COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2003/87/EC as regards aviation's contribution to the Union’s economy-wide emission reduction target and appropriately implementing a global market-based measure
Date: 2021-07-14
Institutions: Directorate-General for Climate Action, European Commission
Subjects: EU emission allowance, EU environmental policy, air transport, auction sale, emission trading, environmental protection, greenhouse gas, pollution control measures, reduction of gas emissions, tradeable emission permit

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 14.7.2021  SWD(2021) 603 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT  Accompanying the document Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2003/87/EC as regards aviation's contribution to the Union’s economy-wide emission reduction target and appropriately implementing a global market-based measure {COM(2021) 552 final} - {SEC(2021) 552 final} - {SWD(2021) 555 final} - {SWD(2021) 604 final}  
 
 
TABLE OF CONTENTS 

1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ............................................................... 4 

1.1.  Aviation and climate change ............................................................................. 4 
1.2.  EU action and relevant international fora: the Paris Agreement and the 

1.3. 

International Civil Aviation Organization (CORSIA) ...................................... 6 
Integration of CO2 aviation  emissions  in  the EU's Emissions Trading 
System ............................................................................................................. 10 

2. 

PROBLEMS DEFINITION ................................................................................................................ 13 

2.1.  What is/are the problems? ............................................................................... 13 

3.  WHY SHOULD THE EU ACT? ........................................................................................................ 19 

3.1.  Legal basis ....................................................................................................... 19 
3.2.  Subsidiarity: Necessity of EU action ............................................................... 20 
3.3.  Subsidiarity: Added value of EU action .......................................................... 20 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? ............................................................................... 21 

4.1.  General Objectives .......................................................................................... 21 
4.2.  Specific objectives ........................................................................................... 22 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? .................................................................... 23 

5.1.  What is the baseline from which options are assessed? .................................. 23 
5.2.  Description of the policy options .................................................................... 28 
5.3.  Options discarded at an early stage ................................................................. 35 
5.4.  Overview of problems, objectives and policy options .................................... 36 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? ........................................................... 36 

6.1.  Environmental impacts .................................................................................... 36 
6.2.  Competitiveness and economic impacts .......................................................... 48 
6.3.  Social impacts .................................................................................................. 60 
6.4. 
Impacts on outermost regions (OMR) ............................................................. 62 
6.5.  Cross-cutting issues ......................................................................................... 66 

7.  HOW DO THE OPTIONS COMPARE? ............................................................................................ 69 

7.1.  Effectiveness .................................................................................................... 69 
7.2.  Efficiency ........................................................................................................ 79 
7.3.  Coherence ........................................................................................................ 83 
7.4.  Conclusions ..................................................................................................... 88 

8. 

PREFERRED OPTION ...................................................................................................................... 90 

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? .................................. 93 

ANNEX 1: PROCEDURAL INFORMATION ............................................................................................ 96 

ANNEX 2: STAKEHOLDER CONSULTATIONS .................................................................................... 99 

ANNEX 3: WHO IS AFFECTED AND HOW? ........................................................................................ 109 

ANNEX 4: ANALYTICAL METHODS ................................................................................................... 113 

1 

 
 
 
1. 

COMMON  ANALYTICAL  FRAMEWORK  FOR  THE  IMPACT  ASSESSMENTS  OF 
THE REVISION OF ESR, ETS, LULUCF, RED AND EED .......................................................... 113 

2. 

SPECIFIC ANALYTICAL ELEMENTS FOR THIS IMPACT ASSESSMENT ............................ 148 

ANNEX  5:  COVID-19  IMPACTS  ON  GROWTH  OF  GREENHOUSE  GAS  EMISSIONS  IN 

THE AVIATION SECTOR .............................................................................................................. 160 

ANNEX 6: 2019 ICAO RESOLUTION ON CORSIA .............................................................................. 161 

ANNEX 7: DEVELOPMENTS FOLLOWING THE 2016 ICAO ASSEMBLY....................................... 169 

ANNEX 8: INTEGRATION OF AVIATION IN THE EU'S EMISSIONS TRADING SYSTEM ........... 173 

ANNEX 9: FEATURES OF THE EU ETS ................................................................................................ 177 

ANNEX  10:  ASSESSMENT  OF  CORSIA  PURSUANT  TO  ART.  28B  OF  THE  ETS 

DIRECTIVE...................................................................................................................................... 180 

ANNEX  11:  STUDY  OF  COST  PASS-THROUGH  PURSUANT  TO  ART.  3D  OF  THE  ETS 

DIRECTIVE...................................................................................................................................... 191 

2 

 
 
 
 
 
List of Acronyms 

CAEP 

CDM 

Committee on Aviation Environmental Protection 

Clean Development Mechanism 

CNG2020 

Carbon Neutral Growth from 2020 

CO2 

CO2 eq. 

CORSIA 

EAG 

EEA 

EU 

ETS 

EUA 

EUAA 

EUC 

Extra-EEA 

GHG 

GMBM 

GMTF 

HLG 

IATA 

ICAO 

Carbon Dioxide 

Carbon Dioxide equivalent 

Carbon Offset and Reduction Scheme for International Aviation 

Environment Advisory Group  

European Economic Area 

European Union 

Emissions Trading System 

EU Allowance 

EU Aviation Allowance 

Emissions Unit Criteria 

Flights between aerdromes within the European Economic Area and 
aerodromes in a third countries 
Greenhouse Gas  

Global Market-Based Measure 

Global Market-Based Measure Technical Task Force 

High Level Group 

International Air Transport Association 

International Civil Aviation Organization 

Intra-EEA 

Flights between aerodromes within the European Economic Area 

LDC 

LLDC 

MBM 

MRV 

MT 

RTK 

SARPs 

SIDS 

Least Developing Country 

Land-locked Developing Country 

Market-Based Measure 

Monitoring, Reporting and Verification 

Million Tonnes 

Revenue Tonne-Kilometre 

Standards and Recommended Practices 

Small Island Developing States 

UNFCCC 

United Nations Framework Convention on Climate Change 

3 

 
 
 
 
1.  INTRODUCTION: POLITICAL AND LEGAL CONTEXT 

Tackling  climate  change  and  reaching  the  objectives  of  the  Paris  Agreement  and  other 
environmental issues  (including addressing air pollution and energy demand) are at  the 
core of the European Green Deal1. The necessity and value of the European Green Deal 
have only  grown in  light  of the very severe effects  of the COVID-19 pandemic on our 
health  and  economic  well-being.  Unprecedented  near  term  investments  are  needed2  to 
overcome the negative impact of the COVID-19 crisis on jobs, incomes and businesses, 
including  in  the  sectors  covered  by  the  EU  Emissions  Trading  System  (ETS).  The 
European Green Deal is a response to these challenges. It is a new growth strategy that 
aims  to  transform  the  EU  into  a  fair  and  prosperous  society,  with  a  modern,  resource-
efficient and competitive economy where there are no net emissions of greenhouse gases 
in  2050  and  where  economic  growth  is  decoupled  from  resource  use.  It  also  aims  to 
protect, conserve and enhance the EU's natural capital, and protect the health and well-
being  of  citizens  from  environment-related  risks  and  impacts.  At  the  same  time,  this 
transition must be just and inclusive.  

The  climate  neutrality  objective,  which  the  Commission  proposed  in  20183  and  the 
European  Council4  and  Parliament5  endorsed,  is  at  the  core  of  this  transformation.  The 
Commission has proposed to enshrine climate neutrality into EU law6. In order to set the 
EU  on  a  sustainable  path  to  achieve  climate  neutrality  by  2050,  and  with  the 
Communication on stepping up Europe’s 2030 climate ambition7 (2030 Communication) 
the Commission has proposed an EU-wide, economy-wide net greenhouse gas emissions 
(GHG) reduction target by 2030 compared to 1990 of at least 55% that will set the Union 
onto the path to climate neutrality. 

The  Commission  is  reviewing  all  relevant  climate  and  energy  policies.  This  includes 
increasing  the  environmental  contribution  of  the  Emissions  Trading  System  (ETS)  in  a 
manner commensurate with the overall target.  

1.1. Aviation and climate change 

Aviation  accounts  for  2-3%  of  global  CO2  emissions8,  and  is  an  important  source  of 
9.  Long-term  projections  of  aviation 
climate  impacts  from  emissions  other  than  CO2
activity  show  major  increases  in  traffic.  The  CO2  emitted  in  2018  from  all  flights 

1 COM(2019)640 final.   
2 E.g. SWD/2020/98 final. 
3 
COM(2018)773 final. 
4 European Council conclusions, 12 December 2019.   
5 European Parliament resolution of 14 March 2019 on climate change and resolution of 28 November. 
2019 on the 2019 UN Climate Change Conference in Madrid, Spain (COP 25).   
6 
COM (2020)80 final.  
7 
COM (2020) 562 final. 
8 IPCC, 2018, IPCC special report on the impacts of global warming of 1.5°C. 
9 COM(2020)777 quantifies these impacts, while COM(2020)747 and associated documents analyse these 
effects in detail. 

4 

 
 
                                                 
10.  At  EU-
departing  from  the  EU28+EFTA  was  at  around  180  million  tonnes  of  CO2
level,  aviation  made  up  3.7%  of  total  CO2  emissions,  or  15.7%  of  CO2  transport 
emissions in 2018.  

Despite significant technological development in the aviation sector,  aviation emissions 
continued  to  rise  up  to  201911  and  the  prospect  of  impacts  upon  recovery  from  the 
COVID-19  crisis  (see  Section  2.1)  represent  an  increasing  challenge  for  reaching  the 
EU’s  economy-wide  greenhouse  gas  emission  reduction  target  and  commitments  under 
the  Paris  Agreement12,  as  well  as  the  temperature  goals  under  the  Paris  Agreement. 
Under the Paris Agreement, the EU and its Members States agreed on a long-term goal of 
keeping  the  increase  in  global  average  temperature  to  well  below  2°C  above  pre-
industrial levels and on pursuing efforts to limit the increase to 1.5% 13.  

The European  Green Deal14 adopted by  the Commission in December 2019, as  well as 
the Climate Law15 and the Climate Target Plan (CTP)16, aim at enhancing the EU climate 
commitment  under  the  Paris  Agreement,  consistent  with  its  objective  of  reaching 
economy-wide climate neutrality in the EU by 2050. The EU is increasing its domestic 
economy-wide  decarbonisation  commitment,  from  40%  to  at  least  55%  compared  to 
1990  levels  by  2030,  without  using  international  credits.  The  updated  Nationally 
Determined Contribution (NDC) of the EU reflecting the target of at least 55% domestic 
reduction  compared  to  1990  was  communicated  to  the  United  Nations  Framework 
Convention  on  Climate  Change  (UNFCCC)  on  18  December  202017.  To  reach  the 
increased climate target, all sectors, including aviation, must adequately contribute to the 
required emission reduction efforts. The European Parliament has underlined that, as co-
legislators,  the  European  Parliament  and  the  Council  are  the  only  institutions  that  can 
decide on any future amendment to the ETS Directive, and stressed that any amendment 
of  the  ETS  Directive  should  only  be  undertaken  if  it  is  consistent  with  the  EU’s 
economy-wide  GHG  emission  reduction  commitment18.  A  key  tool  for  addressing  CO2 
emissions from aviation in Europe is the EU Emissions Trading System (EU ETS). It has 
allowed aviation to contribute to the 2020 climate objective, and this should be pursued 
for 2030, as fully recognized under the CTP. 

10 EEA greenhouse gas - data viewer: https://www.eea.europa.eu/data-and-maps/data/data-
viewers/greenhouse-gases-viewer 
11  Average  fuel  burn  per  passenger  kilometre  of  aircrafts  decreased  by  24%  between  1990  and  2016, 
resulting  in  huge  amount  of  emissions  avoided  that  would  have  happened  without  this  technological 
development. However, growth in air traffic, aircraft size and increase of flight distances caused increased 
levels of emissions in absolute terms (see European Aviation Environmental Report 2019 of EASA, p22, 
https://ec.europa.eu/transport/sites/transport/files/2019-aviation-environmental-report.pdf).  
12 UNFCCC Paris Agreement (FCCC/CP/2015/10/Add.1), 
https://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf 
13 UNFCCC Paris Agreement (FCCC/CP/2015/10/Add.1), 
https://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf  
14 COM(2019)640 final. 
15 COM(2020)80 final. 
16 COM(2020)562 final. 
17 https://data.consilium.europa.eu/doc/document/ST-14222-2020-REV-1/en/pdf 
18 European Parliament resolution of 15 January 2020 on the European Green Deal  
https://www.europarl.europa.eu/doceo/document/TA-9-2020-0005_EN.pdf  

5 

 
                                                 
While the political “mandate” to reinforce the EU ETS for aviation is clear, this is being 
examined in conjunction with other related and relevant initiatives, such as the revision 
of  the  Energy  Taxation  Directive  and  the  Renewable  Energy  Directive,  as  well  as  the 
ReFuelEU  Initiative, which are being assessed separately, with due account of the ETS 
dimension  and  impacts.  As  indicated  in  the  European  Green  Deal,  reducing  CO2 
emissions from aviation relies on a mix of policy instruments, as there is no one single 
solution to decarbonise the sector. The revision of the EU ETS for aviation is therefore 
part  of  the  so-called  “basket  of  measures”,  which  includes  market-based  measures  like 
the  EU  ETS  and  CORSIA,  the  boosting  of  the  production  and  uptake  of  sustainable 
aviation fuels (“SAF”), aircraft technology improvements and operational improvements 
through e.g. the Single European Sky initiative.  

Globally  as  well,  countries  have  to  take  increased  action  in  respect  of  aviation  to 
contribute  to  achieving  the  objectives  of  the  Paris  Agreement.  While  the  EU  ETS 
currently regulates intra-European aviation, and the Korean ETS, New Zealand ETS, and 
the  Shanghai  ETS  within  China  have  covered  domestic  aviation,  broader  and  stronger 
action is essential. 

In the public consultation on updated rules for aviation ETS, 91 % of respondents agree 
that  the  aviation  sector  should  contribute  more  to  climate  actions.  88%  of  respondents 
believe that market-based measures can be effective to tackle aviation emissions in line 
with the climate objectives. 

1.2. EU  action  and  relevant  international  fora:  the  Paris  Agreement  and  the 

International Civil Aviation Organization (CORSIA)  

The  International  Civil  Aviation  Organisation  (ICAO)  Assembly  set  an  objective  to 
stabilise  global  net  CO2  emissions  from  international  aviation19  at  2020  levels  through 
'carbon  neutral  growth'  (CNG  2020)20,  i.e.  compensating  emission  growth  above  2020 
levels  by  purchasing  carbon  credits,  and  of  improving  fuel  efficiency  by  2%  annually 
through 2050. These current objectives are to be attained by a ‘basket of measures’ that 
consists of measures in four different areas: aircraft technology and standards; air traffic 
management  and  operations;  sustainable  aviation  fuels  and  the  Carbon  Offsetting  and 
Reduction Scheme for International Aviation (CORSIA). The initial CNG 2020 objective 
is recognized as largely insufficient to bring the necessary contribution from the aviation 

19 Around 65% of aviation emissions are considered by ICAO to be ‘international’, while 35% are 
‘domestic’, according to the 2020 UNEP gap report (https://www.unep.org/emissions-gap-report-2020, 
pages). As stated by ICAO in its submission to the 4th conference of the Parties of the UNFCCC, ICAO has 
no jurisdiction in respect of domestic aviation, see 
https://web.archive.org/web/20200608064440/https://www.icao.int/environmental-
protection/Documents/STATEMENTS/cop4.PDF. 
20 2010 ICAO Assembly Resolution A37-19, available at: 
http://www.icao.int/publications/Documents/9958_en.pdf  

6 

 
 
                                                 
sector  to  the  achievement  of  the  Paris  temperature  goals21.  It  has  been  suggested  that 
aviation emissions should start decreasing no later than 203022.   

The EU contributed significantly to, and supported the ICAO Assembly Resolution A40-
18, whereby  the  ICAO Assembly  decided to request the  ICAO Council  to  explore “the 
feasibility  of  a  long-term  global  aspirational  goal  for  international  aviation  through 
conducting detailed studies assessing the attainability and impacts of any goals proposed, 
including  the  impact  on  growth  as  well  as  costs  in  all  countries,  especially  developing 
countries,  for  the progress of  the work to be presented  to  the 41st Session of  the  ICAO 
Assembly. Work is under way in view of the 41st Assembly in 2022. The EU has for long 
argued for moving beyond existing CO2 objectives and establishing a common long-term 
goal  in  ICAO,  consistent  with  science  and  the  temperature  goals  under  the  Paris 
Agreement, to best guide and boost the development of adequate measures and spur the 
necessary research and deployment of new technologies. 

In  2016,  the  39th  ICAO  Assembly  adopted  a  Resolution  for  a  global  market  based 
measure for international aviation emissions (GMBM), known as the Carbon Offsetting 
and  Reduction  Scheme  for  International  Aviation  (CORSIA),  despite  reservations  –  on 
different accounts - from China, India, Saudi Arabia and the US23.  

By itself, CORSIA does not aim at reducing aviation emissions. CORSIA is an offsetting 
mechanism, which enables the aviation sector to continue to grow after 2020 in as far as 
collective  international  aviation  emissions  above  a  certain  threshold  (the  baseline)  are 
compensated  through  international  offset  credits  (generated  in  non-aviation  sectors 
mainly).  The  initial  baseline,  the  average  of  international  aviation  emissions  from 
CORSIA participating countries during 2019 and 2020, was deemed inappropriate by the 
ICAO Council in light of the COVID-19  crisis and was changed to 2019 emissions for 
the  duration  of  pilot  phase  2021-2023.  The  EU  did  not  request  such  a  change  but 
accepted “to ensure support for CORSIA under the circumstances created by the COVID-
19  pandemic  and  avoid  unravelling  CORSIA  design  elements”24.  The  consequence  of 
such a baseline change is that CORSIA compliance is unlikely to require any emissions 
to be offset under the pilot phase. 

