initiatives specifically aimed at accelerating the decarbonisation of aviation and maritime transport - two sectors which have shown specific difficulties to increase the use renewable sources of energy and decrease their emissions until now - with the use of sustainable fuels, i.e. ‘ReFuelEU Aviation’ and ‘FuelEU Maritime’. The ReFuelEU Aviation is overall welcomed by the air transport and fuels industries, as well as climate non-governmental organisations, as a key initiative to make aviation more sustainable, while reinforcing the level playing field in the aviation internal market and the competitiveness of the sector. There is also a strong impulse given by a leading group of Member States, for the ReFuelEU Aviation initiative, and more generally for a swift delivery of an EU-level regulatory framework for sustainable aviation fuels. During the High Level Conference on Synthetic SAF of 8 February 2021, the Ministers of Transport of eight EU Member States (Denmark, Finland, France, Germany, Luxemburg, the Netherlands, Spain and Sweden) issued a joint statement to “support the aim of the European Commission to boost the supply and demand for SAF in the EU so as to create favourable conditions in order to ramp up the production and deployment of SAF (…). The challenge is to make use of the current momentum by providing for a clear long-term perspective so as to contribute to a scalable SAF marketplace. A European blending mandate for SAF can achieve this.” 1.2.Role of sustainable aviation fuels in the sector’s decarbonisation The aviation sector is particularly difficult to decarbonise due to its exclusive reliance on fossil energy, the limited technological options available for reducing its emissions, and the long lifespan of aircraft. This is why the EU has adopted a comprehensive approach to addressing aviation emissions. The decarbonisation of the air transport sector will rely partly on intensifying the efforts and measures already in place. These include market-based measures (the EU Emissions Trading Scheme and the Carbon Offsetting and Reduction Scheme for International Aviation of the International Civil Aviation Organisation - ICAO), improved air traffic management operations, and research on more efficient aircraft design and technology. Some of the policy instruments particularly relevant for aviation, notably the EU Emissions Trading System, the Renewable Energy Directive and the Energy Taxation Directive will be reviewed as part of the forthcoming ‘Fit for 55’ package. The coherence of ‘ReFuelEU Aviation’ initiative with those other ‘Fit for 55’ initiatives is discussed in section 1.4. In order to decrease significantly its emissions, the aviation sector will need to reduce its current exclusive reliance on fossil jet fuel and accelerate its transition to innovative and sustainable types of fuels and technologies. However, the aviation sector lacks immediate alternatives to liquid fuels for commercial aircraft propulsion. New zero-emission aircraft technologies such as electric- or hydrogen-powered aircraft are promising but not expected to be mature soon enough to play a significant role in commercial aviation in the next decades. Because aviation needs to address its carbon footprint already by 2030, the role of sustainable aviation liquid fuels will be essential. For this reason, as part of the comprehensive approach, measures are also needed to increase the use of sustainable aviation fuels (biofuels, advanced biofuels or renewable fuels of non-biological origin as defined in the recast Renewable Energy Directive (EU) 2018/2001). Figure 2 in section 2.1.3 gives information about the aviation industry’s expectations of the role to be played by SAF and other CO2-reducing measures (improvements in aircraft design and technology, more efficient operations and better infrastructure, including ATM, offsetting) in the decarbonisation of the aviation sector by 2050. Under this scenario focusing on SAF deployment, SAF and offsets would account for 75% of achieved emissions savings, improved technology would account for 15% and better operations and infrastructure would account for 10%. For the purpose of this impact assessment, the term “sustainable aviation fuel (SAF)” refers to the following three categories of drop-in liquid fuels: Annex IX Part B biofuels, advanced biofuels (Annex IX Part A biofuels) and renewable fuels of non-biological origin (RFNBOs) – mainly synthetic fuels, within the meaning of the Renewable Energy Directive (RED II), which are certified to be used to power commercial aircraft. Section 5.4.1 of this impact assessment brings forward clear policy choices about the precise types of SAF that are eligible under the policy options considered. It explains notably why this initiative focuses on the three categories of above-mentioned drop-in SAF, and explain why it does not cover hydrogen and electricity as primary fuels for aviation. 1.3.Ramp-up trajectories for sustainable aviation fuels (SAF) The common economic assessment, underpinning the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy, looked at the feasibility of achieving a higher climate target and provided insights into the efforts that individual sectors would have to contribute. The assessment looked at a range of possible pathways/scenarios to explore the delivery of the increased ambition of cutting the economy-wide greenhouse gas emissions by at least 55% by 2030 and achieving climate neutrality by 2050. These pathways/scenarios were constructed around a set of indicative policies for all sectors of the economy that either focus on carbon pricing or focus on regulatory measures, or combine the two types of instruments. For air transport, the same policy instruments including the ‘ReFuelEU Aviation’ initiative were included in all scenario configurations. The staff working document accompanying the Sustainable and Smart Mobility Strategy describes the ramp-up trajectories for sustainable aviation fuels in more detail, drawing on the common economic analysis underpinning the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy. These trajectories are derived in a way that enables kick starting the scale-up of sustainable aviation fuels (SAF) from 2025 onwards and their large scale deployment by 2050, while ensuring the consistency with the required overall greenhouse gas emissions reductions by 2030 and 2050, preserving the competitiveness of the sector, promoting innovation, and ensuring feedstock availability for renewable and low carbon fuels in all energy and transport sectors in the transition towards a climate neutral economy. The pathways/scenarios delivering a reduction in the EU greenhouse gas emissions by at least 55% by 2030 and climate neutrality by 2050 suggest that SAF should represent 4 to 8% of the jet fuel used in 2030, for all flights departing from EU airports, and 63 to 68% by 2050. When considering a pathway/scenario that strengthens and further expands the carbon pricing, be it via EU ETS or other carbon pricing instruments, to the road transport and buildings sectors, combined with low intensification of transport policies and no intensification of energy efficiency and renewables policies, the analysis shows that sustainable aviation fuels obligations should represent at least 4% of the jet fuel used in 2030, for all flights departing from EU airports, and 68% by 2050. When considering a pathway/scenario that assumes high increase of the ambition of energy efficiency, renewables and transport policies, while keeping the EU ETS scope unchanged, sustainable aviation fuels obligations should represent 8% of the jet fuel used in 2030 and 63% by 2050. Finally, the pathway/scenario focusing on a combination of carbon pricing and medium intensification of regulatory measures in all sectors of the economy shows that sustainable aviation fuels obligations should represent 5% of the jet fuel used by 2030, for all flights departing from EU airports, and 63% by 2050. All the pathways described above are consistent with the increased ambition of cutting the economy-wide greenhouse gas emissions by at least 55% by 2030 and achieving climate neutrality by 2050. They all deliver a 90% reduction in transport emissions by 2050, in line with the European Green Deal Communication and the Sustainable and Smart Mobility Strategy. In addition, the impact assessment underpinning the 2030 Climate Target Plan noted particular benefits in deploying a broad mix of policy instruments, including carbon pricing and increased energy and transport sectoral regulatory policy ambition, and clearly suggested that there is no single policy instrument being capable of achieving all the objectives considered in the assessment alone.

An update of the pathway/scenario focusing on a combination of carbon pricing and medium intensification of regulatory measures in all sectors of the economy for the purpose of the ‘Fit for 55’ package, while also reflecting the COVID-19 pandemic, the National Energy and Climate Plans and refining the policy design of the initiatives, confirms that air transport effectively contributes to the EU climate goals while considering the 5% share of sustainable aviation fuels obligations in the air transport fuel mix by 2030 and 63% by 2050. It is essential to clarify that the fulfilment of the newly adopted EU climate targets is not conditioned on a precise SAF ramp-up trajectory. On the other hand, the level of ambition of the SAF ramp up should also ensure an effective contribution to reducing emissions in the air transport. The purpose of the SAF ramp-up trajectory suggested by the common economic assessment underpinning the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 2030 Climate Target Plan is to provide an indication, i.e. an order of magnitude of the possible contribution of SAF to the decarbonisation of air transport, in line with the EU’s climate targets. The cornerstone of the EU’s strategy to reach its climate objectives is the combined action of the EU ETS and the Effort Sharing Regulation. These two instruments ensure the overall consistency for the necessary reductions of emissions across the EU economy, and act jointly as a safety net for the attainment of the EU’s climate targets. This means that there is some flexibility to decide on the exact level of ambition of individual measures (such as ReFuelEU Aviation) for the decarbonisation of the various sectors, such as air transport. The corrective mechanisms offered by the EU ETS, Effort Sharing Regulation, Climate Law and the Energy & Climate Governance Regulation (and the future evaluation of the current initiative), would allow to ensure overall consistency with the level of emission reductions necessary to reach EU climate targets. This impact assessment considers the trajectory for sustainable aviation fuels obligation that represent 5% of the jet fuel used by 2030 and 63% by 2050 in the scenario focusing on a combination of carbon pricing and medium intensification of regulatory measures in all sectors of the economy. The objective of the present impact assessment is to determine the design of the policy option that would best allow to reach this contribution. Nevertheless, a qualitative assessment of the implications of lower/higher sustainable aviation fuels obligation ramp-up is however provided in section 5.4.3. The large-scale shift from fossil energy to sustainable aviation fuels is a significant challenge for the aviation sector, but also offers considerable economic opportunities, as well as potentially substantial environmental benefits. In particular, it means making European aviation a pioneer in the use of sustainable fuels, and the EU a global leader in the production of sustainable aviation fuels. 1.4.Coherence with the ‘Fit for 55’ initiatives The ReFuelEU Aviation initiative is coherent with other initiatives of the ‘Fit for 55’ package. Regarding the revision of the Renewable Energy Directive (RED), its objectives converge with ReFuelEU Aviation, namely to increase the share of renewable energy in transport. Coherence is ensured as the aviation-specific SAF targets established under ReFuelEU Aviation will contribute to reaching renewable energy targets for transport as set out under RED. The coherence of the present initiative with RED will be further ensured as ReFuelEU Aviation will rely on several core pieces of the RED rules, with cross-references in the ReFuelEU Aviation legal text. This will be the case in particular regarding the sustainability framework of the RED to determine the eligibility of SAF, the use of monitoring, reporting and verification systems already established under the RED, and caps applying to different types of fuels. However, RED is a cross-sector framework and sets targets for overarching sectors, e.g. transport or for the economy as a whole. It has proven insufficient to boost the uptake of SAF due to the specificities of the aviation sector, including the high fuel quality specifications and the strong EU-wide and global competitive cost pressure. Also, the RED by its design leads to a different policy mix from one Member State to another, which is ill suited for the highly integrated and competitive EU aviation internal market and its global dimension. While ReFuelEU Aviation is coherent with RED and contribute to the overarching objectives of RED, it will lay down fully harmonised requirements to ensure a level playing field between airlines and the avoidance of competitive disadvantage between EU airports. Consequently, also monitoring and enforcement will need to be organised at EU level and will be carried out by existing EU aviation agencies such as EASA or Eurocontrol. Annex 10 gives further details on the interaction between ReFuelEU Aviation and RED II, and Annex 11 gives further details on the reasons why ReFuelEU Aviation objectives cannot effectively be implemented under the RED rules. ReFuelEU Aviation is coherent with the revision of the EU Emissions Trading Scheme (ETS), which applies to aviation since 2012. Their objectives are aligned, namely to reduce CO2 emissions in the aviation sector. The EU ETS contains an incentive for SAF usage, i.e. airlines are not required to surrender allowances when reporting the use of SAF (this benefit can be claimed only for the amount of ‘net’ SAF used, not for the fossil fraction of the jet fuel). As airline increase their use of SAF in the years to come as a consequence of ReFuelEU Aviation, this means that the volume of allowances needed by the aviation sector will decrease over time. The EU ETS will effectively further encourage airlines to decarbonise their operations, as airlines will continue to report the use of fossil jet fuel as fractions of their fuel mix. The effect of the EU ETS is expected to be strengthened in the context of its upcoming revision, with a reduction of the free allowances allocated to airlines and the increase of the linear reduction factor. In turn, this is expected to increase the price of carbon and provide additional incentives for airlines to decarbonise, for example with the use of SAF over and above the mandated minimum blend; and for investing in fuel economy measures, whether it is new fuel-efficient aircraft or operational measures such as flight path efficiency or alternative energy use on the ground at airports. Therefore, it is clear that the ReFuelEU Aviation initiative and the revision of the EU ETS pursue the same objectives and will complement and reinforce each other. As SAF becomes a gradually larger share of the aviation fuel mix over time, the air transport sector will decarbonise. In this context, the EU ETS will continue to play a major role in further reducing emissions from the sector by also driving improvements in energy efficiency. Finally, it is worth noting that coherence will be ensured as ReFuelEU Aviation will rely on the EU ETS as regards the monitoring, reporting and verification of SAF use by airlines. Annex 10 gives further details on the interaction between ReFuelEU Aviation and EU ETS. ReFuelEU Aviation is coherent with the revision of the Energy Taxation Directive (ETD). Their objectives are aligned, i.e. providing the air transport market with the right (policy or fiscal) incentives to accelerate decarbonisation with the use of cleaner energy in the sector. Currently, the use of a number of innovative and sustainable energy products, such as advanced biofuels in transport are not incentivised. The revision of the ETD considers policy options for introducing e.g. a possibility to apply reduced tax rates for SAF. Even though the introduction of a SAF blending mandate may reduce the scope of pricing measures, considering that aviation is also already covered by carbon pricing through the EU ETS, it can be assumed that properly differentiated tax rates could help to some extent make SAF more economically interesting to airlines compared to fossil jet fuel and stimulate greater SAF uptake, i.e. over and above the mandated minimum SAF blend targets. In that sense, ReFuelEU Aviation and a revised ETD would work together towards the same objective of encouraging the deployment of SAF. ReFuelEU Aviation is coherent with the revision of the Alternative Fuels Infrastructure Directive (AFID), but is expected to have limited interaction with AFID. The directive creates a common framework of measures for the deployment of alternative fuels infrastructure in the EU. AFID places a strong focus on the deployment of infrastructure mainly for the road and maritime sectors. For aviation, the revision of the Directive explores the need to install electricity supply at airports e.g. for stationary aircraft. As explained in the subsequent sections of the present impact assessment, SAF are fully fungible with conventional jet fuel and do not require any specific refuelling stations or dedicated infrastructure in addition to what currently exists for conventional jet fuel. It is therefore not expected that the revision of AFID would play a role to boost SAF deployment in the EU. 1.5.Effects of the COVID-19 pandemic on air transport The COVID-19 pandemic changed the air transport landscape. Since its outbreak in early 2020, it has been having a major impact on the international and European aviation industry, as Member States have introduced various measures to contain the spread of disease, such as suspending flights from other EU Member States or third countries. According to Eurocontrol, while the number of flights operating daily in European airspace declined in April-May 2020 by 88% compared to the same period in 2019, the overall number of flights in 2020 could be 55% lower than in 2019, i.e. a drop of 6 million flights. Because of the pandemic, the total loss for the air transport industry in 2020 could amount to €140 billon. The COVID-19 crisis’ long-term effects on air transport activity are uncertain and depend on the global evolution of the pandemic, the coordination of States to address it, and the ability of the aviation sector to restore passenger confidence. Under current trends and policies, air transport activity is projected to go up by close to 45% by 2030 and close to 90% by 2050 relative to 2015. 2.Problem definition 2.1.What are the problems? 2.1.1.General problem Air connectivity is an essential driver of mobility for EU citizens, of development for EU regions and of growth for the economy as a whole. High levels of air connectivity within the EU, as well as to and from the EU, are best ensured when the EU air transport market functions as a level playing field, where all market actors can operate based on equal opportunities. When occurring, market distortions risk putting aircraft operators or airports at disadvantage towards competitors. In turn, this can result in a loss of competitiveness of the industry, and a loss of air connectivity for citizens and businesses. In particular, it is essential to ensure a level playing field across the EU air transport market, when it comes to the use of aviation fuel. Indeed, aviation fuel accounts for a substantial share of aircraft operators’ costs, i.e. up to 25% of operational costs. Variations in the price of aviation fuel can have important impacts on aircraft operators’ economic performance. Furthermore, differences in the price of aviation fuel between geographic locations, as is currently the case between EU airports or between EU and non-EU airports, can lead aircraft operators to adapt their refuelling strategies for economic reasons. GHG emissions from the air transport sector have increased since the early 1990’s at EU and global level and are expected to further grow by 2050. The total air passenger traffic in Europe has more than doubled since 1990 and has more than tripled at global level over the same period. This important growth has been accompanied by a steady rise in EU GHG emissions from the sector, i.e. an increase by 28% from 2005 to 2018. In 2018, aviation was accountable for around 3.6% of the EU’s greenhouse gas emissions (2% at global level) and for 13.2% of the emissions from EU transport. Aviation is under growing pressure to accelerate its decarbonisation without hampering its highly integrated internal market. Over the past decades, fleet replacement by air carriers, investments in research and development for cleaner aircraft technologies, more efficient air traffic management systems and market-based measures have allowed to slow down the increase of GHG emissions of the sector. While industry and policy efforts have brought environmental benefits (e.g. -24% fuel burn per flight in 2017 compared to 2005), this has not compensated the overall growth of the sector. As aviation emissions are projected to keep increasing in the years to come, public and political pressure is continuing to build for aviation to accelerate its decarbonisation. The decarbonisation of the aviation sector will come from a combination of carbon pricing and regulatory measures acting as a whole to reduce the CO2 emissions of aviation in line with the EU’s climate objectives. The common economic analysis underpinning the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy shows that, in the pathway/scenario focusing on a combination of carbon pricing and medium intensification of regulatory measures in all sectors of the economy, these measures will contribute to this objective, reducing CO2 emissions from aviation by 52% by 2050 compared to 2015 (equivalent to 14% reduction relative to 1990). When also accounting for the impacts of the COVID-19 pandemic and the National Energy and Climate Plans, emissions reductions of around 59% are projected in the air transport by 2050 relative to 2015 (equivalent to 26% reduction relative to 1990). Those reductions are consistent with the EU’s long term climate objectives. SAF are expected to play an increasing role from 2025 onwards to bring aviation in line with the EU’s climate targets. Indeed, SAF would need to account for around 2% in 2025 and 4-8% in 2030, going up to 63-68% of the total EU jet fuel consumption by 2050. However, in 2020, the production and use of SAF in the EU aviation market amounts to less than 0.05% of total jet fuel use. This very low use of SAF in the aviation fuel mix can be partly explained by the fact that the EU’s aviation industry is almost exclusively reliant on fossil energy that is currently significantly less costly than SAF. EU transport, and in particular air transport has been reliant on the use of high-emitting fossil-based fuels, notably imported in the EU from third countries. In 2018, EU transport depended on oil products for about 93% of its energy needs. Europe imports around 87% of its crude oil and oil products from abroad. This dependency could be reduced by increased SAF supply in the EU. The very strong reliance of the aviation sector on oil products can be explained partly because of the lack of mature and price-competitive alternatives to power commercial aircraft in a sustainable way in the short- to medium-term. Powering a commercial aircraft requires fuel with high energy density. Currently, only liquid jet fuel known as Jet A and Jet A-1 (including certified SAF), are sufficiently energy-dense to meet this requirement. Other options such as electricity and hydrogen are promising research options as potential sources of energy to power aircraft in the long-term. Research for technologies such as battery-powered aircraft engines have made substantial progress in the past years and have the potential to play an important complementary role in the decarbonisation of aviation in the long-term. Experts recognise that in the short- and medium-term, their use will be limited to very short or short-haul flights for aircraft carrying small numbers of passengers. Similarly, hydrogen-powered aircraft are expected to play a role in the decarbonisation of the aviation sector beyond 2040. However, the emergence in the EU aviation market of a meaningful share of commercial fleets powered by electric batteries or hydrogen fuel cells is conditional on both a shift of aircraft engine technology and the build-up of fuelling infrastructure. Research and innovation costs associated with the emergence of such technologies represent important barriers. Given the long research and development cycles in aviation, including lengthy aircraft certification processes, the long lifespan of aircraft and the considerable costs associated with such technological shifts, it is unlikely that hybrid or full electric aircraft or hydrogen-powered aircraft will account for a substantial share of the EU airlines’ fleets before 2050.