States that voluntarily decide to participate in CORSIA offsetting may join the scheme from 
the beginning of a given year, and should notify ICAO of their decision to join by June 30 of 
the  preceding  year.  As  of  2021,  88  States  decided  to  participate  from  the  start  of  the  pilot 

21 IEA, 2018. World Energy Balances 2018. https://www.oecd-ilibrary.org/energy/world-energy-balances-
2018_world_energy_bal-2018-en 
22 Cames, Martin; Graichen, Jakob, Siemons, Anne; Cook, Vanessa 2015: Emission Reduction Targets for 
International Aviation and Shipping. Berlin. The study was commissioned by the European Parliament’s 
Committee on Environment, Public Health and Food Safety (‘ENVI’) 
http://www.europarl.europa.eu/RegData/etudes/STUD/2015/569964/IPOL_STU(2015)569964_EN.pdf  
23 2016 ICAO Assembly Resolution A39-3, available at: http://www.icao.int/environmental-
protection/Documents/Resolution_A39_3.pdf     
24 COM(2020)219, 
https://ec.europa.eu/transparency/regdoc/?fuseaction=list&coteId=1&number=219&version=ALL&langua
ge=en  

7 

 
                                                 
phase  on  1  January  2021,  including  all  G7  countries.25  While  the  US  has  confirmed  its 
participations,  some  important  partners,  such  as  China,  India  or  Russia,  are  not 
participating.  Unlike  the  voluntary  participation  of  states  in  the  CORSIA  offsetting  in  the 
pilot  and  first  phases  from  2021  to  2026,  the  second  phase  of  the  CORSIA  from  2027  to 
2035  applies  to  all  States.  There  are,  however,  two  categories  of  exemptions  based  on 
aviation-related and socio-economic criteria.26  

To be able to implement CORSIA, detailed rules on transparency, accounting, offsetting, 
registry  and  governance  had  to  be  adopted  in  the  form  of  ICAO  Standards  and 
Recommended Practices (SARPs), which are binding on ICAO member states not filing 
differences  to  them.  The  actual  implementation  of  CORSIA  will  depend  on  domestic 
legislation  being  developed,  adopted  and  implemented  by  countries  and  regions 
participating in the scheme.  

The  EU  and  its  Member  States  consistently  argued  in  support  of  robust  implementing 
rules  and  governance  (e.g.  the  environmental  integrity  of  eligible  offsets,  avoidance  of 
double counting in line with the provisions still to be adopted under the Paris Agreement, 
robust  sustainability  criteria  for  sustainable  alternative  fuels),  as  well  as  adequate 
participation,  in  CORSIA’s  voluntary  and  mandatory  phases  all  being  key  to  ensure 
CORSIA’s integrity and initial objective.  

In 2018, the ICAO Council adopted the First Edition of the International Standards and 
Recommended Practices (‘SARPs’)27.  

The EU has  actively contributed in the process on substance and has been amongst the 
first  jurisdictions  to  adopt  legally  binding  provisions  for  the  purposes  of  implementing 
the monitoring, reporting and verification for ICAO's scheme28, which is a key pillar for 
implementing CORSIA. 

While  strongly  supporting  CORSIA  in  ICAO,  the  EU  Member  States  notified 
differences29 to the ICAO SARPs, due to the presence of existing legislation in the EU 
addressing CO2 emissions from international aviation. In the differences, they highlight 
the main governance difference between the EU ETS and CORSIA (route-based, versus 
State-based regulation). The objective was to maintain the legality of the EU ETS and to 
preserve the EU policy space and climate ambition, consistent with the EU ETS as last 
revised  in  2017  and  with  strong  calls  by  co-legislators  not  to  prejudge  any  further  EU 
action30. In the same spirit, the EU and its Member States, through the EU Presidency, re-

25 https://www.icao.int/environmental-protection/CORSIA/Pages/state-pairs.aspx  
26 These criteria for the exemption of States from the CORSIA offsetting requirements in the second phase 
are defined in ICAO Resolution A40-19 paragraph 9e). 
27 https://www.icao.int/environmental-protection/CORSIA/Pages/SARPs-Annex-16-Volume-IV.aspx  
28 Commission Delegated Regulation (EU) 2019/1603 of 18 July 2019, see https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=uriserv:OJ.L_.2019.250.01.0010.01.ENG  
29 Council Decision (EU) 2018/2027.  
30 European Parliament legislative resolution of 12 December 2017 on the proposal for a regulation of the 
European Parliament and of the Council amending Directive 2003/87/EC to continue current limitations of 
scope for aviation activities and to prepare to implement a global market-based measure from 2021. 
(COM(2017)0054 – C8-0028/2017 – 2017/0017(COD)) available at 
https://www.europarl.europa.eu/doceo/document/TA-8-2017-0477_EN.html   

8 

 
                                                 
stated the above principles during the 40th ICAO Assembly in 2019 at the occasion of the 
adoption  of  a  new  Resolution  on  CORSIA,  reiterating,  and  making  it  clear  that  in  the 
EU’s view CORSIA is not to be regarded as exclusive against other schemes and that it 
should not limit EU climate ambition31. 

Consistent  with  previous  declarations,  in  June  2020,  the  EU  and  its  Member  States 
notified  ICAO  their  participation  in  CORSIA  from  the  start  of  the  pilot  phase  on  1 
January  2021  subject  to  differences  filed  (Council  Decision  2020/954),  by  the  ICAO 
deadline of 30 June 2020.  

The  ICAO  Secretariat  has  not  yet  published  the  reservations  of  other  States  by  that 
deadline,  despite  repeated  calls  from  the  EU  to  do  so.  The  EU  and  its  Member  States 
have  for  long  called  for  enhanced  transparency  in  ICAO,  as  last  reflected  in  an  inter-
institutional declaration agreed at the end of the last co-decision process on the EU ETS 
for aviation in 201732. The lack of publication of differences, which is key to understand 
whether  and  how  our  international  partners  intend  to  participate  to  CORSIA,  is 
problematic. 

In terms of other major partners, there are public reservations to the 2013, 2016 and 2019 
Assembly  Resolutions  made  by  the  US,  China,  Brazil,  Russia,  Saudi  Arabia,  India  and 
Venezuela (see Annex 10). 

While the US has issued reservations it made the following public statement: “The United 
States supported the decision to adopt the CORSIA SARPS based on the understanding that 
CORSIA is the exclusive market-based measure applying to international aviation, and that 
CORSIA will ensure fair and reciprocal commercial competition by avoiding a patchwork of 
country-  or  regionally-based  regulatory  measures 
inconsistently  applied, 
bureaucratically  costly,  and  economically  damaging.  Furthermore,  continued  U.S.  support 
for  CORSIA  assumes  a  high  level  of  participation  by  other  countries,  particularly  by 
countries  with  significant  aviation  activity,  as  well  as  a  final  CORSIA  package  that  is 
acceptable to,  and  implementable  by,  the  United States.”33.  The  US  is  collecting  emissions 
data  from  US  airlines  on  an  expressly  voluntary  basis,  with  the  FAA  ensuring  compliance 
with  CORSIA  monitoring,  reporting  and  verification  rules  by  filling  data  gaps  from  the 
limited airlines not providing data on a voluntary basis, and it has been noted that “the State 
Department will need to work with FAA to secure the implementing legislation necessary for 
further U.S. participation”34.  

that  are 

As  regards  the  Chinese  Government,  it  has  publicly  stated  that:  “China  opposes  any 
scheme  that  strays  from  realities  faced  by  States  and  goes  at  the  expense  of  the  legitimate 

31 https://www.icao.int/Meetings/a40/Documents/10132_corr1_en.pdf  
32 Statement by the European Parliament, the Council and the Commission, annexed to the European 
Parliament legislative resolution A8-0258/2017 available at 
https://www.europarl.europa.eu/doceo/document/TA-8-2017-0477_EN.html#title3   
33 US Federal Aviation Administration (FAA), Department of Transport, Notice of 14 March 2019, 
available at 
https://www.faa.gov/about/office_org/headquarters_offices/apl/research/environmental_policy/media/corsi
a_mrv_program_statement.pdf  
34 https://climate21.org/documents/C21_State.pdf memo 

9 

 
                                                 
rights to development of developing countries and emerging market countries. … China has 
notified differences according to Article 38 of Chicago Convention.”35  

1.3. Integration of CO2 aviation emissions in the EU's Emissions Trading System 

The  EU  led  the  way  in  implementing  a  carbon  market  mechanism  for  CO2  aviation 
emissions  by  including  all  flights  to  and  from  aerodromes  in  the  European  Economic 
Area  in  the  EU's  Emissions  Trading  System  (EU  ETS)  in  2008  (see  Annex  8).  The 
European Court of Justice confirmed the EU’s right to regulate airlines based outside the 
EU on a route basis, which is necessary to provide equal treatment on routes, i.e. to apply 
the principle of non-discrimination enshrined in Article 11 of the Chicago Convention36. 

According to Directive 2003/87/EC, all aircraft operators carrying out aviation activities 
covered  by  the  EU  ETS  have  to  annually  report  their  emissions  corresponding  to  the 
previous year. They have an obligation to surrender as many allowances as the emissions 
they  have  reported.  Every  year,  a  number  of  aviation  allowances  is  issued.  The  total 
amount  is  defined  by  the  allowed  "cap",  which  was  95%  of  the  average  2004-2006 
emissions. Starting from 2021, allocations to aviation are reduced by the linear reduction 
factor  (currently  of  2.2%)  now  applicable  to  all  ETS  sectors  (Annex  9  provides  more 
information on the EU ETS for aviation).  

Allowances  are  distributed  through  two  mechanisms:  auctioning  and  free  allocation. 
Currently, 82% of aviation allowances are distributed through free allocation, 3% are part 
of a special reserve for new entrants and fast growers, and 15% are auctioned. In 2009, 
the  co-legislators  noted  that  ‘auctioning  should  therefore  be  the  basic  principle  for 
allocation,  as  it  is  the  simplest,  and  generally  considered  to  be  the  most  economically 
efficient, system’37.  

The  total  number  of  allowances  for  aviation  was  based  on  average  emissions  in  2004-
2006,  while  the  allocation  to  each  operator  was  based  on  activity  data  from  2010.  The 
reason  for  including  free  allocation  in  the  distribution  of  allowances  was  that  the  "no 
allocation"  option  would  have  treated  the  aviation  sector  differently  from  those  sectors 
already covered by the EU ETS and it would have increased the demand for allowances 
towards other sectors. In addition, the share of auctioning for other sectors under the EU 
ETS has increased, leading to calls from some stakeholders and Member States38 to move 
away  from  free  allocation  for  the  aviation  sector.  The  European  Green  Deal  and  2030 
Climate Target Plan clearly set out the Commission’s intention to propose to reduce the 
EU ETS allowances allocated for free to airlines. 

35 https://www.icao.int/Meetings/a40/Documents/Resolutions/china_EN.pdf 
36 Case C‑366/10, 
http://curia.europa.eu/juris/document/document.jsf?text=&docid=117193&pageIndex=0&doclang=EN&m
ode=req&dir=&occ=first&part=1&cid=211542  
37 Recital 13 of Directive 2009/29/EC, https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:32009L0029 
38 Council meeting (Environment) of 5 March 2020. Outcome of the Council meeting available at 
https://www.consilium.europa.eu/media/47923/st06577-en20.pdf.   

10 

 
 
                                                 
The EU ETS has delivered 200 million tonnes of reductions/offsets over 8 years39, being 
applicable  to  all  operators,  EU  and  non-EU  alike,  on  the  same  routes.  The  compliance 
rate is extremely high, as reported last in the recent Carbon Market Report issued by the 
Commission40. This provides the aviation contribution to the 2020 EU climate objective 
and, as foreseen in the CTP, this will continue for 2030.  

The EU and its Member States’ strong support of international action complementary to 
domestic  or  regional  action  to  address  climate  change,  including  in  the  field  of 
international  aviation  at  ICAO,  is  underlined  by  the  fact  that  the  European  Parliament 
and  Council  have  amended  the  EU  ETS  three  times  to  reduce  its  initial  geographical 
scope and thereby facilitate progress in ICAO on CORSIA.  

First  in  2012,  when  the  ICAO  Council  decided  to  begin  developing  guidance  for  a 
GMBM  for  international  aviation  emissions,  EU  ETS  scope  was  temporary  limited, 
allowing airlines to choose either full coverage or pan-European coverage. Following the 
2013  ICAO  Assembly  Resolution  A38-18  to  develop  a  GMBM  to  offset  international 
aviation emissions, the EU further limited the scope to intra-EEA flights only during the 
period 2013-2016 while maintaining equal treatment on routes. Pending the development 
of the CORSIA implementing rules and modalities (SARPs), the EU ETS Directive was 
last  revised  in  2017  to  extend  the  most  recent  scope  derogation  until  the  end  of  2023, 
while  indicating  the  conditions  under  which  the  EU  would  consider  implementing 
CORSIA,  namely  that  its  implementation  is  “consistent  with  the  Union  economy-wide 
greenhouse gas emission reduction commitment for 2030 with the aim of preserving the 
environmental integrity and effectiveness of Union climate action”. This was intended to 
provide  continued  momentum  to  the  international  process  in  the  light  of  the  political 
commitment  made  by  the  EU  and  its  Member  States  to  take  part  in  CORSIA  from  its 
"pilot phase" (as of 1 January 2021), subject to certain conditions41.  

The  Commission  has  again  recently  recognised42  that  international  cooperation  on 
aviation is desirable and that international instruments such as CORSIA should promote 
effective action in this context. 

In  2020,  the  EU  ETS  was  extended  to  all  departing  flights  from  the  EEA  to 
Switzerland43.  As  a  result,  Switzerland  applies  its  ETS  to  all  departing  flights  to  EEA 
airports,  ensuring  a  level  playing  field  on  both  directions  of  routes,  as  a  result  of  the 
EU/Switzerland Agreement on  the linking of their respective  emission trading systems. 
In  the  EU-UK  Trade  and  Cooperation  Agreement  reached  in  December  2020,  the  EU 

39 See the 2019 European aviation environmental report: ”Between 2013 and 2020, an estimated net saving 
of 193.4 Mt CO2 (twice Belgium’s annual emissions) will be achieved by aviation via the EU ETS through 
funding of emissions reduction in other sectors.”, https://www.eurocontrol.int/publication/european-
aviation-environmental-report-2019  
40 COM(2020)740, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020DC0740  
41 Through the 2016 Bratislava declaration of Directors General of Civil Aviation, see 
https://www.icao.int/environmental-protection/documents/2016-bratislava_declaration.pdf , 
https://www.icao.int/Meetings/a40/Documents/WP/wp_102_en.pdf (see Section 1.4)   
42 COM(2020) 562 final. 
43 Commission Delegated Decision (EU) 2020/1071 of 18 May 2020, https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A32020D1071  

11 

 
                                                 
ETS  shall  continue  to  apply  to  departing  flights  from  the  EEA  to  the  UK,  while  a  UK 
ETS will apply effective carbon pricing on flights departing from the UK to the EEA. 

(Annex 8 sets out the chronological development of the EU ETS) 

Comparing the EU ETS and CORSIA  
Both  CORSIA  and  the  EU  ETS  are  market-based  measures  to  address  CO2  emissions. 
However, there are important differences between them, which have been studied extensively 
in advance of preparing this Impact Assessment and were already looked at in the previous 
Impact Assessment44.  

The first important difference is in the nature of the two measures: the EU ETS is a legally 
binding cap and trade system setting a limit on the total GHG emissions of the participating 
sectors so as to reduce them in absolute terms within the EU (use of international credits to a 
limited extent was allowed in the EU ETS until 2020, but since the start of the fourth trading 
period, i.e.  2021,  not any  more).  CORSIA  is  essentially  a  carbon-offsetting  scheme,  which 
allows  emissions  from  the  aviation  sector  to  continue  increasing  above  the  baseline  (now 
2019 emissions for the pilot and 2019-2020 for future phases unless changed), and foresees 
offsetting with credits from reductions in other sectors worldwide (international offsetting).  

Secondly,  the  scope  of  EU  ETS  is  route-based  (applying  to  all  operators,  EU  and  non-EU 
alike) whereas the scope of CORSIA is state-based (applying to aircraft operators from each 
state only). All nationalities of companies operating in the European market have complied 
with the EU ETS across the economy, EU and non-EU alike. Under the ICAO State-based 
system, the SARPs do not foresee any State enforcing on “other State’s” airlines: No State 
shall  ‘delegate  enforcement  ...towards  ICAO,  [or]  to  another  State.’  (section  1.3.2  of  the 
SARPs). 

The  EU  ETS  is  also  binding  in  Union  law,  and  has  been  enforced  effectively  by  Member 
States.  The  Commission  studied  the  means  by  which  an  effective  global  market-based 
measure  could  be  developed,  and  the  “downsides  of  [ICAO]  Standards  pertain  to  the 
uncertain legal status of such Standards which also affects their enforceability”45. As ICAO 
is using the approach of a standard for CORSIA, no enforcement is possible by ICAO, and 
domestic implementation by States is key. 

Through the EU ETS, aviation has contributed to almost 200 million tonnes of reductions of 
CO2  emissions  over  the  past  8  years.  While  the  in-sector  aviation  emissions  for  intra-EEA 
flights  kept  growing,  from  53.5  million  tonnes  CO2  in  2013  to  69  million  in  2019,  the 
flexibility of the EU ETS, whereby aircraft operators may use any allowances to cover their 
emissions,  meant  that  the  CO2  impacts  from  these  flights  did  not  lead  to  overall  greater 
climate change. 
CORSIA  is  expected  to  generate  significantly  lower  reductions  than  the  EU  ETS  when 
comparing GHG emission reductions achieved in the geographical scope of the EU, as all the 
emissions  credits  will  be  purchased  from  programmes  administrating  projects  outside  the 
EU46. However, on a global scale, CO2 emission reductions through CORSIA may be higher 
(as far as international aviation is concerned). 

44 SWD(2017) 31 final. 
45 https://ec.europa.eu/clima/sites/clima/files/transport/aviation/docs/gmbm_legal_study_en.pdf  
46 Currently only programmes outside the EU are accepted under the CORSIA eligible emission units: 
https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-Emissions-Units.aspx. 