SAF are a technologically viable solution to replace conventional fossil jet fuel. As drop-in fuels, they can be blended with conventional kerosene. SAF can power existing aircraft engines without any technological changes. Analyses show that there is potential to reach a gradually increasing shares of EU aviation with SAF by 2030 and 2050, if additional policies are implemented. This implies to overcome the two major problems faced today: production and demand in the current market conditions are very low. The ReFuelEU Aviation initiative is under preparation at the same time as the FuelEU Maritime initiative. While the two initiatives are similar in their objective, i.e. increasing the uptake of sustainable fuels in transport modes with a prominent global dimension with a view to accelerate their decarbonisation, the problems these two sectors face in this respect are inherently different and require each a tailored approach. The differences between the two initiatives relate mainly to the legal and regulatory context, technical constraints and opportunities (e.g. number and type of fuel alternatives), operating conditions (fuel autonomy, etc.). 2.1.2.Problem 1 – Limited production and supply at reasonable cost Europe is a global leader in transport biofuel production, with a significant number of commercial plants in operation. However, the fuel output of EU bio-refineries focuses almost exclusively on road biofuels. Indeed, out of the 17.8 Mtoe of biofuels consumed in the EU in 2018, around 80% was biodiesel and 19% was bioethanol for road transport. While the EU has a potential SAF production capacity estimated at 2.3 million tonnes per year (corresponding to 4% of the total jet fuel demand in the EU), this production capacity is not optimised for aviation fuels, as it is used almost exclusively for the production of bio-based fuel for the road transport sector, i.e. biodiesel and bioethanol. There is currently no plant in the EU producing SAF at commercial scale on a regular basis. Out of the approximately 47 Mtoe of jet fuel sold in 2018 in the EU, SAF accounts for less than 0.05%, the rest being conventional fossil jet fuel produced from crude oil. The absence of SAF production at commercial scale is one of the reasons why SAF production costs, and in particular capital and operation costs, are high in comparison with that of conventional fossil jet fuel. Indeed, the SAF production sector does not benefit from the economies of scale that would allow the capital and operation cost of production of a batch of SAF to be lower. Depending on the production pathway used, the production costs of SAF are generally estimated to be between 1.5 to 6 times higher than for conventional fossil jet fuel. 90% of respondents to the survey agreed or strongly agreed that low production and supply of SAF at reasonable cost in the EU is a problem. This finding is in accordance with the OPC where 64% of the stakeholders rated the price of SAF and the excessive production cost of SAF as the top barriers for not using SAF. This problem directly affects various parties. First, it directly affects air carriers, who do not have access to regular supply of SAF. As a result, airlines are not in a position to purchase SAF on a regular basis with a view to reducing the GHG impact of their operations. This problem also affects those responsible for the reduction of GHG emissions from aviation such as EU Member States, in view of the European Green Deal and compliance with the EU’s commitments with respect to the Paris Agreement and other international commitments such as CORSIA. Ultimately, this problem also affects European citizens, considering the carbon footprint of individual flights, and subsequently of each air traveller. European citizens tend to become increasingly concerned by the environmental impact of their travel. 2.1.3.Problem 2 – In spite of strong interest for SAF from the aviation sector, demand is low in the current market conditions The aviation industry is setting ambitious emission reduction targets, which increasingly rely on the use of SAF. Already in 2008, the aviation industry decided on an aspirational goal of reducing net emissions from aviation at global level by 50% by 2050 compared to 2005 levels. In October 2020, ATAG published “Waypoint 2050”, outlining the sector’s vision on concrete pathways towards meeting the 50% objective. All scenarios consider that at least 50% of emissions reductions will need to come from SAF. One of the scenarios considers that 75% of the emissions reductions achieved will need to come from SAF. Waypoint 2050 further shows that achieving carbon neutrality in aviation is feasible around 2060. Similarly, several aviation actors, including those with differing business models (passenger airlines, cargo) publically announced commitments to reduce their carbon footprint with similar levels of ambition, with the use of SAF. In spite of the strong and increasing interest of some airlines in sustainable aviation fuels, actual demand is very limited in the current market conditions. While generally airlines show increasing interest to use SAF in the future, actual projects and partnerships remain an exception. Many airlines groups are still not engaging in concrete partnerships or contracts to boost their SAF use in the future, because in the current conditions the business case is rarely perceived as economically attractive. This is particularly the case in a market where the price gap between conventional fossil jet fuel and SAF is significant (see problem drivers 2 and 3). As a result, demand for SAF as an alternative to fossil jet fuel remains very low. In fact, as airlines are sensitive to the market price of jet fuel due to the global competition, this can lead to fuel tankering practices, whereby airlines choose to uplift more jet fuel than necessary at airports where prices are low. Such practices could lead to additional emissions. Such practices are detrimental to healthy competition on the aviation market as they can put some airlines and airports at competitive disadvantage with others. 66% of respondents to the survey strongly agreed or agreed that low demand for SAF in the current market conditions is an issue hindering the use of SAF in the EU. The respondents to the OPC agreed as 46% were of the view that low demand for SAF is hindering the use of SAF in EU. 2.2.What are the problem drivers? 2.2.1.Problem Driver 1 - SAF are at very early stage of commercial development and face various constraints (feedstock availability, sustainability, costs, certification) A scale up of SAF production requires at the same time the existence of certified production routes and the availability of sufficient feedstock. As of October 2020, seven SAF production pathways have been certified to comply with the technical and safety standards of ASTM International (see Annex 14) for use in commercial aircraft, and several others are in the process of being certified. These pathways can produce SAF from different feedstock, at different production costs, and are currently at different stages of commercial development. Annex IX Part B biofuels can play a role to decarbonise aviation, but their potential is limited, due to feedstock availability constraints. The most commercially mature pathway in line with the Renewable Energy Directive is the HEFA pathway (TRL 9) that produces SAF from vegetable oils and waste lipids (used cooking oil and animal fats). When produced from waste lipids, this pathway is referred as “Part B biofuels” in this impact assessment. The vast majority of biofuel production in the EU and globally using Part B feedstock are produced for the road transport sector. Therefore, there is potentially a large production capacity for HEFA that is already installed in the EU. Part B biofuels can achieve emissions savings as high as 85% and 76% compared to conventional jet fuel when produced respectively from used cooking oil and animal fats. HEFA is also currently the least expensive SAF pathway to produce (see problem driver 2), but the availability of feedstock currently included in Annex IX Part B is already a strong limiting factor and will be even more in the future. Indeed, they are highly demanded for the production of other transport biofuels and their aggregation (collection and supply chain) is not always well organised at EU level. Besides, their decarbonisation potential is limited compared to that of advanced biofuels (produced from Annex IX Part A feedstock) that can be provided from renewable independent feedstock sources. Finally, the contribution of Part B biofuels to EU renewable energy transport target is capped under the Renewable Energy Directive.