12 

 
 
 
 
 
 
 
                                                 
CORSIA  relies  on  international  offsets.  The  quality  of  international  offsets  is  harder  to 
control  and  this  may  raise  concerns  over  additionality,  permanence,  net  harm  and  the 
applicable accounting rules to avoid double counting47. In addition, it should be recalled that 
the  EU  2030  climate  objective  under  UNFCCC  should  be  met  through  domestic  reduction 
efforts,  i.e.  without  the  use  of  international  credits.  This  was  reflected  in  the  European 
Council  conclusions  from  October  201448
  and  accordingly  communicated  by  the  EU  under 
the Paris Agreement49.  

The CORSIA baseline for the pilot phase has been changed to “2019 only” in the course of 
2020,  whereas  the  EU  ETS  is  based  on  a  2004/2006  average.  The  change  of  baseline  in 
CORSIA is likely to mean that no offsets will be required for compliance purposes during the 
pilot phase of CORSIA. 

Under the EU ETS, allowances must be surrendered for each tonne of emitted CO2 by flights 
covered  by  the  EU  ETS.  These  allowances  are  currently  worth  around  €30/tonne.  Up  to 
2020, certain types of international credits were allowed for surrendering but limited to 1.5% 
of emissions. In the light of the EU’s experience with international credits and in line with 
the EU contribution to the Paris Agreement, no international credits can be used after 2020 in 
the EU ETS.  

Finally, the geographic scope is different: CORSIA applies to international flights between 
participating  States,  whereas  the  EU  ETS  currently  applies  to  domestic  and  international 
flights within the EEA. 

More information on the EU ETS features on Annex 9. The main features of CORSIA can be 
found on ICAO Resolution A40-19, in Annex 6. 

2.  PROBLEMS DEFINITION 

2.1. What is/are the problems? 

2.1.1.  Problem  1:  Aviation  sector  must  contribute  to  economy-wide  emission 
reductions necessary to achieve the increased level of climate ambition and 
to  avoid  the  risk  of  global  aviation  emissions  undermining  the  global 
temperature goals of the Paris Agreement 

Aviation  emissions  account  for  2-3%  of  global  CO2  emissions  and  have  significantly 
increased  since  1990  both  at  EU-level  but  also  globally.  At  EU-level,  CO2  emissions 
from  aviation  made  up  3.7%  of  the  economy-wide  total  or  15.7%  of  CO2  transport 
emissions in 201850. Aviation’s emissions in Europe increased an average of 5% year-on-
year between 2013 and 201851.  In 2018, the EU was  responsible for 15% of the global 

47 See CORSIA emissions unit eligibility criteria that seek to address such concerns: 
https://www.icao.int/environmental-protection/CORSIA/Documents/ICAO_Document_09.pdf  
48 https://www.consilium.europa.eu/media/24561/145397.pdf  
49 https://data.consilium.europa.eu/doc/document/ST-14222-2020-REV-1/en/pdf  
50 As indicated by the greenhouse data viewer of the European Environment Agency, 
https://www.eea.europa.eu/data-and-maps/data/data-viewers/greenhouse-gases-viewer  
51 Those emissions covered by the EU ETS, not including flights to/from outermost regions, dependencies 
and territories. 

13 

 
 
 
 
 
 
                                                 
aviation  CO2  emissions52.  Moreover,  non-CO2  climate  impacts  are  estimated  to  be  at 
least as important in total as those of CO2 alone53.  

Notwithstanding  the  recent  reduction  in  traffic  as  a  consequence  of  the  COVID-19 
pandemic,  aviation  climate  impacts  are  projected  to  grow  further  given  the  sector’s 
historical growth of above the average of other economic sectors. Before the COVID-19 
pandemic, Eurocontrol had projected an annual increase in European aviation emissions 
by 53% by 2040 compared to 201754. Before the COVID-19 crisis, ICAO had estimated 
that,  by  2040,  international  aviation  emissions  could  rise  by  up  to  150%  compared  to 
202055. However, given the impact of the pandemic, the airline industry does not expect 
air travel demand to return to pre-COVID-19 levels before 2024; however, this does not 
seem to impact significantly the dominant upward trend.  

Considering current and projected emissions from the aviation sector, and in the context 
of an enhanced climate ambition of the EU for 2030, the contribution from aviation to the 
achievement  of  the  EU  objective  will  need  to  be  significantly  strengthened,  therefore, 
also with a view to allow for the necessary contribution to the EU climate neutrality by 
2050.  The 2019 European Aviation Environment Report also highlighted this need56.  

Growing aviation emissions are not only an issue within the EEA but also at the global 
level. The latest UNEP gap report57, recently issued, recalls the growing importance and 
urgency  of  reducing  aviation  emissions  (CO2  and  non-CO2  emissions  having  a  climate 
impact)  generated  by  aviation  activities,  against  the  temperature  goals  of  the  Paris 
Agreement and climate science. 

Since  the  last  review  of  the  EU  ETS  for  aviation,  the  European  political  context  has 
evolved  with  President  Von  der  Leyen’s  Political  Guidelines58,  which  emphasize  that 
“carbon  emissions  must  have  a  price,  and  every  person  and  every  sector  will  have  to 
contribute”.  Beyond  the  increase  in  EU  2030  ambition  to  achieve  domestic  EU-wide 
economy-wide greenhouse  gas emissions reductions of at least 55% compared to 1990, 
the  2030  Climate  Target  Plan  communication  underlines  that  “in  accordance  with  its 
international  commitment  to  economy-wide  action  under  the  Paris  Agreement,  the  EU 
should continue to regulate at least intra-EU aviation emissions in the EU ETS”. In its 
conclusions  of  11  December  2020,  the  European  Council  “invites  the  Commission  to 
assess how all economic sectors can best contribute to the 2030 target and to make the 
necessary  proposals,  accompanied  by  an  in-depth  examination  of  the  environmental, 

52 Intra-EEA aviation represented 7.5% and departing flights to third countries another 7.5%. All departing 
flights are covered in the EU’s NDC under the Paris Agreement and in the aviation industry’s Destination 
2050 initiative. 
53 COM(2020)777 quantifies these impacts, while COM(2020)747 and associated documents analyse these 
effects in detail. 
54 Eurocontrol (2018), European Aviation in 2040. 
55 ICAO, 2019. See https://www.icao.int/environmental-protection/Pages/ClimateChange_Trends.aspx   
56 See: https://www.easa.europa.eu/eaer/ 
57 See pages 52-61at https://www.unep.org/emissions-gap-report-2020 
58 President Von der Leyen’s Political Guidelines, https://ec.europa.eu/info/sites/info/files/political-
guidelines-next-commission_en_0.pdf  

14 

 
                                                 
economic and social impact at Member State level”59. Outgoing flights are in the scope 
of the EU 2020 target of -20% GHG emissions reduction60, and have been included in the 
legislation enacting the EU’s -40% GHG emissions reduction commitment61 and now a -
55% NDC62. 

For  aviation to  contribute to the  goals of  the Paris Agreement, broader  global action is 
required.  CORSIA  is  a  step  in  this  direction.  Additional  measures  will  in  any  event  be 
needed  to  enhance  the  international  aviation  contribution  to  the  fight  against  climate 
change. The Commission is also working with third countries to promote carbon pricing: 
co-operation with China has been underway for the last eight years, and China’s national 
ETS begins operating this year, but does not include (domestic) aviation in its scope for 
the time being. As part of a new trans-Atlantic agenda63, the Commission has emphasized 
that the EU and US “should work closely together on emissions trading, carbon pricing 
and taxation”.  

The  decarbonisation  of  the  aviation  sector  requires  an  enhanced  carbon  price  signal, 
including  in  view  of  the  significant  investments  needed  in  Sustainable  Aviation  Fuels 
(SAF),  improved  air  traffic  management  infrastructure,  as  well  as  further  research  and 
deployment  of  advanced  and  breakthrough  technologies  (such  as  open  rotor  engines, 
carbon-free  synfuels,  hydrogen  or  electrically-propelled  aircrafts).  The  use  of  price 
instruments  to  decarbonise  the  sector  is  considered  to  have  less-adverse  distributional 
effects, and to be potentially socially progressive64. The EU ETS’ current price incentive 
of  approximately  €115  per  tonne  for  zero  emission  jet  fuel,  is  by  itself  insufficient  to 
bridge  the  price  gap  with  conventional  kerosene.  However,  by  investing  auctioning 
revenues  through  the  Innovation  Fund,  the  EU  ETS  can  also  support  deployment  of 
breakthrough  technologies  and  drive  the  price  gap  down.  EU  Member  States  have 
reported  using  more  than  €46  billion  or  77%  of  their  ETS  revenues  for  climate  action 
over the last 8 years. Last, the need to further internalize environmental costs and allow 
for  a  level  playing  field  among  modes  of  transport  is  also  recognised  as  an  important 
element of the decarbonisation strategy of the sector. In that respect, the review of energy 
taxation is also considered as one of the initiatives that would contribute to achieving the 
55% net reduction target presented under the ‘Fit for 55’ package of the European Green 
Deal65. 

59 https://www.consilium.europa.eu/media/47296/1011-12-20-euco-conclusions-en.pdf  
60 See 
https://www4.unfccc.int/sites/SubmissionsStaging/NationalReports/Documents/045612387_European%20
Union-BR4-1-European%20Union-BR4_C_2019_8832_and_SWD_2019_432.pdf  
61 See Commission presentation to Council at 
https://www.transportenvironment.org/sites/te/files/WK_2310_2017_INIT_2.pdf  
62 https://data.consilium.europa.eu/doc/document/ST-14222-2020-REV-1/en/pdf  
63 Joint Communication of the Commission and EEAS of 2 December 2020, JOIN(2020)22. 
64 See SWD/2020/176 final and https://www.bruegel.org/2018/11/distributional-effects-of-climate-policies/  
65 European Commission. (2020). Commission Work Programme 2021: Annex I outlines all the 
instruments to be proposed which includes among others the revision of the EU ETS, the review of energy 
taxation, the revision of the Directive on the deployment of alternative fuels infrastructure. 

15 

 
                                                 
2.1.2.  Problem  2:  Promote  broad  and  effective  participation  by  States  in 
CORSIA  and  ensure  effective  implementation  of  CORSIA  through  the  EU 
ETS  in  a  manner  that  is  fully  compatible  with  the  EU  2030  climate 
objectives and the EU’s commitment under the Paris Agreement 

2.1.2.1. 

The effectiveness of CORSIA 

Effective implementation of CORSIA worldwide will depend on the baseline (beyond the 
pilot phase), the quality of required offsets, level of participation, how CORSIA is being 
implemented  domestically,  the  avoidance  of  double  counting,  fuels  framework  and 
enforcement by states. Whether CORSIA will work depends on all these factors.  

Favoured  by  the  design  of  CORSIA  and  its  implementing  elements,  and  significantly 
amplified by the new baseline adapted at the request of international partners as a result 
of the COVID-19 pandemic, the available supply of units exceeds the likely demand in 
the short-term (if any demand at all materializes during the pilot phase as a result of the 
new baseline). This in turn means that, as long as demand is low, CORSIA will not act in 
practice as an incentive towards emission reductions from the sector. 

Indeed, in comparison to current carbon price of around €30 per tonne CO2, international 
credits trade at far lower prices. For example, the CDM credit price is currently around 
€0.33 per tonne CO2. Added to this the uncertainty of any significant credit demand in 
the next  years,  the steering effect of CORSIA remains doubtful. Where supply  exceeds 
demand, the price for credits will go towards zero. 

Notwithstanding the need for robust rules to be implemented by ICAO and participating 
States, broad/full participation from strategic partners in CORSIA is key if it is to deliver 
on its initial objective.   

The EU has demonstrated its determination to play its part and will continue to do so, but 
it should also be clear that, for CORSIA to work and to be effective, all strategic partners 
need to be on board and undertake domestic implementation. 88 countries are listed on 
the  official  ICAO  Secretariat  website66,  including  all  EU  Member  States  and  all  G7 
countries, but key States are still missing at this juncture e.g. China, India, Russia, Brazil. 

Against  this  backdrop,  the  EU  will  continue  to  support  efforts,  multilaterally  in  ICAO 
to  secure  adequate  participation  and 
and  bilaterally  with  strategic  partners, 
implementation, as well as to make sure that CORSIA delivers on its initial objective and 
is  further  strengthened,  avoiding  any  backsliding  at  the  occasion  of  the  first  review 
planned for 2022. 

2.1.2.2. 

The implementation of CORSIA through the EU ETS in a manner 
that  is  fully  compatible  with  the  EU  2030  climate  objectives  and  the 
EU’s commitment under the Paris Agreement 

Article 28b of the EU ETS Directive 2003/87/EC requires the Commission to present a 
report  to  the  Council  and  the  European  Parliament  in  which  it  shall  consider  ways  for 

66 https://www.icao.int/environmental-protection/CORSIA/Pages/state-pairs.aspx  

16 

 
                                                 
CORSIA  instruments  to  be  implemented  in  Union  law  through  a  revision  of  this 
Directive.  It  shall  also  examine  the  ambition  and  overall  environmental  integrity  of 
CORSIA, including its general ambition in relation to targets under the Paris Agreement, 
the  level  of  participation,  its  enforceability,  transparency,  the  penalties  for  non-
compliance,  the  processes  for  public  input,  the  quality  of  offset  credits,  monitoring, 
reporting and verification of emissions, registries, accountability as well as rules on the 
use  of  biofuels.  In  addition,  the  report  shall  consider  whether  the  provisions  adopted 
under Article 28c(2) need to be revised. Article 28b of the EU ETS Directive foresees the 
Commission  accompanying  the  report  with  “a  proposal,  where  appropriate,  to  amend, 
delete,  extend  or  replace”  the  derogations  provided  for  in  Article  28a  (which  limit  the 
scope of EU ETS to intra-EEA flights from 2017-23), that is “consistent with the Union 
economy-wide greenhouse gas emission reduction commitment for 2030 with the aim of 
preserving the environmental integrity and effectiveness of Union climate action”.  

The review of the EU ETS  for aviation  should ensure that CORSIA is  implemented as 
appropriate  through  the  EU  ETS.  Any  amendment  of  the  EU  ETS  Directive  must  be 
consistent with EU’s ambition to become climate neutral by 2050, the Union’s economy-
wide  greenhouse  gas  emission  reduction  commitment  for  2030  and  with  the  aim  of 
preserving the environmental integrity and effectiveness of Union climate action. At the 
same  time,  Union  legislation  must  ensure  equal  treatment  for  airlines  operating  on  the 
same routes. 

Based  on  the  ICAO  definition  of  “international  flights”,  implementing  the  CORSIA 
SARPs for the offsetting would mean that airlines based in an EU Member State should 
offset  CO2  emissions  generated  by  international  flights  between  states  participating  in 
CORSIA,  above  the  baseline  level,  irrespective  of  the  ETS  in  place  in  the  EU  and  its 
higher level of climate ambition.  

Thus, all international emissions of flights between EU Member States could potentially 
be subject to both  the EU ETS and CORSIA regimes in as  far as intra-EEA flights are 
concerned.  However,  the  EU  policy  space  and  level  of  climate  ambition  have  been 
safeguarded as a result of the differences agreed at the EU level and filed by EU MSs in 
ICAO,  recalled  in  a  formal  EU  statement  delivered  at  2019  ICAO  Assembly  at  the 
occasion of the adoption of a CORSIA Resolution. This was considered crucial in order 
not to prejudge the review of the EU ETS in the light of CORSIA and to fully preserve 
the integrity of EU climate objectives.  

This also means that the validity of EU law (ETS) is fully preserved, with airlines being 
responsible to surrender allowances for their intra-European emissions (and in respect of 
departing flights to Switzerland) through the EU ETS.  

Ultimately, however, the issue is how to apply CORSIA while making sure that it does 
not allow for any backsliding in terms of climate ambition compared to what the EU has 
committed to for 2030, does not bring any undue administrative burden compared to the 
benefits  expected  and  is  fully  consistent  with  the  spirit  and  “mandate”  of  the  last  ETS 
review in 2017. 

17 

 
2.1.3.  Problem  3:  The  current  high  proportion  of  free  allocation  of  aviation 
allowances,  in  the absence  of  carbon  leakage, undermines  the price signal 
and risks future windfall profits. 

When the first proposal to include aviation in the EU ETS was issued, free allocation was 
provided to align with other sectors that received free allocation in the early phases of the 
EU ETS, also as a way to facilitate the initial acceptability of the new system. Under the 
ETS more generally, free allocation is now targeted at sectors at significant risk of carbon 
leakage, while  auctioning is recognised  as the basic principle for allocation, as  it is the 
simplest, and generally considered the most economically efficient, system.  

While  a  significant  risk  for  carbon  leakage  for  aviation  due  to  the  ETS  has  not  been 
substantiated  due  to  its  very  nature  (difficulties  or  even  impossibility  to  change/divert 
route due to the very nature of the traffic), 85% of aviation allowances are nevertheless 
allocated for free which undermines the effectiveness of the carbon price signal thereby 
removing incentives for aircraft operators to decarbonise their activities.  In 2019, aircraft 
operators received free allocation of 31.3 million allowances, covering 46% of the total 
emissions. In contrast, the majority of rail activity in Europe has been covered by the EU 
ETS since 2005, because of its use of electricity, and it has not received free allocation. 

The  total  number  of  allowances  for  aviation  was  based  on  average  emissions  in  2004-
2006,  while  the  allocation  to  each  operator  was  based  on  activity  data  from  2010. 
However,  the  individual  emissions  of  airlines  have  taken  differing  trajectories  since 
2010. This system has  created  unfair  and unjustified treatment  among  operators, which 
now need to be rectified to allow for a better level playing field, also for new entrants. No 
action  by  the  EU  would  perpetuate  a  free  allocation  scheme,  which  mirrors  the  market 
configuration of 2010.  