Advanced biofuels have significant potential but are not yet available at commercial scale. SAF can be produced from feedstock such as lignocellulosic (e.g. agricultural or forestry residues, grass materials), algae, bio-waste feedstock (biogenic content of municipal solid waste) and others (see Annex 15). This type of feedstock is potentially abundant but is also likely to be subject to strong demand as input for bioenergy processes in other sectors of the economy. Feedstock supply chains, including necessary infrastructure and logistics, also need to be improved by the industry and relevant authorities. Advanced biofuels are recognised to be among the most promising resources for the production of sustainable transport fuels. They have high potential for the decarbonisation of aviation since they can achieve high emissions savings compared to conventional jet fuel (e.g. respectively 94% and 91% emissions savings over their lifecycle when produced from forestry residue and municipal solid bio-waste, respectively). Advanced biofuels can be produced through the approved and certified Gasification + Fischer Tropsch (Gas+FT) (TRL 6-8) and Alcohol-to-Jet (ATJ) (TRL 7-8) pathways. These pathways are generally associated with high production costs (see problem driver 2) relative to those of fossil fuels and of HEFA. The production of advanced biofuels is currently only at demonstration phase, meaning that only a handful of industrial projects in the EU are effectively able to produce them at this stage. Substantial investments are needed to scale them up to the commercialisation stage. RFNBOs (i.e. synthetic liquid fuels) have significant potential to decarbonise aviation but face resources availability and technology readiness challenges. Synthetic liquid fuels (also called Power-to-Liquids) are produced through the conversion of renewable electricity (e.g. produced based from wind and solar) into liquid hydrocarbons, via the electrolysis of water (TRL 9) to produce green hydrogen followed by a synthesis (TRL 5-6) with CO2 captured directly from air (TRL 6), from biogenic origin or from industrial processes. RFNBOs have considerable potential for large-scale production and replacement of fossil jet fuel. RFNBOs can be produced using two different production routes, namely the Fischer-Tropsch (FT) or the methanol route (see Annex 15). At this stage, only the FT route (TRL 9) is approved and ASTM-certified for blending with conventional kerosene up to 50%. Like the FT route, the methanol pathway relies on process steps already used in refineries, but ASTM certification is pending. While RFNBOs offer significant opportunities to decarbonise aviation (emissions savings compared to conventional jet fuel can exceed 85%), their large-scale deployment currently face challenges when it comes to the availability of renewable electricity in the EU and CO2 direct air capture technology. In addition, in the short-term, RFNBOs are also faced with high production costs compared to conventional jet fuel (see problem driver 2). Crop based biofuels are commercially mature but feedstock availability is limited and those biofuels raise important sustainability concerns. Biofuels produced from vegetable oils such as soybean, rapeseed, palm oil or others are a well-proven technology relying on the HEFA production route (TRL 9) and used in large amounts in the EU and worldwide notably in the form of hydrogenated vegetable oil for road transport diesel. Crop based biofuels’ life cycle emissions differs from one type of crop to another, but these fuels generally deliver lower emissions savings than Part A and B biofuels or RFNBOs. As crop based biofuels usually compete directly with the food and feed industry for the use of farming land, sustainable feedstock availability is limited, which increases their life cycle emissions. Finally, crop based biofuels may generate non-negligible indirect land use change emissions (ILUC) as a result of displacing other agricultural crops. ILUC can reduce importantly their sustainability potential or even lead to an increase in CO2 emissions compared to the use of fossil fuel. Under RED II, biofuels produced from high ILUC risk feedstock are capped at 2019 level and phased out by 2030. Finally, in the past year, companies producing or using certain types of crop-based biofuels have been subject to criticism. Indeed, such biofuels are associated by the public with issues such as deforestation and damage to biodiversity, notably in developing countries. Airlines are generally discarding the possibility of using crop-based biofuels. SAF technologies currently stand at different stages of commercial development and face various challenges. Their respective trajectories towards large-scale deployment follow different timelines ranging from short- to medium-term. While Part B biofuels could be available in meaningful volumes in the short-term (i.e. before 2025), it is clear that their contribution will be limited notably because of feedstock availability constraints. Advanced biofuels and RFNBOs have significant potential to increase the sustainability of the aviation sector. However, they currently exist only at demonstration level and still face industrial challenges, which means their emergence at commercial scale on the market could be expected towards 2030 if specific incentives are in place. Crop-based biofuels are unlikely to play a role in the decarbonisation of aviation. There is a broad consensus between fuel producers and airlines that a wide spectrum of production pathways and feedstock (including more innovative, sustainable and cost-effective pathways) will be necessary to contribute effectively to decarbonising aviation. Several pathways are currently under certification, and more should follow in the years to come. However, fuel certification is a lengthy and costly process that can be a barrier for new small and medium fuel producers. Aviation fuel certification is currently performed by the American Society for Testing and Materials (ASTM – see Annex 14). Given the strict and technical safety requirements related to the use of fuel aviation, SAF need to pass a stringent multi-tier certification process which spreads over time (3-5 years) and require significant financial investments (between €1 and €5 million). The certification process can prove highly resource consuming in particular for small to medium-size fuel producers aiming to introduce new SAF pathways to the market. Such fuel producers may not always have the necessary human and financial resources to dedicate to the process. Significant volumes of fuel are also needed for testing purposes, which represent an additional strong constraint. 55% of respondents to the survey strongly agreed or agreed that the costs and time needed for the fuel certification processes contribute to the limited production and uptake of SAF in the EU. 2.2.2.Problem Driver 2 - Scaling up SAF production means high-risk investments with significant uncertainty for producers and investors As explained in section 2.1.2, the potential SAF production capacity already installed in the EU amounts to an estimated 2.3 million tonnes per year (around 4% of total jet fuel sold at EU airports). However, EU biofuel producers optimise their production setup for other outputs than SAF. The current most important biofuel technology in terms of installed nominal production capacity in the EU is the HEFA/HVO process. HEFA (aviation biofuel) is obtained from HVO (road transport biofuel), thanks to additional process steps. Biofuel production facilities operating with biomass feedstock are typically optimized to produce biodiesel for road transport. When road biofuel is the main desired output, the typical share of SAF could result in the range of 10-15% of total output. For ATJ and Gas+FT, SAF output can be respectively 25% and 20%. Maximising the SAF output is possible, but tends to reduce the refinery output destined to road transport. The choice of biofuel producers to favour road transport biofuels to the detriment of SAF is driven by a higher return on investment and regulatory obligations. Indeed, the road transport biofuel market is well established and supported by a robust regulatory framework at European and Member States level, which secures a continuous demand (see problem driver 3). This is not yet the case for the SAF market, which is in its very infancy and where no regulatory obligations exist on SAF supply or demand. If HEFA/HVO plants would adjust their production mix to include the SAF production, up to 55% to 60% of the total refinery output could be directed to air transport. Similarly, for the other production pathways, maximum yields for SAF could vary from to 32% for FT route, 60% for Gas+FT route and 77% to 85% for the Alcohol-To-Jet route, while for RFNBOs it could be around 60%. While a reasonable share of SAF could come in the short term from the production capacity already installed in the EU, this will be far from sufficient for SAF to contribute to the decarbonisation of aviation in line with the EU’s climate targets by 2030 and 2050. A major scale-up of the SAF production capacity and a shift towards advanced biofuels and RFNBOs is necessary in the years to come. However, building and operating new SAF production facilities means high-risk and costly upfront investment expenditures. It is especially the case for SAF production routes that rely on innovative conversion technologies like advanced biofuels and RFNBOs. These incur high upfront investment expenditures (CAPEX) as they require e.g. gasification units (Gas+FT route), pre-treatment, hydrolysis and fermentation units (ATJ route). Setting up first-of-a-kind SAF production plants is costly and risky in a context where there is high uncertainty of policy framework and demand from airlines (see problem driver 3). Furthermore, large-scale investments in energy production generally have a long amortisation period, i.e. around 15 years, which adds to the investment risks and expectations of higher returns for investors, further increasing investment costs. The high SAF production costs are also driven by high operational expenditure (OPEX) for certain production routes. For installations producing through the HEFA route, costs are driven for 80-90% of their share by the cost of feedstock, as e.g. used cooking oil is expensive. The costs to produce RFNBOs are driven by the costs of additional renewable electricity as well as the cost of CO2-capture and purification. A smaller part of the costs can be attributed to the synthetic fuel production (FT or methanol route). The costs to produce advanced biofuels via Gas+FT and ATJ routes are primarily driven by the upfront investment expenditures for conversion facilities, but feedstock cost (municipal solid waste, agricultural residues, etc.) is expected to represent an important driver in the transition towards a climate neutral economy due to the increased competition over feedstock with other energy and transport sectors. Finally, because advanced biofuels or RFNBOs are novel or emerging fuel technologies, the CAPEX costs for conversion facilities are estimated rather than based on existing facility data. This adds a layer of uncertainty and risk. 85% of respondents to the survey strongly agreed or agreed that high upfront capital costs and operational costs for novel conversion processes are a challenge for SAF production. Similarly, 74% of the respondents to the OPC were of the view that excessive production costs for SAF is one of the most important barriers which hinders an extensive use of SAF. It is difficult to put a precise figure on SAF production costs because these are partially based on past experience, partially estimated, and expected to evolve over the coming years and decades to come, as production volumes increase. Economies of scale, ‘learning curve’ and lower renewable electricity prices are expected to bring SAF production costs down gradually by 2050. Large scale production volumes lead to decreasing CAPEX of novel technology applications. For example, electrolysers (used to produce RFNBOs) are currently tailor-made and the production process is not yet automated. Yet, the technology is ready for industrial scale-up. Furthermore, the efficiency and productivity of plants is expected to increase over time thanks to the learning curve. OPEX are also expected to evolve as the price of resources, in particular the levelled cost of renewable electricity at global level could go down by 40% to 70% by 2050. On the other hand, the cost of feedstock for advanced biofuels is expected to go up over time in view of the competition with other energy and transport sectors. The estimated current production costs of various production routes are represented in the Table 1, and compared with the production costs of convention fossil jet fuel. Annex 16 provides detailed information on the economies of scale, as well as the cost structure of SAF production per pathway, and explains the key differences between Part A and Part B biofuel production costs. Production route Fossil jet fuel HEFA Gas+FT ATJ RFNBOs Estimated production cost in 2020 (k€/tonne) 0.6 0.95-1.14 1.7-2.5 1.9-3.9 1.8-3.5 2.2.3. Problem Driver 3 - There is a SAF market failure that policies have not yet enabled to address successfully The important price differential between SAF and conventional jet fuel explains the low demand for SAF. While conventional jet fuel prices vary around 0.5€/litre, the minimum market price of SAF is estimated to be 1.5 to 6 times more expensive, depending on the type of SAF considered. The very low price of fossil jet fuel can be explained by several reasons. Indeed, fossil jet fuels are available in significant quantities around the world, there are many producers and suppliers in competition with each other at global and regional scale, their supply chain infrastructures are well established, demand from the aviation sector has increased steadily over the past decades, and they are subject to tax exemptions at various levels. While the important price gap between SAF and conventional jet fuel is explained by higher SAF production costs and tax exemptions for conventional jet fuel (see problem driver 2), it is also to some extent a consequence of the fact that prices in aviation (of which jet fuel represent a non-negligible part of airlines’ expenses, i.e. 17% to 25%) do not fully internalise the environmental cost of the sector. 96% of respondents to the survey agreed that high market prices of SAF compared to conventional jet fuel represent a challenge for SAF production and uptake. Similarly, 84% of the respondents to the OPC were of the view the price of conventional jet fuel as one of the most important barriers preventing uptake of SAF. The existing fiscal and regulatory framework contribute to maintaining fossil jet fuels’ low market prices. Indeed, while aviation is subject to several types of taxes (VAT, ticket taxes), jet fuel is generally exempt from excise duty in international aviation. The ICAO Chicago Convention requires tax exemption of fuel on-board when landing, whereas fuel delivered to aircraft is exempted through most existing air services agreements between States. At EU level, the Energy Taxation Directive contains a mandatory tax exemption for fuel used in air navigation, contrary to rail and road transport. It however permits Member States to tax jet fuel on domestic flights or flights between Member States based on bilateral agreements. Price gaps between fossil fuels and biofuels do not exist to the same extent in other transport modes. Low prices of fossil jet fuel and strong competition in the aviation market explain the negligible actual demand for SAF. Airlines operate in an environment of strong competition, i.e. in the EU aviation internal market and on international routes where they also compete with non-EU airlines. The strong competition in the aviation market means that airlines’ net profit margins are overall tight. The price difference between SAF and conventional jet fuel means that using SAF would represent additional fuel expenses for airlines, since fuel costs account for between 17% and 25% of airlines operating expenses. In this context of strong competition and the current regulatory framework, absorbing the SAF cost premium or passing it on to passengers may not be a viable strategy, in particular if competing airlines do not use SAF. Practices such as ‘fuel tankering’ occur when aircraft operators, for economic reasons, uplift more aviation fuel than necessary at a given airport, with the aim to avoid refuelling partially or fully at a destination airport where aviation fuel is more expensive. When performed for economic reasons, i.e. in 90% of cases, fuel tankering undermines fair competition in the air transport market, as certain aircraft operators are able to use favourable aviation fuel prices at their home base, as a competitive advantage towards other airlines operating similar routes. This affects the competitiveness of some aircraft operators and can also reduce the attractiveness of certain airports.

84% of respondents to the survey agreed that competitive air services with low profit margins reduce the willingness of airlines to pay a premium for fuel. There is a strong ongoing interdependency between the demand and supply sides of the SAF market, i.e. the lingering “chicken-or-egg” issue. The absence of effective demand for SAF is explained by the high SAF market prices relative to low fossil jet fuel prices. In turn, this absence of effective demand means that biofuel producers on the supply side of the market do not produce SAF. This causes SAF production costs to remain high (absence of economies of scale and learning curve – see problem driver 2) and SAF to remain economically not attractive on the market compared to fossil jet fuel. This situation has been ongoing for more than a decade, i.e. since the first certification of SAF and the first demonstration flights in the late 2000’s. EU policies on renewable energy for transport have so far proved insufficient to boost the production and uptake of SAF. Indeed, the regulatory framework of the past decade focused predominantly on driving renewable energy to road and rail transport. While this can be justified by the fact that road is by far the largest energy consumer of all transport modes (72.2% of the total in 2018), it means that incentives to supply renewable energy to aviation were very limited. As explained below, the Fuels Quality Directive and the Renewable Energy Directive have contributed to the positive effects of reducing the CO2 emissions from road transport, and of increasing the share of biofuels in transport from 3.4% to 8.3% between 2007 and 2018. However, due to the absence of specific incentives, EU policies on renewable energy in transport have not led to a reduction of CO2 emissions in aviation. The original 2009 Renewable Energy Directive (RED I) set a mandatory target for the transport sector to be supplied with 10% of renewable energy including transport biofuels by 2020. It contained no specific target for the air transport sector. The 2018 recast Renewable Energy Directive (RED II) revised the mandatory target for transport to 14% by 2030. There is no specific mandatory target for the air transport sector, but RED II allows Member States to account for biofuels supplied to the aviation sectors towards meeting the renewable energy target. In addition, biofuels directed to the aviation sector can benefit from a multiplier of 1.2, meaning that such biofuels can account towards the renewable energy target for 20% more of their energy content. A multiplier of 1.2 for aviation represents however a very limited incentive in comparison with the multiplier of 4 encouraging the use of renewable electricity in the road and rail sector. The amendment to the Fuels Quality Directive (FQD) adopted in 2009 establishes that fuels used for road transport in the EU must meet strict quality requirements and contains a mandatory target requiring a reduction of 6% of road fuels greenhouse gas intensity by 2020. This was a strong regulatory push to drive renewable energy towards the road sector, as the target could be met notably with the use of biofuels and RFNBOs. Aviation fuels were not subject to a target as they were not covered by the scope of FQD. Similarly to RED I, the FQD also included the ‘opt-in’ clause since 2019. Aviation CO2 emissions have been covered by the EU Emissions Trading System (EU ETS) since 2012. The EU ETS includes incentives for airlines to use SAF by allowing them to benefit from a “zero emissions-rating” if they use SAF. In practice, this means that airlines are not required to surrender any allowances for CO2 emissions where fossil jet fuel is replaced with SAF. This mechanism may provide a true incentive for airlines to use SAF if the savings from having to buy fewer allowances, or being able to sell more allowances, would match the additional cost of using SAF, compared to the cost of fossil fuels. However, the EU ETS on its own has not been sufficient to boost SAF uptake by airlines. Since 2012 the price of CO2 emission allowances in the EU ETS has oscillated from around EUR 4 to over 40 per tonne of CO2. Provided that the price of SAF would be EUR 1 per litre, and that the EU ETS would constitute the only financial incentive towards the use of SAF, the price of CO2 emission allowances should be at least EUR 160 to incentivize the use of SAF by airlines. Hence, only Germany and Sweden reported the use of SAF under the EU ETS in 2016 and 2017. At global level, the regulatory framework relating to SAF consists mainly of the