Taking into consideration the impact of COVID-19 on air traffic, and the likelihood that 
2019  levels  will  not  be  reached  before  2024,  a  continuation  of  the  current  allocation 
levels would generate not costs, but windfall profits for operators (i.e. a large proportion 
of  the  opportunity  cost  of  using  allowances  received  for  free  has  been  passed  on  to 
consumers/customers),  and  would  create  downwards  pressure  on  the  prices  of  ETS 
allowances.  The  price  signal  would  not  only  be  insufficient  to  generate  emission 
reductions  in  line  with  the  2030  climate  targets  but  would  act  in  the  opposite  direction 
than that required by those targets. 

A transition to a higher or full auctioning share, whether immediate or staggered, would 
eliminate  windfall  profits  and  put  new  entrants  on  the  same  competitive  footing  as 
existing operators67.  

Free allocation of aviation allowances does not take into account cost pass through from 
producers/service  providers  to  customers  and  consumers,  a  behaviour  which  is  much 
better understood now. The issue had been raised for a while by the EP and, as a result of 
the last co-decision, the EU ETS Directive requires the Commission to “study the ability 

67 Foonote 15 of Directive 2009/29/EC, https://eur-
lex.europa.eu/legalcontent/EN/TXT/?uri=CELEX:32009L0029  

18 

 
                                                 
of the aviation sector to pass on the cost of CO2 to its customers in both the EU ETS and 
ICAO’s market-based measure, comparing this to industries and to the power sector, and 
with  the  intention  to  propose  to  increase  the  percentage  of  auctioning  pursuant  to  the 
review  referred  to  in  Article  28b(2)”68.  The  Commission  study  on  auctioning  and  cost-
pass through69 shows that the majority of the opportunity cost of emission allowances is 
passed through to customers. Whether allowances are received free of charge or against 
payment  would  not  be  expected  to  make  any  difference  to  this  cost  pass-through 
decision.  Consequently,  full  auctioning  would  not  imply  unreasonable  costs  on  aircraft 
operators. Recently, in 2020 the European Court of Auditors found that “the number of 
free allowances allocated to the industry and aviation sectors in phase 3 was not based 
on their ability to pass through costs (see paragraphs 29 to 31) and that, while carbon 
leakage  has  the  potential  to  affect  EU  carbon  markets,  and  thus  the  evolution  of  the 
greenhouse gas emissions worldwide, there is limited targeting of the free allocation of 
allowances (see paragraphs 32 to 38)”70.   

The Communication on a European Green Deal71 states that there will be a proposal to 
reduce the  free allowances allocated to airlines. This is re-stated in the Communication 
on  Stepping  up  Europe’s  2030  climate  ambition:  “For  aviation,  the  Commission  will 
propose  to  reduce  the  free  allocation  of  allowances,  increasing  the  effectiveness  of  the 
carbon price signal in this sector, while taking into account other policy measures such as 
energy taxation and the ReFuelEU initiatives”.  

In this context, the revision of the EU ETS for aviation should ensure that the allocation 
of  allowances  is  aligned  with  the  reinforced  EU  climate  objective  and  is  economically 
efficient.     

80% of the public consultation respondents, half of which private sector stakeholders and 
including most of respondents from the aviation sector, believe that reducing or removing 
the  free  allocation  of  allowances  to  airlines  would  increase  the  cost  of  flying  for 
operators and consumers. At the same time, 69% of respondents, gathering mostly NGOs 
and EU citizens, agreed that a reduction or removal of the free allocation of allowances 
to airlines would increase the climate change mitigation impact by the EU. 

3.  WHY SHOULD THE EU ACT? 

3.1. Legal basis 

The  legal  basis  for  the  EU  ETS  Directive  2003/87/EC,  as  well  as  all  subsequent 
legislation amending it or other legislation regulating GHG emissions, is Article 192 of 
the Treaty on the Functioning of the European Union. This should remain the legal basis 

68 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32017R2392  
69 https://ec.europa.eu/clima/sites/clima/files/ets/revision/docs/cost_pass_through_en.pdf 
70 Special Report, the EU’s emissions Trading System: free allocation of allowances needed better 
targeting  2020, https://www.eca.europa.eu/Lists/ECADocuments/SR20_18/SR_EU-ETS_EN.pdf   (see 
paragraphs 32 to 38). 
71 COM(2019)640 final. 

19 

 
 
                                                 
for any new legislation addressing climate impacts of aviation, as the principal objective 
of  the  measure  is  the  protection  of  the  environment  through  the  reduction  of  GHG 
emissions. 

3.2. Subsidiarity: Necessity of EU action 

As recalled  in chapter  1, the EU has  committed to economy-wide climate neutrality by 
2050,  and  the  Commission  has  proposed  an  EU-wide  net  greenhouse  gas  emissions 
reduction target by 2030 compared to 1990 of at least 55%, which has been endorsed by 
the European Council. To reach the target, all sectors need to contribute. The projected 
continued growth of aviation emissions represents a challenge to reaching the EU’s target 
and its commitments under the Paris Agreement. 

Article 28b of the EU ETS Directive, as amended by Regulation 2017/2392, requests the 
Commission to present a report to the European Parliament and to the Council in which it 
shall consider ways for CORSIA to be implemented as appropriate in Union law through 
a revision of the EU ETS Directive. Furthermore, Article 3d requires the Commission to 
undertake  a  study  on  the  cost  pass-through  of  the  aviation  sector  with  the  intention  of 
making  a  proposal  to  increase  the  percentage  of  auctioning  of  aviation  allowances, 
pursuant to the review referred to above.  

Any amendment to the ETS Directive can only be brought about by the EU. An EU legal 
act  is  required  for  Member  States  to  apply  CORSIA  for  the  flights  covered  by  the 
geographical scope of application of Directive 2003/87/EC as set out in its Annex I, i.e. 
flights  departing  from  airports  in  the  EEA  and  arriving  to  other  airports  in  EEA  or  to 
third countries and, incoming flights to airports in the EEA from third countries. 

To  ensure  a  joint  effort  of  EU  Member  States  towards  meeting  the  EU's  climate 
objectives and to ensure a level playing-field on the EU single market, it is essential for 
the EU to continue to act to ensure a harmonised approach to appropriate implementation 
of CORSIA across all Member States. 

3.3. Subsidiarity: Added value of EU action 

Acting  at  EU level  is  more efficient than  acting  at  the Member State level,  in  terms  of 
scale  –  the  larger  an  emission  trading  system  is,  the  more  cost-efficient  the  emission 
reductions.  It  also  prevents  distortion of competition in  the internal  market  by ensuring 
that  the  environmental  requirements  are  harmonised  across  the  EU.  In  order  to  avoid 
distortions of competition in comparable circumstances, it is important that all flights on 
the  same  route  be  treated  in  the  same  way.  This  harmonized  approach  through  an  EU 
emission reduction tool (cap and trade system) has allowed for aviation's contribution to 
the EU 2020 climate objective and is set to ensure consistency with the 2030 target. 

Specifically,  as  regards  the  implementation  of  CORSIA,  EU  action  ensures  the 
participation  of  all  Member  States  (effectiveness)  while  also  ensuring  a  level  playing-
field on the EU single market and administrative simplification for operators concerned. 

20 

 
 
4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

4.1. General Objectives  

4.1.1.  Ensure  achievement  of  increased  EU  climate  targets  for  2030  and  2050 

and fulfil international commitments under the Paris Agreement 

Through  the  2030  Climate  Target  Plan,  the  Commission  proposed  to  raise  the  level  of 
ambition on climate action and to cut greenhouse gas emissions by at least 55% by 2030 
in order to set Europe on a responsible path to becoming climate neutral by 2050. It states 
that mobility will still have to be made substantially cleaner and that transport, including 
aviation,  will  have  to  substantially  reduce  emissions  in  particular  in  sectors  that  so  far 
have  been  hard  to  decarbonise  such  as  aviation.  This  means  enhanced  emission 
reductions from all sectors of the EU  economy, including aviation, consistent also with 
the EU’s economy-wide commitment under the Paris Agreement. 

As recently stated in the CTP, the EU ETS will remain a key tool to achieve reductions 
of CO2 emissions from aviation by 2030 (directly or indirectly).  

The EU ETS is  a system designed to drive CO2 emission reductions first in the sectors 
covered and in the locations where it is cheapest to achieve. Given the rapid growth in 
aviation activities, the EU ETS has not  yet led to aviation sector reductions in absolute 
terms. This state of play might change if 

 

 

 

 

the  cheapest  reductions  have  already  been  achieved  (reducing  emissions  in  the 
aviation sector is considered generally more expensive than in other sectors);  
the  cost  of  allowances  increases,  to  a  level  leading  to  investment  into  new 
technology,  operational  improvements  and  sustainable  aviation  fuels  and  this, 
combined with EU initiatives like RefuelEU, leads to direct emission savings;  
the  carbon  cost  (through  ETS,  removal  of  tax  exemption,  removal  of  VAT 
exemption  or  other  financial  measures  or  through  the  ReFuelEU  initiative) 
increases  the  air  fares,  potentially  reducing  demand  and  incentivising  shift  to 
other means of transport;  
demand for air travel is reduced due to rising awareness of the impact of aviation 
and more online conferencing replacing business travels. 

Therefore,  strengthening  the  ETS  is  considered  as  an  important  part  of  the  solution  to 
achieve  both  emission  reductions  while  reinforcing  the  price  signal  to  incentivise 
necessary investments in decarbonisation. At the same time, other EU measures are also 
needed to further reinforce the price signal, outside the scope of this impact assessment 
(in accordance with the concept of a “basket of measures”), as also indicated by the fact 
that  a  growing  number  of  Member  States  feel  the  need  to  adopt  passenger  duties.  The 
concept  is  further  supported  by  the  fact  that  82  %  of  respondents  to  the  public 
consultation  agreed  that  market-based  measures  such  as  the  EU  ETS  and  CORSIA 
should  be  combined  with  other  policies  such  as  support  for  innovative  aviation 
technologies,  operational  improvements,  taxation,  and  the  production  and  use  of 
sustainable aviation fuels. 

21 

 
 
Enhanced action for both domestic and international emissions is needed to significantly 
reduce climate impacts from international aviation, consistent with the Paris Agreement, 
the commitments under ICAO and climate science. 

The objective of CORSIA, i.e. essentially to compensate for the growth of international 
aviation CO2 emissions beyond 2019 levels through international credits, is expected to 
lead to CO2 emission reductions on a global scale, and may even have a positive effect on 
domestic aviation emissions all over the world, but is in itself far from being sufficient to 
duly contribute to the EU’s objective of climate neutrality by 2050. 

CORSIA – as the first international sectorial agreement on CO2 emissions following the 
conclusion  of  the  Paris  Agreement  –  should  in  particular  deliver  CO2  emissions 
reductions  compared  to  ‘business  as  usual’  on  the  global  scale.  In  case  it  will  ensure 
contribution  from  all  major  international  aviation  states,  thereby  leading  to  world-wide 
collective action on a non-discriminatory basis, it should be considered as a complement 
to the EU ETS. 

Assuming  adequate  environmental  integrity  of  offsets72  and  avoidance  of  double 
counting, CORSIA offsetting would be transitionally helpful pending the deployment of 
breakthrough technologies such  as electrification, hydrogen or synthetic  fuels produced 
from  renewable  energy  sources.  CORSIA  relies  on  airlines  purchasing  and  cancelling 
offset units that certify reductions achieved in other sectors. The Paris Agreement covers 
all anthropogenic emissions, from all sectors of the economies, with developed countries 
being  required  to  undertake  economy-wide  action  while  developing  countries  are 
expected to move towards economy-wide action over time. 

4.2. Specific objectives 

4.2.1.  Lead  international  efforts,  build  alliances  with  the  like-minded  and 

maintain competitiveness 

In  order  for  the  EU  to  lead  international  climate  efforts,  it  should  encourage  other 
countries  to  follow.  In  2018,  the  EU-27  accounted  for  around  22.5%  of  total  global 
aviation CO2 emissions (7.5% intra-EU and 15% from flights that either depart or land in 
the EU to/from  a non-EEA third country).  The  need for the EU to  also  spur on  ICAO 
states  to  take  action  to  contribute  to  achieving  the  temperature  goals  of  the  Paris 
Agreement  is  self-evident  against  this  backdrop.  In  this  context,  it  is  encouraging  that 
China has put a national ETS into operation, which may be extended to aviation, and that 
Korea and New Zealand have ETSs, which cover some emissions from aviation. 

72 https://ec.europa.eu/clima/sites/clima/files/ets/docs/clean_dev_mechanism_en.pdf  

22 

 
 
                                                 
4.2.2.  Increase carbon price signal, while avoiding carbon leakage and ensuring 

a level playing field and fairness   

As in other areas of climate action, it is important to ensure that the options selected to 
reduce emissions do not lead to an increase in climate impacts elsewhere, the so-called 
carbon leakage. There is no evidence of carbon leakage at present for aviation, because 
there is equal treatment of all airlines on flight routes covered by the ETS. On the other 
hand,  the  issue  of  ‘hub  leakage’  (aviation  activity  could  theoretically  be  somewhat 
displaced  to  hub  airports  where  carbon  pricing  is  not  applied),  should  be  examined. 
Another aspect worth examining is substitution of air travel by other means of transport, 
such as trains. 

Ensuring  that  operators  on  the  same  route  are  treated  equally  remains  a  key  specific 
objective, to avoid any discrimination on grounds of nationality. This includes examining 
the situation of flights to and from outermost regions in addition to impacts on outermost 
regions in general. It should also be taken into account that EU carriers have a relatively 
large  share  of  their  emissions  covered  by  the  EU  ETS  compared  to  their  non-EU 
competitors. 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

5.1. What is the baseline from which options are assessed? 

Baseline 

For CORSIA implementation, options are assessed against option C1BASE (as described 
below), the current ETS scope, where the application of the EU ETS legislation is limited 
to intra-European flights. This is the situation under the current scope derogation, which 
applies to emissions until end 2023. 

The baseline against which all other options for auctioning of allowances are assessed is 
option  A0BASE,  the  ‘do-nothing’  option,  under  which  15%  of  allowances  for  aviation 
are auctioned as under the current legal situation until 2030.   

These are the baselines for the assessment of policy options modelled using the Aviation 
Integrated Model (AIM) for aviation  sector impacts  as described in  Annex 4.2.  As for 
other  impact  assessments  for  the  Fit  for  55  proposals,  we  use  values  from  the  REF 
scenario  modelled  under  PRIMES  (as  described  in  the  common  methodological  annex 
4.1), the common baseline, as inputs for the AIM modelling. The baselines C1BASE and 
A0BASE use values from the REF scenario to ensure consistency.  

Modelling approach and assumptions 

The  quantitative  analysis  of  impacts  of  each  option  and  combinations  is  based  on 
modelling of the aviation sector using the AIM global aviation systems model and of the 
wider  economy  using  the  E3ME  global  macro-economic  model.  The  full  results  are 

23 

 
 
presented in  the study by  ICF commissioned by  the Commission73. The modelling also 
relied  on  information  from  the  assessment  of  CORSIA,  the  assumption  that  a  large 
number  of  countries  apply  CORSIA  through  domestic  regulation  and  maintain  their 
participation,  the  price  of  CORSIA  eligible  credits,  and  from  the  study  of  cost  pass 
through under the EU ETS. 

The  modelling  was  carried  out  both  for  a  set  of  ‘most  likely’  trajectories  for  input 
variables (oil price, carbon price, demand growth, CORSIA participation and changes in 
technology),  which  give  the  nominal  values  for  which  the  results  are  presented  here, 
unless otherwise stated,   and across a series  or  grid  of different  ranges or scenarios for 
these input variables. Uncertainty is examined by using in most cases a high, central and 
low value for each input variable. This allows highlighting of the cases where a variable 
is  particularly  important.  The  impact  of  some  variables  that  do  not  require  model  runs 
were  also  tested  and  are  presented  here,  such  as  the  extent  to  which  offsets  under 
CORSIA are real and additional.   

The model runs were first undertaken in 2020, but were updated by new model runs in 
January  2021  to  reflect  the  latest  information  on  the  impact  of  COVID-19  and  revised 
Commission  projections  of  aviation  demand.  The  results  presented  here  are  those 
updated to reflect the impacts of COVID-19.   

Table  5.1:  Broad  categorisation  of  AIM  model  inputs  which  may  lead  to  differences  in 
outputs  (as  assessed  by  total  aviation  sector  CO2  up  to  2050  on  a  global/extra-
EEA/intra-EEA basis) 

Potential 
impact on 
outcomes 
Low 

Mid 

Low 

Level of uncertainty 
Mid 

High 

  Biofuel 

characteristics74 
  Carbon intensity 
of electricity 
generation 

  EUA/CER prices 

  Electricity price 

  Cost pass-through 
assumptions 

  Coverage of 

flights to/ from 
UK and 
Switzerland 
  Allowance 

allocation methods 

  Urbanisation 

73 ICF Consulting et al. (2020), Assessment of ICAO's global market-based measure (CORSIA) pursuant to 
Article 28b and for studying cost pass-through pursuant to Article 3d of the EU ETS Directive. (hereafter 
“ICF Study”). 
74 Biofuel characteristics include price, fuel lifecycle CO2 as compared to fossil-derived Jet A, any limits 
on blending ratio, and supply available to aviation. To a year-2035 timescale these are likely to have only 
low impact on outcomes because use of aviation biofuels over this timescale likely represents only a small 
fraction of total fuel, as discussed in Section 1.1.2.6; impacts in the case that biofuel take-up is much 
higher than anticipated are discussed in Section 1.2.14. 

24 

 
  
  
 
                                                 
Potential 
impact on 
outcomes 
High 

Low 

Level of uncertainty 
Mid 

High 

  GDP/capita 
  Oil price 

  Population growth    CORSIA 

participation 
  Future aircraft 
technology 
characteristics 
  Rules on quality 
of CORSIA 
credits 

 The  variables  to  which  results  are  most  sensitive  include  CORSIA  implementation  by 
states and continued participation, technology assumptions and demand.  

Participation 

CORSIA  coverage  will  vary  substantially  depending  on  its  implementation  and 
continued  participation  by  states.  CORSIA  only  covers  emissions  from  international 
flights  when  both  origin  and  destination  countries  are  participants.  In  other  words,  if  a 
country does not implement or decides not to continue participating in CORSIA, none of 
the  flights  to  and  from  that  country  are  covered.  In  addition,  CORSIA  foresees  that  no 
state should regulate airlines based in  any third country. This  would pose challenges to 
ensuring equal treatment on routes, which is important for any economic measure to be 
effective.  As  a  result,  emissions  coverage  decreases  rapidly  with  reduction  in 
participation.  

As the ICAO Secretariat has not published the responses which were required by 30 June 
2020  to  a  State  letter,  these  responses  and  any  conditions  attached  are  not  public.  The 
analysis in this impact assessment is based on what the ICAO Secretariat has published 
on its website. The analysis looks at the following CORSIA participation scenarios:  

 

Initial  assumed  implementation:  the  level  assumed  for  the  results  presented 
(nominal)  values,  assumes 
implementation  and  continued  participation 
throughout the period 2021-2035 of the 88 States listed by the ICAO Secretariat 
on  its  website  in  December  2020  (which  includes  the  US),  but  that  none  of  the 
larger  countries  which  have  opposed  CORSIA  (China,  Russia,  India,  Brazil  or 
Vietnam) participate in any of its phases. 

  High  implementation  and  continued  participation:  assumes  implementation 
throughout  the  period  2021-2035  of  all  of  the  88  States  listed  by  ICAO 
Secretariat on its website in December 2020, plus starting in 2027, participation 
of the currently five additional States - China, Russia, India, Brazil and Vietnam - 
which are not exempt from CORSIA’s second phase. 

Technology 

25 

 
  
 
 
Technology  developments  are  modelled  by  specifying  individual  characteristics  of 
candidate technologies for nine aircraft size class. However the characteristics of future 
technologies  (e.g.  new  aircraft  models,  retrofits,  operational  measures  or  alternative 
fuels) can be highly uncertain.  In many cases,  estimates of the benefits  of technologies 
depend on engineering breakthroughs that have still to be made.  

Therefore,  the  technology  adoption  model  uses  scenarios  to  assess  the  impact  of 
uncertainty in technology parameters. This assessment is based on three scenarios using 
technology  parameters,  including  changes  in  aircraft  operating  costs  by  cost  type  and 
changes in fuel burn, as derived from Schäfer et al. (2016)75 and Dray et al. (2018). For 
example,  the  ‘pessimistic’  technology  scenario  used  in  this  study  describes  a  future  in 
which  it  is  particularly  hard  to  reduce  aviation  emissions  through  technology;  this 
assumes the reduction in  fuel  use from  new technologies is  at  the low end of available 
estimates,  costs are at  the high end of available  estimates, and the date from  which the 
technology  is  available  is  at  the  late  end  of  available  estimates.  The  central  scenario 
assumes  all  technology  parameters  are  at  central/’most  likely’  values  from  available 
estimates, and in the ‘optimistic’ scenario reductions in fuel use from new technologies 
are at the high end of available estimates, costs are at the low end of available estimates, 
and  the  date  from  which  the  technology  is  available  is  at  the  early  end  of  available 
estimates. In all cases, consistency with ICAO’s CO2 standard is assumed. Measures are 
adopted based on their cost-effectiveness. This means that high fuel and/or carbon prices 
can affect which technologies, retrofits and operational strategies are adopted.  

The results also depend on a number of other input assumptions, for example the scale of 
supply  of  cellulosic  biomass-derived  drop-in  aviation  fuel.  Projections  of  how  much 
biofuel  might  be  in  use  in  aviation  up  to  2050  vary  widely  and  are  dependent  on  the 
costs, sustainability and supply of biomass assumed, as well as the characteristics of and 
demand  from  other  sectors  and  policies.  Most  recent  multi-sectoral  analyses  project 
relatively low aviation biomass use to 2035.  

Electrofuels  (or  power-to-liquid  fuels)  also  have  potential  to  contribute  to  climate 
neutrality.  However,  given  the  current  costs  at  3-6  times  that  of  untaxed  kerosene  and 
uncertainties about uptake, electrofuels are not included in the modelling for this impact  

Carbon prices 

The  following  carbon  price  scenarios  are  used  in  this  impact  assessment  for  EU 
allowances and CORSIA eligible offsets (adjusted for the impacts of COVID-19).  

Table 5.2: Carbon price assumptions by scenario and allowance type, corrected for the 
impacts of COVID-19.  

75 Schäfer, A., Evans, A. D., Reynolds, T. and Dray, L. M. Costs of Mitigating CO2 Emissions from 
Passenger Aircraft. Nature Climate Change, Vol. 6, 2016, pp. 412-417. 

26 

 
 
                                                 
Scenario 

(EU  ETS)  Base 

EUA 
COVID-19  (nominal) 

EUA 
(EU  ETS) 
COVID-19  (high) 

IIb 

CORSIA Sc1 (nominal) 

CORSIA Sc2 (high) 

2015 

7.8 

7.8 

0.20 

0.20 

Carbon price €/tCO2, year 2020 euros 

2020 

26.5 

26.5 

1.02 

1.02 

2025 

27.5 

47.8 

1.02 

5.09 

2030 

32 

84.5 

1.02 

13.2 

The  nominal  values  in  table  5.2  above  are  those  used  for  the  results  presented  in  this 
impact assessment, unless stated otherwise.  The nominal case uses the REF scenario EU 
ETS  price,  as  inthe  Impact  Assessment  for  the  EU  ETS  and  other  proposals.  The  ETS 
carbon price in REF only reflects currently adopted policies, with 2030 price at €32 and 
average  prices  at  €29  for  the  period  2021  to  2030.  Currently  observed  carbon  market 
prices  do  already respond to  the increased GHG  target  and vary  between €40 and €55. 
The  policy  scenarios  modelled  under  the  ETS  revision  Impact  Assessment  project 
average  carbon  price  ranges  between  €45  and  €70  for  the  period  2026  to  2030,  with 
projected carbon prices in the year 2030 ranging between €50 and €85. This is broadly in 
line with external analyses, for which the average of price forecasts for 2030 is €71, with 
a large range between €42 and €89 (with all prices adjusted to  2020 Euros).   Both  this 
and  the  ETS  impact  assessment  recognise  that  an  increase  in  GHG  reduction  ambition 
would  lead  to  higher  carbon  prices.  In  addition,  the  broader  EU  ETS  revision  impact 
assessment also  uses the following rounded  central  carbon price assumptions, based on 
these  and  other  sources,  for  the  assessment  of  some  impacts,  such  as  auctioning 
revenues, (in €2020): €50 as average for the whole period 2021 to 2030.  

Higher carbon cost scenarios for both EU ETS allowance and CORSIA were also used in 
sensitivity testing for this aviation ETS impact assessment. These were defined before the 
finalisation  of  the  modelling  exercises  for  the  general  ETS  impact  assessment  and  are 
given in  table 5.2 above (see the ‘high’ scenarios).  The 2030 carbon price assumptions 
for  the  ETS  high  price  scenario  (EUA  (EU  ETS)  IIb  COVID-19  (high))  are  however 
consistent with  the upper range of the  above price projections, so that the full range of 
carbon prices  is  covered by the scenarios modelled. Also,  when expressed as  averages, 
the  high  cost  scenario  for  EU  allowances  under  the  EU  ETS  are  above  the  above 
mentioned levels used in the broader ETS impact assessment with (in €2018): €51.7 as 
average for the whole period 2021 to 2030  

To ensure consistency in the calculation of revenues, the assumptions of the general ETS 
impact assessment have been used just for revenues. 

27 

 
 
 
 
5.2. Description of the policy options 

5.2.1.  CORSIA implementation 

5.2.1.1.  Option C0WIDE: Return to full scope EU ETS 

This  option  proposes  applying  the  EU  ETS  legal  scope  of  departing  flights  to  third 
countries (other than Switzerland and the UK), and incoming flights from third countries 
(unless exempted), if no amendment to the ETS Directive was adopted before surrender 
requirements apply to emissions as of 202476. Currently, the flights exempted from this 
scope  are  those  incoming  from  Switzerland,  while  a  delegated  act  is  being  prepared  to 
exempt  incoming  flights  from  the  UK,  which  are  in  the  scope  of  the  ETS  of  the  UK. 
Incoming flights could also be exempted to provide for optimal interaction between the 
EU ETS and third countries' measures for reducing the climate change impact of flights. 
This  would  maintain  the  equal  treatment  of  aircraft  operators  on  routes,  with  the  EU 
regulating departing flights to countries applying CORSIA, while these countries would 
be responsible for flights to the EEA77. This would also be consistent with the EU’s NDC 
that covers outgoing flights.  

In  this  option,  EU  allowances  are  required  to  be  surrendered  by  airlines  for  these 
emissions, while CORSIA is not applied at all by any EU or EEA member state.   

Table 5.3: Key features of Option C0WIDE 

Features 
EU ETS Scope 
CORSIA Scope 

EU ETS cap 

EU ETS allocation 
Modelling  CORSIA 
CO2 eligibility 
Outermost 
coverage 

regions 

Assumptions 
Flights to, from, within EEA, including domestic (from 2024) 
International  flights  between  participating  non-EEA  countries; 
to/from/within EEA not covered 
95%  of  average  full  scope  year  2004-2006  aviation  CO2;  
LRF of 2.2% per year from 2021 
Existing situation 
N/A 

Flights to, from and within any given OMR are included.  

5.2.1.2.  Option C1BASE: Intra-EEA scope 

This option is the baseline. It mirrors the current application of the EU ETS. The EU ETS 
would be applied in line with the scope of the system as currently applied78: allowance 
surrendering obligations for aircraft operators would be based solely on emissions from 

76 The first surrender requirements that, under existing law, would apply to extra-European flights apply on 
30 April 2025. 
77 This approach has been noted as a practical way to solve the issue of Common but Differentiated 
Responsibilities and Capabilities, which has been a longstanding challenge in the UNFCCC context. See, 
for example, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1952554 . 
78 Flights within the EEA, and departing flights to Switzerland and to the UK. 

28 

 
 
 
                                                 
flights between aerodromes located in the EEA, and for departing flights to Switzerland 
and  the  UK.  In  this  option,  CORSIA  is  not  applied  to  any  intra-EEA  routes,  nor  on 
flights to and from the EEA. 

Table 5.4: Key features of Option C1BASE  

Features 
EU ETS Scope 

CORSIA Scope 

EU ETS cap 

EU ETS allocation 
Modelling  CORSIA 
CO2 eligibility 
Outermost 
coverage 

regions 

Assumptions 
Flights within EEA, including domestic; departing flights to CH 
and UK  
International  flights  between  participating  non-EEA  countries; 
to/from/within EEA not covered 
As option 0 but reduced to reflect reduced scope; LRF of 2.2% 
per year from 2021 
Existing situation 
N/A 

Flights within any given OMR are included. Flights to and from 
OMRs are exempt.  

5.2.1.3.  Option C2CONLY: CORSIA only 

In this option, only CORSIA would be applied to all international flights  (as commonly 
defined by ICAO): flights between EEA states and flights between EEA states and third 
countries. The EU ETS would no longer apply to aviation in this option. 

Table 5.5: Key features of Option C2CONLY 

Features 
EU ETS Scope 
CORSIA Scope 

EU ETS cap 
EU ETS allocation 
Modelling  CORSIA 
CO2 eligibility 
Outermost 
coverage 

regions 

international  and 

Assumptions 
N/A 
All 
(excluding to/from CORSIA non-participating States) 
N/A 
N/A 
Emissions above CORSIA baseline 

intra-EEA 

(non-domestic) 

flights 

International  flights  to  and  from  OMRs  are  included,  domestic 
flights within OMRs are exempt  

5.2.1.4.  Option C3CLEAN: Clean 

The  EU  ETS  would  continue  to  apply  to  the  current  intra-EEA  scope,  as  in  Option 
C1BASE, and CORSIA would be introduced for extra-EEA flights, i.e. flights between 
EEA States and third countries (other than to Switzerland and the UK). In this option, the 
EU ETS would be applied as at present and CORSIA would be applied to flights to and 
from third countries which participate in the scheme, provided that a level playing field is 
maintained  on  routes.  Any  emissions  above  CORSIA’s  baseline  on  routes  to  and  from 
those third countries would be offset by airlines based in Europe using CORSIA eligible 
offsets. 

29 

 
 
 
A variation of this  option is  that  the EU operators use a sub-set  of the  ICAO CORSIA 
Implementation Element listing eligible units, or use ETS allowances if they choose to do 
so79. The EU might decide that units should originate from reductions in countries which 
are Party to  the Paris Agreement, to  encourage  participation in  the global agreement to 
tackle climate change. The EU might also decide that units should originate in countries 
which participate in CORSIA80, so as to incentivise participation in ICAO’s scheme and 
discourage  free-riding.  It  could  also  be  ensured  that  double-counting  is  avoided  with 
Paris  commitments.  The  EU  could  also  decide  to  extend  the  list  of  eligible  offsets  to 
project types not on ICAO’s list. 

The  option  would  continue  to  keep  the  currently  applicable  scope  of  the  EU  ETS  and 
would  potentially  strengthen  it  by  application  of  CORSIA  on  extra-EEA  flights,  which 
could  generate  additional  emissions  reductions  compared  to  the  current  situation,  when 
international  aviation  emissions  as  a  whole  exceed  2019  levels  (the  current  CORSIA 
baseline). 

Table 5.6: Key features of option C3CLEAN 

Features 
EU ETS Scope 

CORSIA Scope 

EU ETS cap 
EU ETS allocation 
Modelling  CORSIA 
CO2 eligibility 
Outermost 
coverage 

regions 

Assumptions 
Flights within EEA, including domestic; departing flights to CH 
and UK 
International 
participating States), intra-EEA excluded 
Same as in C1BASE 
Existing situation  
Emissions above CORSIA baseline 

to/from  CORSIA  non-

(excluding 

flights 

Flights  within  any  given  OMR  included  under  the  EU  ETS. 
International  flights 
included  under 
CORSIA.  

to  and  from  OMRs 

5.2.1.5.  Option C4MIX: Mix 

In this option, the EU ETS would continue to cover the emissions from domestic flights 
within  each  EEA  state.  For  flights  between  EEA  states,  which  are  covered  by  the  EU 
ETS  at  present81,  the  ETS  would  continue  to  apply  for  emissions  up  to  the  CORSIA 
baseline (bearing in mind that no CORSIA obligation to offset emissions arises as long as 
emissions  are  below  that  baseline).  For  emissions  above  the  baseline,  CORSIA  would 
then apply.  

In  practical  terms,  given  that  CORSIA  has  a  later  timeline  than  the  ETS,  the  EU  ETS 
would apply in a way that any CORSIA offsetting that actually takes place could simply 
be deducted from the next EU ETS emissions surrender obligation, thereby avoiding an 

79 As allowances are currently valued at around €30, while CDM credits trade at €0.30, airlines are likely to 
use the cheaper units. 
80 Possibly with the exception of landlocked developing countries and less developed small island States. 
81 Flights within the EEA, and departing flights to Switzerland and to the UK. 

30 

 
 
                                                 
airline  paying  both  the  ETS  carbon  price  and  for  offsets  under  CORSIA,  for  the  same 
emissions.  Accordingly,  to  ensure  the  environmental  integrity  of  the  EU  ETS,  the 
emissions covered by CORSIA offsetting would be deducted from the available amount 
of allowances (the cap). 

For  extra-EEA  flights  between  EEA  states  and  third  countries,  only  CORSIA  would 
apply. 

Same  as  for  Option  C3CLEAN,  a  variation  also  of  this  option  would  be  that  the  EU 
applies  some  specific  conditions  to  the  choice  of  offsets  to  be  used  for  CROSIA  by 
operators administered by an EEA member state.  

De facto, this option would  retain the applicability of the EU ETS  within the currently 
applied scope, as long as aviation emissions on all routes worldwide covered by CORSIA 
do  not  exceed  2019  levels82.  Afterwards,  intra-EEA  emissions  would  be  offset  with 
international credits to the extent required by CORSIA83 (with the consequence that they 
could represent reductions achieved potentially outside the territory of the EEA). 

Table 5.7: Key features of Option C4MIX 

Features 
EU ETS Scope 
CORSIA Scope 

EU ETS cap 
EU ETS allocation 
Modelling  CORSIA 
CO2 eligibility 
Outermost 
coverage 

regions 

Assumptions 
EEA domestic flights. Intra-EEA flights up to CORSIA baseline 
All  international  flights  and  intra-EEA  (non  domestic)  flights 
(excluding  to/from  CORSIA  non-participating  States),    intra-
EEA excluded 
Same as in Option C1BASE, CORSIA offsetting deducted 
Existing situation  
Emissions above CORSIA baseline 

International flights to/from OMRs included in CORSIA. Flights 
within  any  given  OMR  are  fully  subject  to  EU  ETS  (i.e.  inc. 
emissions above CORSIA baseline)   

5.2.1.6.  Option C5MIX2: Mix bis 

In this option, for operators with licences issued by EEA States, the EU ETS would apply 
to  non-domestic  intra-EEA  flights  (for  all  emissions  generated  by  these  flights, 
independently from the level). CORSIA would apply to flights by these operators to and 
from  third  countries  participating  in  the  scheme.  For  operators  with  licences  issued  by 
third  countries,  the  EU  would  no  longer  be  able  to  ensure  that  there  is  a  level-playing 
field on routes as CORSIA would also apply on those non-domestic intra-EEA flights, in 
addition to flights between EEA States and third countries participating in CORSIA. The 
EU ETS would not be applicable to third country operators. This option would not cover 
domestic flights at all. 

82 Application of CORSIA before 2030 means that the baseline and the calculated offsetting are based on 
the emissions on all CORSIA routes worldwide. 
83 The calculation of CORSIA offsetting of individual airlines depend on the increase of emissions on all 
CORSIA routes worldwide, not on the increase of emissions of the individual airline. 