dedicated mechanism contained in the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) under the International Civil Aviation Organization (ICAO). The scheme, which pilot phase starts in January 2021, aims to cap CO2 emissions from international air transport by requiring airlines to offset emissions beyond 2019 levels. Instead of purchasing emissions offsets, aeroplane operators can choose to use SAF that comply with a dedicated strict sustainability framework. In a similar way as for the EU ETS, in the short-term, given the current conditions of the carbon market, it is likely that CORSIA on its own will not provide a sufficient economic incentive for airlines to use SAF, as the market price of carbon offsets is expected to be lower than the additional market price of SAF. Further work is ongoing at ICAO level to define the possible contribution of SAF (among other types of fuels) in international aviation. In 2017, the Conference on Aviation and Alternative Fuels (CAAF/2) adopted recommendations and approved a declaration, calling for a significant proportion of aviation fuels to be substituted with sustainable aviation fuels by 2050. In 2019, the 40th ICAO General Assembly adopted a Resolution calling on the ICAO Council to explore the feasibility of a long-term global aspirational goal for international aviation (LTAG). SAF are identified as a building block in this exercise. The same Resolution calls for ICAO States to “consider the use of incentives to encourage the deployment of clean and renewable energies sources for aviation, including SAF”. Policy work at global level to support SAF deployment in aviation is advancing, but progress is slow. Discussions on lower carbon aviation fuels under CORSIA are diverting the attention from SAF, which effectively can achieve much higher emissions savings. Finally, the treatment and eligibility of SAF under CORSIA and RED II differs today in several ways, notably in terms of sustainability framework, accounting system and reporting. This adds a layer of complexity and uncertainty for producers and investors. 84% of respondents to the survey agreed that lack of clear policy signals and limited impact of existing legal framework contribute to the challenges for SAF production and uptake. 2.3.How the problem will evolve SAF are expected to continue facing unequal commercial development and important industrial challenges (problem driver 1). In the years to come, the potential production capacity for Part B biofuel might increase slightly, albeit at a very slow pace. This is because Part B biofuels are the most commercially mature and the least costly to produce. However, feedstock availability constraints will continue to be a barrier to more significant use of Part B biofuels in aviation. In addition, they provide the least benefits in terms of emissions reductions. Regarding advanced biofuels for air transport, only very few demonstration sites are expected to scale-up to commercial production without further EU level intervention. RFNBOs capacity productions for aviation are also projected to make no significant inroads without additional EU level intervention. In the absence of regulatory and financial support, this will be insufficient for these technologies to benefit from the necessary economies of scale and learning curve that widespread scale-up would deliver. In addition, feedstock prices for biofuels are expected to increase over time, due to the competition with other energy and transport sectors in the transition towards a climate neutral economy. The industrial challenges faced by advanced biofuels and RFNBOs in air transport are thus expected to remain in the medium- to long-term. While new production pathways will become certified, these new technologies will have very low market maturity and will need to be demonstrated at small scale. Finally, it is possible that the certification process could become lighter for fuel producers in the future, as the ASTM may set up a ‘Fast Track’ certification. This would speed up the process to some extent, but it is not clear whether it would make it less resource-intensive in particular for small producers. Upfront capital costs investment are expected to remain high, as well as the level of risk for investors (problem driver 2). Investors and biofuel producers are expected to take a low-risk approach when investing in new production capacity, i.e. by ensuring that the plants are versatile enough to be optimised for other outputs than SAF e.g. road biofuel or chemical industry, where demand is expected to remain relatively stable in the years to come. Concerning investments in plants to produce advanced biofuels for air transport, it is likely that the situation will remain unchanged, meaning that very few demonstration projects will be scaled up to commercial size, and levels of investments will continue to be very low. This is even more the case for RFNBOs whereas the capital costs are higher than those for advanced biofuels. As a result, production cost of SAF will continue to be substantially higher than that of fossil jet fuel and upfront investments in production capacity will continue to represent high risk for investors, in particular early movers. Finally, whether biofuel producers will durably optimise their installations to produce SAF on a regular basis will depend on the emergence of a stable, long-term demand on the side of airlines. This is unlikely to happen without further EU level intervention, as explained in the following paragraph. The existing regulatory framework is not expected to drive biofuels or RFNBOs towards use in aviation (problem driver 3). The SAF market prices are expected to remain substantially higher than those of fossil jet fuel under current trends and policies, with oil prices projected at 72 €/bbl by 2030 and 106 €/bbl by 2050. In addition, fossil jet fuels are subject to highly volatile prices, linked to the evolution to the oil prices that react to an array of factors far beyond the dynamics of the aviation market. Furthermore, it is not clear whether the airlines will be subject to less intense competition in the future and achieve higher profits allowing them to invest sufficiently in sustainable fuels. The higher SAF market prices relative to that of fossil jet fuel and the high level of uncertainty surrounding the two factors mentioned above will continue deterring biofuel producers and investors from further deploying or investing in SAF. The chicken-or-egg situation is thus likely to continue. This problem is unlikely to be solved if the current regulatory framework is maintained. Indeed, for the EU ETS to make uptake of SAFs economically interesting, a price of CO2 emission allowances of at least €160 would be necessary, which is unlikely in the short- or medium-term. Similarly, without further EU level intervention, the RED II and the FQD are expected to continue driving the vast majority of transport biofuels towards the road sector. The current option given to Member States under the RED II to account for biofuels supplied to the aviation sectors is expected to lead to different rules and incentives introduced by individual Member States with very few of them taking the advantage of the opt-in. Given the elements explained above, problems of (A) low production and (B) low demand are expected to remain present in the medium to long term in the absence of further regulatory action. They will continue to be strongly driven by problem drivers 1 to 3. The projected baseline uptake of SAF is limited to 0.1 Mtoe in 2030, increasing gradually to 1.5 Mtoe in 2050, which would account for 0.2% of total fuel consumption in aviation by 2030 and 2.9% by 2050. In turn, the persistence of Problems 1 and 2 is expected to aggravate the general problem. Air traffic is projected to increase by close to 45% by 2030 and close to 90% by 2050, relative to 2015, following the recovery from the COVID-19 pandemic. CO2 emissions would increase by 17% by 2030 and slightly over 20% by 2050, relative to 2015, despite the significant improvements in energy efficiency. Annex 4 provides more explanations on the baseline scenario, reflecting the impacts of the COVID-19 pandemic. While other sectors of the economy and other transport modes will likely continue reducing their carbon footprint, the aviation sector would remain one of the few sectors where emissions keep rising. In this context, the public and political pressure on aviation would continue to build, with important risk of reputational damage for the sector. Potentially, this could also threaten jobs in the air transport industry, connectivity, as well as growth of businesses and regions. The revision of the Renewable Energy Directive, part of the ‘Fit for 55’ package is expected to help scaling up the production of advanced biofuels and RFNBOs. It will however not enable setting specific requirements on airlines and aviation fuel suppliers in a harmonised way across the EU. This is expected to lead to different rules and incentives introduced by individual Member States. It may also lead to uncertainty for the fuel and airline industry if Member States obligations support different types of SAF with differing fuels eligibility and sustainability requirements. As a result, this would likely still divert the advanced biofuels and RFNBOs towards the road transport sector instead of air transport. On the other hand, the present initiative can support the review of the Renewable Energy Directive by reinforcing the delivery of renewable energy in the transport sector, including in the air transport sector. The revision of the Energy Taxation Directive, part of the ‘Fit for 55’ package, will revisit the tax exemptions for conventional jet fuel. This would however not allow to address problem drivers 1 and 2 of the present initiative (SAF face industrial challenges; scale-up of SAF production means high risk investments), because is unlikely to provide, on its own, a sufficient incentive for the fuel industry and airlines to make the necessary investments in SAF production and uptake. Finally, as explained above, for the EU ETS to make SAF economically interesting for airlines, a price of CO2 emission allowances of at least €160 would be necessary. By comparison, the impact assessment accompanying the 2030 Climate Target Plan projects carbon prices for the ETS sector in the range of 32 to 65 €/tCO2, to cut the economy-wide GHG emissions by at least 55% by 2030. The EU ETS is therefore unlikely, by itself, to drive SAF uptake in aviation in the medium-term. 3.Why should the EU act? 3.1.Legal basis The Treaty on the Functioning of the European Union confers to the EU the competence to lay down appropriate provisions in the air transport sector (Article 100(2)). Transport is a shared competence between the European Union and the EU Member States.

This initiative is fundamentally about air transport, maintaining high levels of connectivity, competition and industry competitiveness level in the aviation internal market while stepping up its sustainability. Sustainability is an inherent trait of transport, as safety and security are. The legal text will include detailed aviation-specific provisions to cater for the complexities of the sector. 3.2.Subsidiarity: Necessity of EU action Air transport, climate and renewable energy are matters of high EU relevance. Aviation is a highly integrated market operating in a network dimension across the whole of the EU. The cross-border dimension is inherent to air transport, which makes any fragmented regulatory framework a significant hurdle for economic operators. The CO2 emissions from aviation are also of transboundary nature and as such cannot be addressed at national or local level only. Therefore efforts to reduce CO2 emissions of the air transport sector and to promote its use of renewable energy sources should be addressed at EU level. Market players should benefit from clear climate and energy rules applying in a harmonised way across the EU. An intervention at EU level is necessary, as the scaling up SAFs can contribute to reducing air transport emissions and is in line with the EU’s climate objectives. The Commission’s 2030 Climate Target Plan identifies an increase in the use of SAF as one of the important contributors to the goal of reducing GHG emissions by 55% by 2030 and achieving a climate-neutral economy by 2050. An EU-level intervention is necessary to avoid a patchwork of national measures with possible unintended effects. National initiatives to incentivise the supply and use of SAF in the Netherlands (by an aviation opt-in to the RED II targets) and Nordic States (with the emergence of national blending mandates) are expected to have only limited effects on the use of SAF at EU level. Such national initiatives risk creating a patchwork of different obligations for the aviation and fuel supply industry. Different levels of obligations per Member State could potentially distort the aviation market encouraging adverse practices such as fuel tankering, whereby airlines would refuel in Member States with less strict obligations in order to save on fuel costs. National frameworks could lead to unintended negative impacts by inducing inefficiencies in air navigation (longer flight trajectories, higher volumes of fuel lifted) that could lead to a fragmented regulatory framework, inducing higher compliance costs for economic operators. It may also lead to uncertainty for the fuel and airline industry if Member States obligations support different types of SAF with differing sustainability requirements. Finally, it could lead to higher fuel burn and GHG emissions. EU-level regulatory action on SAF is widely supported by consulted Member States and industry stakeholders. 68% of respondents to the ReFuelEU Aviation open public consultation considered that regulatory action on SAF was best suited at EU level. Stakeholders consulted from across the EU agree that the supply and uptake of SAF will remain relatively low across the EU and the price gap with conventional jet fuel will persist in the absence of an EU-wide approach to incentivise the production and use of SAF. 3.3.Subsidiarity: Added value of EU action EU-level action is expected to set a clear policy direction for the market players from both the aviation and fuels industries. As explained in section 2, a part of the problem is due to the absence of specific incentives to reduce aviation CO2 emissions in the EU policy framework. This was confirmed by the desk research and stakeholders’ consultation. One clear set of EU rules on the supply and uptake of SAF will mean that SAF producers and airlines can operate based on equal opportunities across the EU, creating level playing field for airlines to compete. It will give clear signals on the need to develop specific types of SAF. A single set of rules also means reduced compliance costs for market players. EU-level action on SAF would contribute to achieving the desired climate change policy targets. The 2030 Climate Target Plan establishes that SAF have a major role to play to reduce emissions from aviation by 2030 and 2050 and attain EU climate goals. Therefore, establishing EU rules on SAF production and use allows taking a “tailored” approach towards meeting the targets. Relying on national measures only with likely different targets (if any) would incur the risk that the aggregated level of ambition is not sufficient. The current initiative can also support the forthcoming review of the Renewable Energy Directive by reinforcing the share of renewable energy in the transport sector. EU-level action may have positive effects at international level. As EU intervention would have effects on the entire aviation and SAF EU market, it is expected to have higher prominence towards third countries than isolated national initiatives. Spill-over effects are also likely to occur more easily, whereby third countries may consider adopting similar measures. In turn, this could accelerate the ongoing work at ICAO level on the use of SAF. In short, EU action could spur further developments on the production and uptake of SAF outside of the EU, which could help create a level playing field at global level, as well as reduce air transport emissions at a wider scope. 4.Objectives: What is to be achieved? 4.1.General objectives The air transport sector needs to maintain a level playing field and accelerate its decarbonisation urgently in the years to come in order to be in line with the Union’s climate targets for 2030 and the Union’s ambition to become carbon neutral by 2050. As explained in section 1.3, while considering a combination of carbon pricing and medium intensification of regulatory measures in all sectors of the economy, the common economic assessment underpinning the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy identifies the trajectory of SAF ramp up from 2025 to 2050 in order to bring aviation in line with the climate ambition of the Union. The general objective of this initiative is to reduce aviation CO2 emissions in line with the 2030 and 2050 climate objectives of the EU, by transitioning away from fossil jet fuel and tap into the high decarbonisation potential of sustainable aviation fuels by establishing a competitive SAF market, while at the same time ensuring a level playing field on the aviation market. Strengthening ongoing efforts at EU and global level only will not be sufficient if the aviation sector remains entirely dependent on fossil jet fuel. The decarbonisation of aviation can only be achieved if the EU deploys a clear and comprehensive aviation fuels policy. In the aviation fuels landscape, there are very promising alternatives to fossil jet fuel: (i) liquid sustainable aviation fuels (advanced biofuels and RFNBOs), (ii) hydrogen fuel cells, and (iii) electric batteries. It is clear that the decarbonisation of aviation will come from a combination of these alternatives. However, these will become available at different points in time. While liquid sustainable aviation fuels should be commercialised as early as 2022, with potential for significant scale-up as of 2025, electric aircraft and hydrogen-powered aircraft could play a role in commercial aviation in the long-term. This requires targeted action on each of these initiatives to ensure that they can be delivered in time. ReFuelEU Aviation therefore specifically targets the drop-in liquid sustainable aviation fuels. In addition it should be noted that this initiative does not target GHG emissions as a whole but targets CO2 emissions and some of the non-CO2 emissions from aviation. It should lead to simultaneous reductions of CO2 emissions, of non-volatile particulate matter and sulphur emissions. However due to the remaining scientific knowledge gaps on the impact of the non-CO2 emissions from aviation, these will be analysed only qualitatively in this report (see section 6.1.4 and Annex 13). The initiative will contribute to the achievement of the general objective by pursuing the following two specific objectives. 4.1.1.SO1: To achieve large-scale production and supply of SAF in the EU with high decarbonisation potential, at competitive costs Specific objective 1 is to achieve the large-scale production in the EU of sustainable aviation fuels with high decarbonisation potential, and to ensure adequate levels of supply to the aviation sector at competitive costs. In concrete terms, taking an industrial policy perspective, this means that the aim is to develop the SAF production capacities on several fronts. First, the objective is to support the use of the existing SAF production capacity in order to increase significantly the SAF output. As explained under problem 1, there is an important SAF production capacity already installed and potentially available in the EU, but it is currently not used for SAF production due to the reasons outlined previously (see section 2.2). Second, the objective is to boost the development of new additional production facilities in the EU for SAF with the highest decarbonisation potential, i.e. advanced biofuels for aviation and RFNBOs. Third, the objective is to lead to the emergence on the market of new, sustainable and more cost-effective SAF pathways, taking a technology-neutral approach. New pathways, using innovative technologies and sustainable low-cost feedstock can broaden the spectrum of available SAF and unleash the potential for higher emission savings. A technology-neutral approach in the regulatory framework can ensure that a wide spectrum of innovative fuels technologies can reach the market, and can contribute to the aviation fuel mix in the future. Fourth, the objective is to reduce SAF production costs relative to the current levels. Due to economies of scale, learning effects, and the technology maturity over time, production sites will be able to reduce their capital costs gradually. This will be counterbalanced to some extent by an increase in the feedstock costs, given the competition over feedstock with other energy and transport sectors. This will allow nevertheless SAF to be available on the market at lower prices than estimated currently (see Specific Objective II).