31 

 
 
                                                 
Table 5.8: Key features of Option C5MIX2 

Features 
EU ETS Scope 

CORSIA Scope 

EU ETS cap 

EU ETS allocation 
Modelling  CORSIA 
CO2 eligibility 
Outermost 
coverage 

regions 

Assumptions 
Flights  within  EEA,  excluding  domestic,  if  operator  licence 
issued by an EEA State 
International  flights  to/from  EEA.  Flights  within  EEA,  if 
operator licence issued by a non-EEA state  
As  Option  C1BASE  but  reduced  further  to  reflect  reduced 
coverage; LRF of 2.2% per year from 2021.  
Existing situation  
Eligible operator emissions above CORSIA baseline 

For  aircraft  operators  with  licences  not  issued  by  EU  Member 
States,  non-domestic  flights  to  and  from  OMRs  are  included 
under CORSIA.   

Table 5.9: Summary of CORSIA implementation options 

Policy 
option 

C0WIDE  

C1BASE  

C2CONLY  

C3CLEAN  

C4MIX  

Domestic flights 

ETS 

ETS 

- 

ETS 

ETS 

C5MIX2  

- 

Intra-EEA flights 
(including departing to CH, 
UK) 
ETS 

ETS 

CORSIA 

ETS 

ETS/  
CORSIA (above 
CORSIA baseline) 

EEA airlines: ETS   
non-EEA airlines: 
CORSIA 

Extra-EEA flights 

ETS 

- 

CORSIA 

CORSIA 

CORSIA 

CORSIA 

5.2.2.  Auctioning share increase 

5.2.2.1. 

 Option A0BASE: “Do nothing”  

Article  3d  paragraph  2  of  the  EU  ETS  Directive  provides  that  15%  of  allowances  for 
aviation  shall  be  auctioned  and  that  the  Commission  shall  study  cost-pass  through  by 
airlines  “with  the  intention  of  making  a  proposal  to  increase  the  percentage  of 
auctioning”  in  the  current  review.  In  the  absence  of  any  amendment,  this  level  would 
continue under a revised ETS as well. This option is the baseline against which the other 
policy options will be assessed.  

32 

 
 
 
The aviation cap would be subject to the linear reduction factor, which is currently 2,2%, 
yearly, and which will be subject to revision in the upcoming ETS legislative proposal84. 
The  total  number  of  corresponding  allowances  would  be  distributed  through  free 
allocation (82%), special reserve (3%) and auctioning (15%). 

5.2.2.2.  Option A1FULL: Immediate full auctioning 

In  this  option,  100%  of  the  allowances  for  aviation  would  be  auctioned  from  the  entry 
into  force  of  the  revision  (assumption  for  the  assessment:  2023).  The  aviation  cap,  as 
calculated  before  starting  full  auctioning,  would  be  decreased  by  the  (revised)  linear 
reduction factor each year up to 2030.  

In case the scope of the EU ETS were to change as a consequence of the application of 
one of the options in section 5.1.1, which differs from the intra-EEA scope, the aviation 
cap would have to be recalculated proportionally. 

5.2.2.3.  Option A2SWIFT: Swift phase out 

The application of this option would lead to full auctioning of allowances for aviation by 
2025. It would start with an auctioning share of 60% in 2023, and then a share of 80% in 
2024. The method of distribution between operators would continue the current situation, 
based on 2010 traffic. 

5.2.2.4.  Option A3SLOW: Slow phase out 

This  option  would  entail  a  slower  movement  to  full  auctioning  by  2030.  It  would  start 
from 20% of auctioning of allowances for aviation in 2023 and would increase in a linear 
manner to full auctioning by 2030. The method of distribution between operators would 
continue the current situation. 

5.2.2.5.  Option A4RED: Slow reduction 

Under this option, the auctioning share of 20% of allowances for aviation would also be 
set in 2023. It would increase in a linear manner to end at 55% at least until 2030 (and 
afterwards, in the absence of future revisions of the ETS). This option would maintain a 
number of free allowances for aviation at least until 2030 (and afterwards in the absence 
of  future  revisions  of  the  ETS).  The  method  of  distribution  between  operators  would 
continue the current situation. 

A  mix  of  business  associations  and  NGOs  made  suggestions  to  revise  options  listed  in 
the questionnaire or to introduce new options. The top three reasons for such suggestions 
were the importance of creating a level playing-field between EEA airlines and non-EEA 
airlines; avoiding market distortions on certain routes and avoiding hub leakage; and the 
impact of COVID-19. The concrete suggestions included aligning policy reference year 

84  As  stated  in  the  Inception  Impact  Assessment  of  the  general  ETS  review,  “general  improvements 
proposed  to  the  EU  ETS  may  be  applied  across  the  whole  system”,  which  includes  the  linear  reduction 
factor 
as  well.  See  https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12660-
Updating-the-EU-Emissions-Trading-System  

33 

 
                                                 
with  CORSIA  baseline  year  2019;  ensuring  no  double  counting;  and  four  new  options 
varying in their coverage of EU ETS. 

5.2.3.  Cross-cutting issues 

In  combination  with  the  options  on  the  main  parameters  above,  there  are  some  issues 
which need to be addressed by the proposal: 

5.2.3.1. 

 Exemptions for outermost territories 

Currently, the EU ETS temporarily exempts flights to and from outermost regions85 (e.g. 
Tenerife – Madrid; Berlin – Tenerife), as well as flights between two different outermost 
regions  (Madeira  -  Azores)  from  2013-202386.  However,  flights  within  the  same 
outermost  region  are  covered  by  the  EU  ETS  (Lanzarote  –  Tenerife),  the  exception  to 
that being Public Service Obligation (PSO) flights, which are excluded. 

From  an  environmental  perspective,  this  exemption  covers  about  14%  of  the  EU  ETS 
aviation  emissions.  The  share  of  flights  to/from  outermost  regions  considered  as 
domestic  (to  their  respective  Member  State)  represents  about  6%  of  the  aviation 
emissions  currently  covered  by  the  EU  ETS87.  CORSIA  does  not  foresee  any  special 
status and exemptions for remote or outermost regions. 

The flights to and from outermost regions could: 

  Continue to be exempted from the EU ETS, and seek to apply CORSIA  
  Be included in EU ETS and CORSIA  
  Be exempted from any obligation  

5.2.3.2. 

 SAF implementation 

EU  ETS  incentivises  operators  to  use  Sustainable  Aviation  Fuels  (SAF)  at  a  level  of 
around EUR 115/tonne, but this incentive is insufficient for large-scale use of fuels that 
are  more  expensive.  The  EU  ETS  considers  a  tonne  of  SAF,  which  fulfils  all  the 
sustainability criteria of RED II to count as zero emissions. 

Whereas  the  EU  will  continue  to  rely  on  the  RED  II  framework  for  the  definition  of 
Sustainable Aviation Fuels, there are different options for dealing with the incentives to 
use SAF: 

  Continue  to  consider  SAF  as  zero-emissions  in  EU  ETS  and  consider  it  zero-

emissions for CORSIA too;  

85 Within the meaning of Article 349 of the Treaty on the Functioning of the European Union. 
86 Flights to and from these areas were covered by the EU ETS in respect of the year 2012. 
87 In 2019, the aviation emissions in the scope of the EU ETS was 68 million tonnes, the emissions from 
flights to/from outermost regions (currently exempted) was 9.9 million tonnes and emissions from flights 
to/from outermost regions from/to their respective Member State (considered as domestic) was 4.3 million 
tonnes. 

34 

 
                                                 
  Consider  it  zero-emissions  for  EU  ETS,  but  use  the  life-cycle  emissions  value 
from the CORSIA SARPs for purposes of reductions of offsetting requirements to 
CORSIA;  

  Adopt the proportional emissions reduction for the EU ETS too.  

The ReFuelEU Aviation initiative would also aim at incentivising operators to use SAF, 
through  obligations  on  both  the  supply  and  demand  sides.  On  the  supply  side,  the 
ReFuelEU  Aviation initiative could  introduce  an obligation for  fuel  suppliers to  supply 
only  SAF-blended  fuels  at  EU  airports.  On  the  demand  side,  the  ReFuelEU  Aviation 
initiative  could  oblige  airlines  departing  from  an  EU  airport  to  use  a  share  of  SAF.  In 
order  to  prevent  fuel  tankering  (i.e.  a  practice  whereby  an  airline  refuels  with  more  jet 
fuel than necessary at an airport outside the EU with less strict SAF obligations and thus 
cheaper fuel), the ReFuelEU Aviation initiative could foresee an obligation for airlines to 
refuel before departure at an EU airport with an amount of jet fuel corresponding to that 
necessary  to  operate  the  next  flight.  Therefore,  if  adopted,  the  ReFuelEU  Aviation 
initiative  would  share  the  same  objectives  as  the  revision  of  the  EU  ETS  for  aviation, 
namely reducing CO2 in the aviation sector and supporting the uptake of SAF.  

5.2.3.3. 

 Exemptions for business aviation  

Currently  the  EU  ETS  provides  for  an  exemption  for  aircraft  with  a  total  mass  below 
5700 kg; for flights of non-commercial aircraft operators with annual emissions less than 
1000 tonnes; and for flights of commercial aircraft operators with a yearly emission less 
than  10000  tonnes  or  less  than  243  flights  in  a  year.  The  effect  is  that  the  majority  of 
business aviation is de facto exempted from any obligation of reporting or surrendering 
allowances. Business aviation flights which are exempted from the EU ETS amounted to 
1,1% of emissions of the intra-EEA scope in 2019.  

The  proposal  should  examine  whether  this  exemption  is  still  justified  or  no  longer 
warranted. 

5.3. Options discarded at an early stage 

Variations of option C4MIX could be maintaining the EU ETS for intra-EEA flights, and 
also apply CORSIA for the emissions above the 2019 CORSIA baseline. The operators 
which,  having  surrendered  EU  allowances,  then  cancel  ICAO  offset  units  for  the  same 
emissions, would receive free allocation proportional to the costs of those offsets (noting 
that  allowances  are  currently  worth  around  €30,  and  CDM  credits  are  currently  worth 
around  €0.30).  This  option  would  create  double  compliance  obligation  for  the  same 
emissions,  implying  increased  complexity  and  additional  burden  both  on  aircraft 
operators  and  competent  authorities.  Furthermore,  this  would  require  continuing  free 
allocation, unless auction revenue were used to purchase any such credits. Therefore, this 
possibility was not further assessed. 

35 

 
 
 
Option C5MIX2 was not further analysed as it would add high level of complexity to the 
system without significant additional benefit compared to other options and introducing 
concerns for equal treatment of airlines on routes. In the public consultation, this option 
received no support, it was the second least favoured option of the respondents. 

5.4. Overview of problems, objectives and policy options 

The policy options above, to a different extent, directly contribute to the achievement of 
the objectives defined in Chapter 4. Table 5-8 shows how the policy options are meant to 
contribute to the solution of the problems described in Chapter 2. 

Table 5.10: Overview of intervention logic 

Problem 

Objective 

Policy options 

Increased climate 
ambition 

Implementation of 
CORSIA  

Carbon price signal 
is weak 

General objective: ensure 
aviation’s contribution to 
achieve the increased targets 

Specific objective:  
Lead international effort 
4.2.1 

Specific objective: Increase 
price signal while avoiding 
carbon leakage and ensuring 
level playing field 
4.2.2 

All 

C options 
5.2.1 

A options 
5.2.2 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? 

This section assesses the environmental, economic and social impacts of each option, for 
the aviation sector and more generally.  

6.1. Environmental impacts 

The  policy  options  assessed  involve  the  use  of  flexible,  market-based  measures,  where 
airlines  can  choose  either  to  reduce  their  own  emissions  or  to  buy  and  surrender 
allowances  under  the  EU  ETS  or  offsets  under  CORSIA  to  comply,  which  can  lead  to 
emissions reductions outside the aviation sector. As a result, the assessment looks both at 
the direct impact on CO2 emissions from aviation and the net impact on greenhouse gas 
emissions both for intra-European and global aviation. The net impacts are those which 
are  most  important  in  terms  of  aviation’s  contribution  to  meeting  2030  emissions 
reduction  targets.    In-depth  analysis  considers  that  aviation  emissions  are  currently 

36 

 
 
 
 
 
warming the climate at approximately three times the rate of that associated with aviation 
CO2 emissions alone88. These impacts are reflected in the narrative but not in the tables 
presenting results for direct and net CO2 emissions. 

This  section  goes  on  to  look  at  the  external  costs  for  other  environmental  impacts 
associated with each policy option.  

6.1.1.  Impacts on aviation emissions 

This  section  assesses  the  impact  of  the  different  policy  options  on  direct  aviation 
emissions- CO2 emitted by aircrafts.  

It is worth noting that the price for international credits today is less than €1, as compared 
with the price of ETS allowances, which is above €35. Therefore, the options C2CONLY 
and C4MIX would simply consist in relaxing the current mitigation policies in place for 
limiting intra-EEA aviation emissions which have proven effective.  

Direct emissions from aviation grow in all options between 2015 and 2030. As shown in 
Table 6.1 below, direct global aviation emissions are projected to be 1079 Million tonnes 
(Mt)  in  2030  for  the  baseline  option  C1BASE  and  options  C2CONLY  to  C4MIX,  up 
from 769 Mt in 2015. This is down from the growth in projected direct global emissions 
in  the  pre-COVID-19  model  runs  of  1138  Mt  in  2030,  a  drop  of  about  5%  in  global 
aviation  emissions  taking  into  account  the  expected  impacts  of  the  pandemic.    Option 
C0WIDE,  full  scope,  is  estimated  to  lead  to  1077  Mt  in  2030  (down  from  1135  Mt  in 
pre-COVID-19  modelling).  Direct  emissions  from  Extra-EEA  flights  (to  and  from  the 
EEA) show a similar pattern, with options to C4MIX projected to have CO2 emissions of 
174 Mt in 2030. Option C0WIDE has emissions of 172 Mt. For intra-EEA emissions in 
2030 Options C1BASE 1 and C3ONLY and C4MIX are projected to emit 52.5 Mt CO2, 
C0WIDE 52.4 Mt and Option C2CONLY 52.7 Mt. The results in the last row of the table 
below show that when ETS rather than CORSIA is used for extra EEA flights, there is a 
difference  in  emissions  of  60  Mt  (154-94)  in  C3CLEAN  vs  C0WIDE  scenario  and  67 
(151 -94) in C4MIX vs C0WIDE, all in 2030. 

88 SWD(2020)277, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2020:277:FIN. 

37 

 
 
                                                 
Table 6.1:  Comparison of direct and net aviation CO2 by policy option.  Direct CO2 includes all CO2 emitted by aircraft engines. Net CO2 totals take 
into account the emission reductions taking place in other sectors due to aviation sector’s demand for offsets, allowances and use of alternative fuels. 
The table also shows how allowance and offset use is distributed between CORSIA offsets and EU allowances. The calculations assume CORSIA offsets 
are of high quality and fully additional. Due to the functioning of the model, EU-EFTA totals include Switzerland and exclude the UK as EU ETS 
coverage of departing flights to UK was not agreed at the time of modelling. 

Policy 
option 

Global  aviation CO2 emissions, Absolute, in Mt 

Aviation 
sector 
emissions 
(Direct) 
2015 

Aviation 
sector 
emissions 
(Direct) 
2030 

Emissions  after accounting 
for reductions in other 
sectors from use of 
CORSIA offsets  and EU 
ETS  allowances (Net) 2030 

Total 

Compared to 
Baseline 

Aviation sector  
(Direct) global CO2 
in  2030 in Mt that  
are offset under: 
EU 
CORSIA 
ETS 

Intra-EU/EFTA aviation CO2 emissions,  Absolute, in Mt  

Extra-EU/EFTA CO2 emissions, Absolute, in Mt 

Aviation 
sector 
emissions 
(Direct) 
2015 

Aviation 
sector 
emissions 
(Direct) 
2030 

Emissions  after accounting 
for reductions in other 
sectors from use of 
CORSIA offsets  and EU 
ETS  allowances (Net) 2030 

Aviation 
sector 
emissions 
(Direct) 
2015 

Aviation 
sector 
emissions 
(Direct) 
2030 

Emissions  after accounting 
for reductions in other 
sectors from use of 
CORSIA offsets  and EU 
ETS  allowances (Net) 2030 

Total 

Compared to 
Baseline 

Total  

Compared to 
Baseline 

C0WIDE  

789 

1077 

918 

-74 

C1BASE  

789 

1079 

992 

C2CONLY 

789 

1079 

1047 

C3CLEAN 

789 

1079 

1003 

C4MIX 

789 

1079 

1022 

- 

55 

11 

30 

61 

61 

32 

50 

32 

98 

25 

0 

25 

25 

52.4 

29.5 

-2.5 

151 

172 

94 

-76 

52.5 

27.0 

- 

151 

174 

170 

52.7 

49.2 

22.2 

151 

174 

161 

52.5 

27.0 

0 

151 

174 

154 

52.5 

23.9* 

-3.1 

151 

174 

161 

- 

-9 

-16 

-9 

52 

52 

52 

52 

52 

38 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.1.2.  Impacts on emissions from other sectors 

This  section  looks  at  the  net  impact  of  the  different  policy  options  on  emissions, 
including  the      reductions  brought  about  in  other  sectors  through  the  use  of  EU 
allowances  from  stationary  installations  or  eligible  offsets  under  CORSIA  for 
compliance.   

6.1.2.1.  CORSIA Options 

Net aviation emissions are presented alongside the direct emissions in Table 6.1 above. 
Under  the  baseline  (Option  C1BASE),  which  maintains  the  EU  ETS  for  aviation  at  its 
current, reduced scope, global net aviation emissions are projected to be 992 Mt CO2 in 
2030,  an  increase  of  29%  from  2015  levels.  Intra-EEA  net  aviation  emissions  are 
projected to be 27 Mt CO2 in 2030, a reduction of 27% between 2015 and 2030.  

Looking at net global aviation emissions under other options, the reduction in emissions 
when taking account of reductions under CORSIA and ETS ranges from 15% for option 
C0WIDE to 3% for C2CONLY.  

The greatest impact is for emissions from flights between EEA States, where all options 
with an EU ETS component lead to a reduction in impacts relative to direct emissions of 
43%  (for  C0WIDE)  to  55%  (C4MIX),  though  the  impact  of  the  latter  is  inflated  by 
operators of intra-EEA flights offsetting a share of CORSIA emissions that exceeds their 
own growth in emissions (see text box 7.1).  

For  emissions  to  and  from  the  EEA,  the  biggest  impact  on  emissions,  when  emissions 
reductions under CORSIA and EU ETS are taken into account, is also for C0WIDE with 
a 45% reduction in CO2 emissions while C2CONLY and C4MIX show a 7% reduction 
and C3CLEAN a 27% reduction.  

The  detailed  results  are  in  Table  6.1,  and  the  implications  in  terms  of  comparison  of 
options are elaborated further in chapter 7. Two messages emerge from this table on net 
emissions: first is that net emissions intra EU-EFTA are of the same order on all options 
except for C2CONLY and secondly that all the options under extra EU-EFTA showed a 
similar scale except for C0WIDE. 

The  results  are  sensitive  to  assumptions  about  CORSIA  participation,  as  set  out  in 
Chapter  5.  The  results  presented  in  the  report  are  based  on  the  initial  assumed 
participation. Table 6.2 below shows the proportion of global aviation emissions that fall 
under  CORSIA  under  this  scenario  as  well  as  under  the  high  CORSIA  participation 
scenario.    Note  that  the  values  in  Table  6.2  below  are  all  emissions  that  fall  under  the 
CORSIA remit, not the proportion of global aviation CO2 that is offset under CORSIA. It 
includes  emissions  below  the  CORSIA  baseline  that  are  not  offset  and  biofuel-related 
direct  CO2  emissions  which  are  exempt.  For  Option  C4MIX,  it  includes  intra-EEA 
emissions  below  the  CORSIA  baseline  (not  offset),  which  are  also  covered  by  the  EU 
ETS.  The  proportion  of  global  aviation  CO2,  offset  under  CORSIA  is  therefore 

39 

 
 
significantly below the proportion of international emissions covered shown in the table 
below.  

It  should  be  noted  that  ICAO  has  no  jurisdiction  in  respect  of  domestic  aviation 
emissions,  which  comprise  more  than  40%  of  total  emissions  from  aviation89.  So  the 
table excludes domestic aviation emissions  

Table  6.2:  CORSIA  percentage  coverage  of  international  aviation  CO2  emissions  in 
2025,  2030  and  2035,  by  participation  scenario,  with  the  COVID-19-adjusted  demand 
scenario and all other input variables set to nominal values90.  

Policy 
option 

C0WIDE  

C1BASE  

C2CONLY  

C3CLEAN  

C4MIX  

CORSIA coverage of global 
international CO2, Initial Assumed 
Participation, % 
2025 
31.2 

2030 
30.8 

2035 
30.8 

CORSIA coverage of global 
international CO2, High 
Participation, % 
2025 
31.2 

2030 
48.2 

31.1 

53.6 

47.5 
) 
53.6 

30.7 

51.5 

45.9 

51.4 

30.6 

50.2 

45.1 

50.2 

31.1 

53.6 

47.5 

53.6 

48.0 

73.0 

67.4 

73.0 
(72.8-73.2) 

2035 
48.4 

48.2 

71.8 

66.7 

71.8 

A better measure of emissions potentially covered by CORSIA is given by looking at the 
potential demand for CORSIA offsets, Table 6.3 below.  

Table  6.3:  Potential  demand  for  CORSIA  offsets  in  the  pilot,  first  and  second  phases, 
showing  the total  demand for each full  period  (the Pilot and 1st Phase the total  over 3 
years  for  each  and  the  2nd  Phase,  the  total  of  9  years),  under  COVID-19-adjusted 
nominal scenario assumptions 

Policy 
option  

C0WIDE  

C1BASE  

CORSIA offset demand at Initial 
Assumed Participation, million 
Cumulative demand over the period: 
First 
2024-2026 

Second 
2027-2035 

Pilot 
2021-2023 

CORSIA offset demand at High 
Participation, million 
Cumulative demand over the period: 
First 
Pilot 
2024-2026 
2021-2023 

Second 
2027-2035 

51 
(24-62) 
51 
(24-62) 

113 
(53-155) 
113 
(53-155) 

547 
(303-880) 
548 
(310-882) 

51 
(24-62) 
51 
(24-62) 

113 
(53-155) 
113 
(53-155) 

941 
(546-1450) 
942 
(558-1450) 

89 Graver, Zhang, and Rutherford, “CO2 Emissions from Commercial Aviation, 2018.”. 
90 Nominal values are those from most likely trajectories for all uncertain scenario variables (including 
demand growth, oil prices, carbon prices, CORSIA participation and the rate of improvement of new 
technology). 

40 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Policy 
option  

CORSIA offset demand at Initial 
Assumed Participation, million 
Cumulative demand over the period: 
First 
2024-2026 

Second 
2027-2035 

Pilot 
2021-2023 

C2CONLY  

C3CLEAN  

C4MIX  

0.0 
(0.0-3.4) 
12 
(0.0-25) 
0.0 
(0.0-3.1) 

9.9 
(0.0-76) 
63 
(0.0-127) 
9.6 
(0.0-75) 

375 
(79-  867) 
494 

(173-962) 

373 
(78-  865) 

CORSIA offset demand at High 
Participation, million 
Cumulative demand over the period: 
First 
Pilot 
2024-2026 
2021-2023 

Second 
2027-2035 

0.0 
(0.0-3.4) 
12 
(0.0-25) 
0.0 
(0.0-3.1) 

9.9 
(0.0-76) 
63 
(0.0-127) 
9.6 
(0.0-75) 

783 

(275-1500) 

902 
(409-1590) 
781 
(271-1492) 

Under  current  CORSIA  provisions,  until  2030,  the  baseline  and  the  offsetting  required 
for  each  operator  under  CORSIA  are  based  on  the  collective  emissions  in  the  baseline 
year,  2019  for  the  pilot,  and  2019-2020  for  future  phases,  and  the  growth  in  emissions 
above the baseline level for all routes included in CORSIA. For the purpose of modelling 
only, the assumption made is that the 2019 baseline applies to the pilot phase and future 
phases.  

The  impact  of  these  collective  provisions  is  that  including  or  excluding  a  country 
changes the collective effort. A decision by a large, emerging economy (such as China or 
India) with a faster growing aviation sector than in Europe to implement and continue to 
participate  in  CORSIA  would  for  example  lead  to  Europe  offsetting  a  larger  share  of 
emissions.  

For  comparison  reasons,  global  aviation  demand  in  2030  would  be  around  1  bn  Mt  in 
2030.  Tables  6.2  and  6.3  above  show,  for  example,  that  under  Option  C1BASE  (Intra-
EEA), CORSIA coverage, which is projected to be 30.7% of global international aviation 
CO2 under the initial assumed implementation and continued participation, could rise to 
48.0%  of  global  international  emissions  in  2030  under  high  participation.  In  terms  of 
offset demand looking for example at the pilot phase and Option C1BASE, this implies a 
total  offset  demand  under  CORSIA  of  around  51  Mt  for  the  initial  assumed  and  high 
participation  scenarios.  For  the  first  phase  running  from  2024  to  2026,  total  offsets 
demand could be around 113 Mt for the initial assumed and high participation scenarios. 
For the second phase, 2027-2035, it could go up to 942 Mt under high participation. The 
impact  of  participation  on  other  options  is  shown  in  the  tables.  Uncertainty  about 
implementation  and  continued  participation  in  CORSIA  and  its  enforcement  by 
participating  states  has  a  larger  impact  than  oil  or  carbon  price  uncertainty  on  the 
outcomes of the options91.  

91 ICF Study, p.56. 

41 

 
 
 
 
                                                 
Note that all the net results presented in Table 6.1 assume that CORSIA is implemented 
by all 88 countries in the initial participation scenario and that offsets are of high quality 
and  fully  additional.  The  risk  of  higher  CO2  emissions  if  CORSIA  offsets  are  not 
additional  has  also  been  modelled.  Other  risks  such  as  double  counting  have  not  been 
modelled but  are discussed in  chapter 7. The results show that the modelled outcomes, 
especially for global and extra-EEA flights, are sensitive to assumptions about CORSIA 
offset  quality.  Table  6.4  below  looks  at  the  extreme  case  where  none  of  the  CORSIA 
offsets  are  additional.  In  this  case,  net  global  emissions  are  32  to  61  Mt  CO2  higher 
across the options in 2030. There is also an impact on some net intra-Europe emissions 
outcomes  (see Table 6.4 below).  

Table  6.4: Year-2030  and  2035  net  aviation  CO2  after  offsets  and  EU  ETS  allowances 
are subtracted, for different levels of CORSIA offset additionality. Central values shown 
are for all scenario variables at nominal values92, including demand growth.  

Policy option 

Direct annual CO2 
emissions, Mt 

Global 

C0WIDE 

C1BASE 

C2CONLY 

C3CLEAN 

C4MIX 

2030 

1077 

1079 

1079 

1079 

1079 

Net annual CO2 emissions, 
Mt (0% additional 
CORSIA offsets) 
2030 

Net annual CO2 emissions, 
Mt (100% additional 
CORSIA offsets) 
2030 

Emissions  Compared 
to baseline 

Emissions 

Compared 
to baseline 

979 

1053 

1079 

1053 

1054 

-74 

- 

26 

0 

1 

918 

992 

1047 

1003 

1022 

-74 

- 

55 

11 

30 

Extra-Europe (to/from EEA, excluding UK, including OMRs) 

Emissions  Compared 
to baseline 

Emissions 

Compared 
to baseline 

C0WIDE 

172 

94 

-76 

94 

-76 

92 Nominal values are those from most likely trajectories for all uncertain scenario variables (including 
demand growth, oil prices, carbon prices, CORSIA participation and the rate of improvement of new 
technology). 

42 

 
 
 
 
 
 
                                                 
Policy option 

Direct annual CO2 
emissions, Mt 

C1BASE 

C2CONLY 

C3CLEAN 

C4MIX 

2030 

174 

174 

174 

174 

Net annual CO2 emissions, 
Mt (0% additional 
CORSIA offsets) 
2030 

Net annual CO2 emissions, 
Mt (100% additional 
CORSIA offsets) 
2030 

170 

170 

170 

170 

- 

0 

0 

0 

170 

161 

154 

161 

- 

-9 

-16 

-9 

 Intra-Europe (EEA, excluding UK, including OMRs) 

Emissions  Compared 
to baseline 

Emissions 

Compared 
to baseline 

C0WIDE 

C1BASE 

C2CONLY 

C3CLEAN 

C4MIX 

52.4 

52.5 

52.7 

52.5 

52.5 

29.5 

27.0 

52.6 

27.0 

27.3 

2.5 

- 

25.6 

0 

0.3 

29.5 

27.0 

49.2 

27.0 

23.9 

2.5 

- 

22,2 

0 

-3.1 

The EU ETS requires the tonnes of direct CO2 emissions covered to be reported and an 
equivalent  number  of  allowances  to  be  surrendered  each  year.  The  coverage  of  direct 
CO2 emissions by policy option is shown in Table 6.5 below. This shows that 45 million 
tonnes of aviation CO2 emissions are projected to be covered by the EU ETS in the year 
2030  under  Option  C1BASE  (Intra-EEA),  up  from  44  Mt  in  2025.  At  the  upper  end, 
Option C0WIDE (return to full scope) leads to 224 Mt under the EU ETS in 2030, while 
Options C3CLEAN (clean cut) and C4MIX (mix) both lead to 45 Mt under the EU ETS 
in 2030.   

43 

 
 
 
 
 
 
Table  6.5:  Modelled  direct  CO2  emissions  from  routes  under  the  EU  ETS,  by  policy 
option at nominal values for uncertain input variables in the years 2015, 2025, 2030 and 
2035 

Policy option 

Direct CO2 emissions under the EU ETS scope, Mt, for nominal scenario inputs 
and uncertainty range 

2015 

2025 

2030 

Compared to 
baseline 

Compared to 
baseline 

C0WIDE  

C1BASE  

C2CONLY  

C3CLEAN  

C4MIX  

58 

58 

58 

58 

58 

213 

44 

0 

44 

44 

169 

- 

-44 

0 

0 

224  

45  

0  

45  

45  

179 

- 

-45 

0 

0 

As  aviation  emissions  continue  to  grow,  and  as  the  overall  EU  ETS  cap  declines 
according to Linear Reduction Factor (with the LRF assumed here to be 2.2%), airlines 
will use EU allowances from other sectors under the EU ETS for compliance. Additional 
demand  for  allowances  from  aviation  will  increase  emission  reduction  incentives  and 
scarcity  in  the  EU  ETS  and  therefore  result  in  greater  emissions  reductions  in  other 
sectors.  The  estimated  number  of  allowances  (each  equivalent  to  1  tonne  of  CO2) 
demanded by the aviation sector under each option is shown in the table below. Option 
C0WIDE  leads  to  a  demand  of  98  Mt  from  other  sectors,  C1BASE,  C3CLEAN  (clean 
cut) and C4MIX (mix) to 25 Mt of demand for EUAs from other sectors.  

Table  6.6:  Annual  demand  for  EUAs  from  other  sectors  from  aviation  in  the  EU  ETS, 
and projected revenues, in 2030 by policy option at nominal values for uncertain input 
variables  (numbers  in  larger  font)  and  range  due  to  variations  in  uncertain  input 
variables (numbers in brackets).  

Policy option  Estimated demand for EUAs by aviation from stationary sectors, million 

2015 

20 

20 

20 

20 

20 

2030 

Compared to baseline 

98 

25 

0 

25 

25 

73 

- 

-25 

0 

0 

C0WIDE  

C1BASE  

C2CONLY  

C3CLEAN  

C4MIX  

44 

 
 
 
 
 
 
 
 
 
 
 
 
 
The  results  presented  in  this  impact  assessment  include  the  impact  of  the  decision  to 
change  the  COVID-19  baseline  to  emissions  in  2019  (instead  of  2019  and  2020).  The 
change in CORSIA baseline is expected to delay the need for airlines to provide offsets 
to cover emissions growth by several years. It is very likely that there will be no need for 
offsets in the pilot phase or even the first phase due to COVID-19 effects93.  

In terms of cumulative impacts the RefuelEU and options described here, a higher SAF 
uptake in  2030 would be expected to  lead to  a small  net  increase in  net  CO2  on routes 
covered by the EU ETS (C0WIDE, C1BASE, C3 CLEAN and C4MIX)  as SAF is zero 
rated  under  the  EU  ETS  but  is  associated  with  some  emissions.  It  would  lead  to  a 
decrease  in  net  CO2  on  non-ETS  routes.  ReFuelEU  is  likely  to  lead  to  a  reduction  in 
demand for offsets under CORSIA. For example, by ReFuelEU applying on extra-EEA 
routes, there is a potential for a 40-70% reduction in CORSIA offsetting costs on these 
routes by 2035.  

The  different  options  are  associated  with  other  environmental  impacts,  beyond  the 
impacts  of  CO2  emissions.  The  assessment  looks  at  the  total  EEA  external  costs  of 
aviation  for  the  period  2021  to  2035,  when  CORSIA  is  due  to  end.    It  focuses  on  the 
external/environmental costs associated with passenger air travel, but the broad impacts 
of  freight  aviation  are  likely  to  be  similar.  It  covers  the  external  costs  from  accidents, 
local  NOx  and  PM2.5  air  pollution,  noise  and  habitat  destruction  as  well  as  climate 
externalities.  The  climate  costs  presented  are  those  associated  with  the  direct  CO2 
emissions  from  planes,  not  the  net  costs  that  take  account  of  CO2  reductions  in  other 
sectors  or  the  non-CO2  climate  impacts.  The  approach  used  to  estimating  the  external 
costs follow the approach set out in the Commission Handbook on the External Costs of 
Transport,  which  includes  the  impacts  of  non-CO2  aviation  impacts  and  use  of  a 
marginal  cost  of  carbon  of  €100/  tonne  CO2  eq.  External  costs,  shown  in  Table  6.7 
below, show a similar pattern across options, with  externalities driven by  demand. The 
total external costs assessed amount to €667.5 billion for Option C1BASE with a range 
from the lowest externality cost for C0WIDE at  €662.3 billion to the highest of €669.2 
billion  for  Option  C2CONLY.  The  direct  CO2  emissions  are  doubled  to  give  the  CO2 
and  non-CO2  impacts  of  aviation.  The  non-CO2  impacts  are  more  uncertain.      If  non 
CO2  impacts  are  not  taken  into  account  in  estimating  the  external  costs  of  climate 
impacts, the total  external cost  ranges from €346 billion to €350 billion for the options 
considered. These are dominated by the externality costs associated with climate impacts, 
which range from €631.9 billion for Option C0WIDE to €638.6 for Option C2CONLY. 
The  externality  associated  with  local  NOx  pollution,  the  next  largest  cost  amounts  to 

93 Lambert Schneider and Jakob Graichen, Should CORSIA be changed due to the COVID-19 crisis?, May 
2020. 

45 

 
 
 
                                                 
€14.94 billion in the baseline, €14.90billion for Option C0WIDE and €15.00 billion for 
Option C2CONLY. 

Table 6.7: Total estimated EEA aviation externality costs by category, cumulative costs 
for 2021-2035, at nominal values for all uncertain scenario variables.94  

Policy 
option 

Accident 
costs, 
billion 
€2018 

Local 
NOx 
costs, 
billion 
€2018 

PM2.5 
costs, 
billion 
€2018 

Noise 
costs, 
billion 
€2018 

Habitat 
destr’n 
costs, 
billion 
€2018 

Climate 
costs, 
billion 
€2018 

Total, 
billion €2018 

C0WIDE  

2,236  14,900 

0,535 

11,250 

1,490  631,900 

662,300 

C1BASE 
(baseline)  

2,239  14,940 

0,536 

11,270 

1,494  637,000 

667,500 

C2CONLY  

2,250  15,000 

0,537 

11,320 

1,501  638,600 

669,200 

C3CLEAN  

2,239  14,940 

0,536 

11,270 

1,494  637,000 

667,500 

C4MIX  

2,239  14,940 

0,536 

11,270 

1,494  637,000 

667,500 

Compared to baseline 

C0WIDE  

-0,003 

-0,040 

-0,001 

-0,020 

-0,004 

-5,100 

-5,200 

C1BASE 
(baseline)  

- 

- 

- 

- 

- 

- 

- 

C2CONLY  

0,011 

0,060 

0,001 

0,050 

0,007 

1,600 

1,700 

C3CLEAN  

C4MIX  

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

6.1.2.2. 