4.1.2.SO2: To ensure a level playing field in the aviation market and achieve a gradual and continuous uptake of SAF with high decarbonisation potential at competitive prices Specific objective 2 is to maintain a level playing field in the aviation market and achieve a gradual and continuous uptake of SAF with high decarbonisation potential by the aviation sector at lower prices than estimated today and based on the uniform obligations ensuring the integrity of competition within the internal market. For this objective to be achieved, it needs policy intervention on several fronts. First, the objective is to ensure that airlines have access to SAF at airports. This means that the logistics of the supply network for SAF-blended jet fuel must be well organised and that the necessary volumes and qualities of SAF must be physically distributed at airports, and made accessible to airlines for refuelling on a regular basis. The logistics of SAF-blended jet fuel need to be geared to cater for gradual increase of SAF production and supply at airports over time. Second, the objective is to boost the uptake of the most sustainable types of SAF in a technology-neutral way. In order to maximise the decarbonisation potential of SAF, to accelerate the decarbonisation of aviation and to deliver environmental benefits in line with the EU’s climate targets, it is also necessary to ensure that the uptake of the most sustainable SAF increases over time. Third, the objective is that airlines can purchase SAF at lower prices than estimated today and based on uniform obligations across the Union. This means that the selling price of SAF goes down relative to current price estimates, bridging to some extent the gap between conventional jet fuel and SAF prices. Other initiatives like the forthcoming review of the ETS Directive and the Energy Taxation Directive could also play a role in further bridging this gap. Fourth, the objective is to ensure a level playing field between airlines to purchase aviation fuel and in particular SAF. This means that distortion of competition must be avoided across the internal market, as well as between EU and non-EU airlines. In particular, airlines should be able to purchase SAF at competitive prices regardless of the nature or geographical spread of their operations. Fifth, the objective is to avoid carbon leakage resulting from increased fuel tankering. This means that this initiative should not lead to airlines carrying excessive volumes of fuels or changing their refuelling locations and strategies in order to avoid using SAF and incurring higher fuel costs. In this context, it is also necessary that the competition between airlines within the internal market is not distorted. Due to the “chicken-or-egg” situation on the SAF market, as described in section 2, Specific Objectives 1 and 2 mutually support and reinforce each other. This means that it will be easier to successfully achieve Specific objective 2 (gradual and continuous uptake of SAF) if Specific objective 1 is successfully achieved (achieve large-scale SAF production), and vice versa. 5.What are the available policy options? 5.1.What is the baseline from which options are assessed? The baseline scenario reflects developments under current trends and adopted policies as described in section 2.3, without further EU level intervention. It builds on the baseline scenario underpinning the impact assessment accompanying the 2030 Climate Target Plan and the staff working document accompanying the Sustainable and Smart Mobility Strategy, but it additionally considers the impacts of the COVID-19 pandemic and the National Energy and Climate Plans. In this scenario, the total intra and extra-EU air transport activity is projected to increase by close to 45% by 2030 and close to 90% by 2050, relative to 2015, following the recovery from the COVID-19 pandemic. The pace of the recovery builds on the GDP projections but also considers some structural changes due to limited shifts towards digital meetings. The overall impact of the COVID-19 pandemic on the air transport activity is however significant, with lower growth projected relative to pre-COVID projections (i.e. around 11 percentage points lower growth for 2015-2030 relative to the pre-COVID projections and 14 percentage points lower growth for 2015-2050). More details are provided in Annex 4. The energy demand in aviation is projected to grow from around 40 Mtoe in 2015 to 50 Mtoe in 2050, following the significant decrease estimated for 2020 (to 21 Mtoe) due to the COVID-19 pandemic. Aviation is projected to remain almost entirely reliant on conventional jet fuel by 2050 without further EU level intervention, as explained in section 2.1.1. Air transport tank to wing CO2 emissions are projected to increase by 17% by 2030 and slightly more than 20% by 2050, relative to 2015. This is due to the strong growth in activity, following the recovery from the COVID-19 pandemics and despite the significant improvements in energy efficiency over time. Well-to-wing emissions would follow a similar trend. The baseline scenario underlines an aggravation of the general problem (see section 2.1.1.). The share in the total transport CO2 emissions is projected to go up from around 12% in 2015 to 20% in 2050. More details on the baseline scenario are available in Annex 4, drawing on the impact assessment support study. The very low and slow market penetration of SAF by 2030 and 2050 means that problems 1 and 2 (see sections 2.1.2 and 2.1.3) remain largely valid, underpinned by the drivers identified in section 2.2. The COVID-19 pandemic’s long-term effects on air transport activity are highly uncertain and depend on the global evolution of the pandemic, the coordination of States to address it, and the ability of the aviation sector to restore passenger confidence. A discussion of the effectiveness of this initiative in relation to the possible effects of COVID-19 pandemic is included in section 7. The baseline scenario does not include the other ‘Fit for 55’ initiatives. This ensures a consistent approach with the impact assessments accompanying the other ‘Fit for 55’ initiatives. However, a qualitative assessment of their possible impact on how the problem will evolve is provided in section 2.3, section, 7.2 and Annex 10. In addition, as explained in section 1.3, the trajectory of SAF ramp up from 2025 to 2050 in the policy options is based on the common economic assessment underpinning the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy while considering a combination of carbon pricing and medium intensification of regulatory measures in all sectors of the economy. This ensures a consistent approach for delivering the EU climate ambition by 2030 and 2050, while at the same time identifying the impacts of the design of the policy option that would best allow to reach this contribution. Nevertheless, a qualitative assessment of the implications of lower/higher trajectory for the SAF ramp up is provided in section 5.4.3. 5.2.Policy measures under consideration and approach taken Achieving the desired objectives of this initiative requires a holistic approach to the possible levers of action to address the problems and drivers. A comprehensive and consistent set of actions is therefore necessary, which individually may not be sufficient to achieve the desired objectives, but will need to mutually complement each other. This is for example the case with the problem of the price differential between SAF and conventional jet fuel (see problem driver 3). The measures proposed in this section cannot fully bridge the price gap on their own, but can contribute to reducing it. A list of policy measures (outlined and briefly described below) is considered after extensive consultations with stakeholders, expert meetings, independent research and the Commission’s own analysis (see Annex 5). The measures included in the scope of the present initiative are structured around a regulatory requirement consisting of a SAF blending obligation. It is important to note that such mandate can be designed in multiple ways. Each design has different chances of reaching the objectives depending on their practical applicability, political feasibility and expected market and industrial behaviour (e.g. choice to invest in specific SAF types). These regulatory measures are complemented by a set of ‘flanking’ measures that support the intervention to address the problems and drivers identified along the SAF supply chain (also at global level), and meet the identified objectives. All flanking measures provide an enabling framework for policy options although they are not directly included and assessed in the policy options. They consist of the following: ·Intensifying European efforts at ICAO level to raise ambition on SAF use; ·A strategic alliance on advanced biofuels and electro-fuels; ·Steering financial support towards SAF development in the EU; ·Facilitating the certification of new SAF pathways. Measures addressed as part of the revision of other pieces of EU regulatory framework, part of the ‘Fit for 55’ package and for which dedicated, in-depth impact assessments have been prepared by the Commission services, are beyond the scope of this impact assessment. This relates namely to: ·Revision of the Energy Taxation Directive; ·Revision of the EU Emissions Trading System;

·Revision of the Renewable Energy Directive; ·Revision of the Fuels Quality Directive; ·Reform of the Single European Sky. Annex 10 provides information on each of these measures. These measures may additionally contribute to the achievement of the desired policy objectives. Annex 10 provides a qualitative assessment of how these measures could contribute and establishes a clear reference to the impact assessments, which provide in-depth qualitative and quantitative analysis. This document also assesses the interplay between these measures and the preferred policy option of the present initiative, and explains how some of these measures could contribute to reaching the objectives of the present initiative. It also explains how the present initiative complements and reinforces the objectives of other initiatives part of the ‘Fit for 55’ package. 5.3.Description of the policy options (PO) The table below provides an overview of the various policy measures considered under this initiative and the way in which they are grouped in policy options (POs) A1, A2, B1, B2, C1 and C2. It is important to note that all POs (except PO B2, due to its reduced scope) are designed to achieve the same CO2 savings on a well-to-wing basis over time. Policy measure Driver Problem Specific Objective A1 A2 B1 B2 C1 C2 SAF obligation 1 Fuel suppliers are obliged to supply only jet fuel that is blended with a minimum share of SAF across all EU airports. D1, D2, D3 P1, P2 S1, S2 ✓ ✓ ✓ ✓ 2 Transition period: from 2025 to 2030, fuel suppliers are obliged to supply a minimum share of SAF over their total jet fuel supply on a yearly basis. All jet fuel supply must contain SAF in the range 0% - 50%. D1, D2, D3 P1 S1 ✓ ✓ 3 Transition period: from 2030 to 2035, fuel suppliers are obliged to supply a minimum share of SAF over their total jet fuel supply on a yearly basis. All jet fuel supply must contain SAF in the range 2% - 50%. D1, D2, D3 P1 S1 ✓ ✓ 4 Airlines are obliged to use a minimum share of SAF as part of their total fuel consumption on intra and extra-EU flights on a yearly basis. D3 P2 S2 ✓ 5 Airlines are obliged to use a minimum share of SAF as part of their total fuel consumption on intra-EU flights on a yearly basis. D3 P2 S2 ✓ Obligation of jet fuel uplift 6 Airlines departing from EU airports are required to uplift the amount of jet fuel needed for their planned flight. D3 P2 S2 ✓ ✓ Target setting: volumes or CO2 intensity 7 The minimum target is expressed in terms of SAF volumes blended into jet fuel, expressed as share. D3 P1, P2 S1, S2 ✓ ✓ ✓ ✓ 8 The minimum target is expressed in terms of GHG intensity reduction of the jet fuel used. D3 P1, P2 S1, S2 ✓ ✓ Ramp-up of SAF obligation 9 The required minimum share of SAF blended in total jet fuel supplied increases over time from 2025 to 2050, in line with the EU climate objectives. D1, D2, D3 P1, P2 S1, S2 ✓ ✓ ✓ ✓ 10 The required reduction in CO2 intensity of total jet fuel supplied increases over time from 2025 to 2050. It is designed to achieve the same emissions reductions in the air transport sector over time as measure 9. D1, D2, D3 P1, P2 S1, S2 ✓ ✓ Additional incentives for e-fuels 11 RFNBOs are subject to a sub-mandate gradually increasing from 2030 to 2050. D1, D2, D3 P1, P2 S1, S2 ✓ ✓ ✓ ✓ 12 A multiplier applies to the accounting of RFNBOs towards meeting the SAF obligation. D1, D2, D3 P1, P2 S1, S2 ✓ ✓ Penalties for non-compliance 13 Fuel suppliers are subject to penalties applied at national level in case of non-compliance with the SAF supply obligation. P1 S1 ✓ ✓ ✓ ✓ 14 Airlines are subject to penalties applied at national level in case of non-compliance with the SAF use obligation. D3 P2 S2 ✓ ✓ 15 Airlines are subject to penalties applied at national level in case of non-compliance with the jet fuel uplift obligation. D3 P2 S2 ✓ ✓ SAF transaction for accounting purposes 16 Fuel suppliers may request SAF transactions between them for accounting purposes, to comply with the supply obligation. D3 P1 S1 ✓ ✓ 17 Airlines may request SAF transactions between them for accounting purposes, to claim the use of SAF. D3 P2 S2 ✓ ✓ Monitoring, reporting, verification 18 An existing EU agency (e.g. EASA) is required to compile the data provided by fuel suppliers and report to the Commissio