 Auctioning share increase options 

From  2021  onwards,  the  total  amount  of  aviation  allowances  issued  will  decrease  over 
time  consistently  with  the  LRF  applied  to  all  ETS  sectors95,  and  the  ratio  of  free  to 

94 ICF Study COVID-19 Update, Table 1.18, p. 40, using values from  the handbook commissioned by DG 
MOVE on the external costs of transport Version 2019 – 1.1: https://op.europa.eu/de/publication-detail/-
/publication/9781f65f-8448-11ea-bf12-01aa75ed71a1  
95 On the level of the linear reduction factor see the impact assessment on the general ETS. 

46 

 
 
 
 
                                                 
auctioned allowances is a policy decision. Fixing the total amount of aviation allowances 
and applying LRF to the amount will strengthen the steering effect of ETS on the sector.  

All modelling scenarios in the ICF Study, including the scenarios with low growth and 
high  ambition,  suggest  that  aviation  emissions  will  exceed  the  aviation  cap.  However, 
increasing the share of auctioned allowances would further reinforce a clear price signal. 
Airline  operators  would  pay  for  a  larger  share  of  their  allowances  and  have  a  greater 
incentive to  reduce emissions. This  effect  will remain limited due to  airlines’ ability to 
pass through the carbon cost to consumer prices, as discussed in section 2.1.3. 

Different options for increase of auctioning share may have different impacts on carbon 
leakage  or  perceived  risk  thereof.  Due  to  the  nature  of  aviation  (geographical 
determination  of  routes),  moving  the  same  activity  outside  Europe  has  limited 
possibilities. 

The  intention  of  free  allocation  is  to  prevent  emitters  from  avoiding  carbon  costs  by 
moving  the  location  of  emissions  outside  the  policy  area.  For  aviation,  this  carbon 
leakage  could  only  occur  via  airline  decisions  (e.g.  choosing  to  develop  non  policy-
affected  routes)  or  passenger  decisions  (e.g.  choosing  an  itinerary  that  hubs  via  a  non-
policy-affected  country),  with  the  balance  of  the  two  depending  on  rates  of  cost  pass-
through and modal shift,  whereby shift  from  plane to  rail is the main risk, as switch to 
road transport is not a viable option for the majority of air travel.  

Leakage mechanisms due to carbon pricing can be positive or negative. When leakage is 
positive,  emissions  increase  outside  the  policy  area.  Passengers  on  a  stopping  itinerary 
who could hub via an airport in the policy area may choose instead to hub via a (cheaper) 
airport outside the policy area. When leakage is  negative, emissions may decrease both 
inside and outside the policy area. Passengers may decide not to travel due to increased 
costs. Passengers may also choose an alternative, likely less polluting, mode of transport. 
Because  positive  leakage  is  typically  less  when  the  policy  area  is  larger  (as  fewer 
alternative  non-policy  hubs  are  available  which  do  not  involve  a  large  detour),  even 
greater auctioning percentages are unlikely to lead to significant positive leakage. 

The ICF Study checked whether carbon leakage occurred due to the impact of auctioning 
share  increase  on  airline  cost  per  RPK,  ticket  prices  and  demand  (in  RPK)  by  route 
group. The modelling found that immediate full auctioning option (A1FULL) resulted in 
lower  emissions  combined  with  those  CORSIA  options  where  ETS  coverage  is  wider 
than  for  options  with  smaller  coverage.  This  is  due  to  negative  leakage,  ie.  passengers 
choosing  not  to  fly.  For  example,  comparing  option  C3CLEAN  and  C2CONLY 
combined with immediate full auctioning option, the leakage is negative with around 0.6 
Mt reduction in direct emissions in 2035 on non-ETS routes in option C3CLEAN.  

In  general,  the  results  suggest  there  is  a  low  risk  of  (positive)  carbon  leakage  when 
switching  to  a  higher  auctioning  percentage,  and  that  changes  in  cost  associated  with 
auctioning changes are still well within the range of cost variability due to fluctuations in 
fuel price.  

47 

 
 
6.2. Competitiveness and economic impacts 

When  looking  at  economic  impacts,  it  is  important  to  assess  the  policy  options' 
implications on operating costs, ticket prices and demand, as well as auction revenues as 
presented below. These are then used to assess whether there is potential for options to 
distort  competition,  between airlines, airports  and tourist destinations. This section also 
considers the  cumulative impacts of this and other ‘Fit for 55’ initiatives, in particular of 
RefuelEU and the review of the Energy Taxation Directive, on costs and competitiveness 
of  airlines  and  EU  airport  hubs  to  the  extent  possible  given  the  timetables  for  the 
different impact assessments and availability of data. The section ends with an evaluation 
of the administrative effort for the different options. 

6.2.1.  Impacts on operating costs, prices and demand  

The options vary in their coverage of CO2 emissions from aviation and in the policy tools 
used  to  cover  different  segments  of  emissions.  The  two  policy  tools,  EU  ETS  and 
CORSIA, lead to different prices for each tonne of CO2 emissions covered. As a result, 
the different options have different impacts on the operating costs of airlines. The extent 
to which changes in operating costs lead to changes in ticket prices depends on the extent 
to  which  airlines  can  pass  extra  costs  on  to  customers.  Higher  fares  may  change 
passengers’  and  freight  operators’  demand  for  air  transport,  or  transport  on  the  routes 
affected, depending both on the size of the change in fare and on airline customers’ price 
sensitivity.  However,  the  ICF  study  finds  the  impact  of  the  carbon  price  for  all  policy 
options (except C0WIDE) negligible compared to differences in other sources of airline 
costs (e.g. fuel). 

6.2.1.1.  CORSIA implementation options 

For  intra-EEA  flights,  the  baseline  leads  to  a  projected  increase  in  carbon  costs  from 
0.2%  of  total  operating  costs  in  2015  to  1%  in  2030.    This  represents  an  increase  in 
carbon costs from 1.2% to 7 % of fuel costs from 2015 to 2030. The impact of the carbon 
price  on  the  operating  costs  is  very  small  for  all  other  options.    In  Option  C2CONLY, 
CORSIA only, this impact, a rise of 0.005%, is negligible. For all other options, also, the 
impact  is  very  limited  (between  0.8%  and  1%  for  the  central  or  nominal  scenario 
presented and at most rising to 3% of operating costs under the high cost scenario).  

For extra-EEA flights, the costs of all options, except C0WIDE, full scope, are negligible 
in 2030, under the nominal and high cost scenarios. For C0WIDE, the cost rises to 1.8% 
of total operating costs in 2030, rising to a maximum of 5.6% of operating costs for the 
high cost scenario. 

48 

 
 
 
 
Table  6.8:    Estimated  intra-EEA  carbon  costs  when  all  scenario  variables  ,  including 
carbon prices for EU ETS allowances and CORSIA,  are at COVID-19- adjusted nominal 
values, as a percentage of fuel costs and total operating costs, by policy option, 2015 and 
2030. 

Policy 
option 

Carbon costs as % of fuel costs (exc. carbon) 

2015 

2030  

Carbon costs as % of total operating 
costs 
2015 

2030 

C0WIDE 
C1BASE 
(baseline) 
C2CONLY 
C3CLEAN 
C4MIX 

1.2 

1.2 

1.2 
1.2 
1.2 

6.8 

7.0 

0.04 
7.0 
7.0 

Compared to 
baseline 
-0.2 

- 

-6.96 
0 
0 

0.2 

0.2 

0.2 
0.2 
0.2 

0.9 

1.0 

0.005 
1.0 
0.9 

Compared to 
baseline 
-0.1 

- 

-0.995 
0 
-0.1 

Table 6.9: Estimated extra-EEA carbon costs when all scenario variables, including 
carbon prices for EU ETS allowances and CORSIA,  are at COVID-19-adjusted nominal 
values , as a percentage of fuel costs and total operating costs, 2015 and 2030  

Policy 
option 

Carbon costs as % of fuel costs 

Carbon costs as % of total operating 
costs 

2015 

2030 

2015 

2030 

C0WIDE 

C1BASE 
(baseline) 

C2CONLY 

C3CLEAN 

0.2 

0.2 

0.2 

0.2 

Compared 
to baseline 

8.1 

0.0 

0.04 

0.06 

8.1 

- 

0.04 

0.06 

0.04 

0.04 

0.04 

0.04 

Compared 
to baseline 

1.8 

- 

0.01 

0.01 

1.8 

0.0 

0.01 

0.01 

C4MIX 
Note carbon costs are non-zero in 2015 as routes to/from the UK are included in extra-EEA throughout. 

0.01 

0.04 

0.04 

0.04 

0.01 

0.2 

In terms of impact of carbon costs on ticket prices or fares, the calculated initial average 
carbon cost pass through rates (for EU ETS and CORSIA costs) is around: 

  74% for intra-EEA flights 
  75-82% for extra-EEA flights 
  And 77% for other routes (flights not within, or to or from the EEA) 

As  can  be  seen  in  Table  6.10,  the  resulting  impact  on  fares  is  small.  By  2030,  for 
C1BASE, the baseline, the average one-way fare for intra EEA flights is projected to be 
€148.10 (€150.2 under the high price scenario), up from €143.47 in 2015. For extra-EEA 
the 2030 projected price is € 330.16 (or €330.4 under the high price scenario), up from 
311.41 in 2015 and for other routes €188.38 in 2030 down from € 193.31 in 2015. Other 

49 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
options are projected to  have very similar fares.  One-way intra-EEA  fares  vary  by less 
than  €1  between  the  different  policy  options  (or  €3  under  the  high  cost  scenario).  For 
extra-EU/EFTA  fares,  the  largest  difference  is  between  Option  C0WIDE  and  other 
options,  amounting  to  around  €2  for  one-way,  less  than  1%  of  the  total  ticket  price  or 
fare. Under the high carbon price scenario, this rises to €6 difference, less than 2% of the 
total fare.  

Table 6.10: Average fare in 2030 and 2035 by region and policy option, for all uncertain 
scenario values set to COVID-19-adjusted nominal values). 

Policy 
option 

Avg. one-way fare, 
intra-EEA, €2018 
2015 

2030 

Avg. one-way fare, extra-
EEA, €2018 
2015 

Avg. one-way fare, other 
routes, €2018 
2015 

2030 

Compared 
to baseline 
€ 

2030 
  Compared 
to 
baseline 
€ 

C0WIDE 

143.47 

C1BASE 
(baseline) 
C2CONLY 

143.47 

143.47 

C3CLEAN 

143.47 

C4MIX 

143.47 

148.0
0 
148.1
0 
147.1
4 
148.1
0 
148.1
0 

-0.10 

311.41  332.17 

2.01 

193.31 

188.39 

- 

311.41  330.16 

- 

193.31 

188.38 

-0.96 

311.41  330.07 

-0.09 

193.31 

188.38 

0 

0 

311.41  330.19 

0.03 

193.31 

188.38 

311.41  330.18 

0.02 

193.31 

188.38 

Compar
ed to 
baselin
e 
€ 
0.01 

- 

0 

0 

0 

With minimal ticket price differences between the options in 2030, the assessment also 
predicts  small  differences  in  demand,  measured  in  Revenue  Passenger  Kilometres  and 
Revenue  Tonne  Kilometres  (RTK),  for  all  policy  options.  Table  6.11  shows  that  for 
extra-EEA flights,  all options are projected to  have the same demand with  1.87 trillion 
RPK and 90.3 trillion RTK in 2030, except Option C0WIDE, which leads to RPK of 1.85 
trillion, and RTK of 88.5 billion just 1% and 2% lower than other options. For intra-EEA 
flights all options lead to the same passenger demand projection of 0.78 trillion RPK in 
2030.  For  freight,  there  is  also  little  difference,  with  C2CONLY  leading  to  the  highest 
demand with 2.26 trillion FTK and all other options at 2.23 trillion RTK in 2030. 

Table 6.11: Estimated global, extra-EEA and intra-EEA RPK and FTK by policy option, 
for all uncertain input variables at COVID-19-adjusted nominal values  

Policy 
option 

Estimated global annual RPK, 
trillion 
2015 

2030 

Estimated global annual FTK, 
billion 
2015 

2030 

50 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C0WIDE 

C1BASE 

C2CONLY 

C3CLEAN 

C4MIX 

Compared 
to baseline 

Compared 
to baseline 

6.88 

12.22  

-0.02 

204 

358.2   

-1.8 

6.88 

12.24   

6.88 

12.24   

6.88 

12.24   

6.88 

12.24   

- 

0 

0 

0 

204 

360.0   

204 

360.1  

204 

360.0  

204 

360.1  

- 

0.1 

0 

0.1 

Estimated extra-EEA annual 
RPK, trillion 
2030 
2015 

Estimated extra-EEA annual 
FTK, billion 
2015 

2030 

C0WIDE 

C1BASE 

C2CONLY 

C3CLEAN 

C4MIX 

1.30 

1.85  

1.30 

1.87   

1.30 

1.87   

1.30 

1.87   

1.30 

1.87   

Compared 
to baseline 
-0.02 

- 

0 

0 

0 

60.0 

88.5   

60.0 

90.3   

60.0 

90.3  

60.0 

90.3  

60.0 

90.3  

Compared 
to baseline 
-1.8 

- 

0 

0 

0 

Estimated intra-EEA annual 
RPK, trillion 

2015 

2030 

Estimated intra-EEA annual 
FTK, billion 
2015 

2030 

  Compared 
to baseline 
0 

0.78  

1.70 

  Compared 
to baseline 
0 

2.23  

0.54 

C0WIDE 

C1BASE 

C2CONLY 

C3CLEAN 

0.54 

0.78  

0.54 

0.78  

0.54 

0.78  

C4MIX 

0.54 

0.78 

- 

0 

0 

0 

1.70 

2.23  

- 

1.70 

2.26  

0.03 

1.70 

2.23  

1.70 

2.23 

0 

0 

The  results  presented  here  assume  base  case  carbon  prices,  also  adjusted  to  reflect  the 
impacts of COVID-19.  For EU allowances this €26 /tonne in 2020 and €31 in 2030 and 

51 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
€1/tonne in both 2020 and 2030 for CORSIA credits (all in  year 2018 Euros). The ICF 
Study  also  looked  at  sensitivity  to  carbon  prices  if  these  follow  the  high  carbon  price 
scenario, with EU allowance prices rising to €83/ tonne in 2030 and CORSIA credits to 
€13 per tonne (see Table 6.12 below) 

Table  6.12:  Direct  comparison  of  intra-EEA  and  extra-EEA  RTK  at  different  carbon 
price  assumptions,  under  COVID  19-adjusted  nominal  scenario  inputs  for  all  other 
uncertain variables, by policy option.  

Policy option 

Intra-EEA annual RTK, 2030 
COVID-19-
adjusted nominal 
scenario inputs 

COVID-19-adjusted 
nominal scenario inputs 
+ higher carbon price 

Extra-EEA annual RTK, 2030 
COVID-19-adjusted 
nominal scenario inputs 

COVID-19-adjusted 
nominal scenario inputs 
+ higher carbon price 

Compa
red to 
baseline 

Compared 
to baseline 

Compared 
to baseline 

Compared 
to baseline 

C0WIDE 

79.9 

-0.01 

78.7 

-0.03 

273.8 

-3.1 

266.7 

-10.1 

C1BASE 

C2CONLY 

C3CLEAN 

C4MIX 

80.0 

80.5 

80.0 

80.0 

- 

0.05 

0 

0 

79.0 

80.4 

79.0 

79.0 

- 

1.4 

0 

0 

276.9 

277.0 

276.9 

276.9 

- 

0.1 

0 

0 

276.8 

276.8 

276.5 

276.6 

- 

0 

-0.3 

-0.2 

6.2.1.2.  Auctioning share increase options 

Aviation  auctioning  costs  to  airlines  vary  substantially  depending  on  the  auctioning 
option  chosen,  ranging  from  €41  billion96  over  the  2023-2030  period  in  the  case  of  an 
immediate  full  auctioning  and  full  scope  EU  ETS,  to  0  euros  in  the  case  that  only 
CORSIA is applied. It should be noted that in the case of CORSIA, airlines will have the 
obligation to finance private entities around the world through purchase and use of offset 
credits,  instead  of  contributing  to  public  finance  in  their  own  jurisdiction.  Typically, 
global EU ETS-related airline costs exceed CORSIA-related costs unless the EU ETS for 
aviation  is  stopped  completely  (option  C2CONLY).  This  is  because  EUA  prices  are 
assumed to be significantly higher than eligible unit prices for CORSIA.  

For policy options where ETS and CORSIA do not apply on the same routes, the impact 
of different auctioning options on total CORSIA offset costs is under 0.5%. Under option 
C4MIX, the two schemes overlap, with CORSIA also covering intra-EEA slightly higher 

96 As for other estimation of auction costs/ revenues in the broader ETS impact assessment  using carbon 
price assumptions of  (in €2020): €40 as average for the whole period 2021 to 2030, €45 as average for the 
period 2026 to 2030 (drawing on the results of the PRIMES MIX and MIX-CP scenarios), €35 as average 
for the period 2021 to 2025. 

52 

 
 
 
 
 
 
 
 
 
 
 
                                                 
CORSIA  costs.  However,  offset  costs  still  change  by  less  than  1%  between  different 
auctioning options. 

Around 75% of this  cost will be passed through, given the  characteristics of the  routes 
operated in terms of competition, airport congestion and passenger demand sensitivity97. 

6.2.2.  Impacts on level playing field 

Generally,  changes  in  operating  costs,  ticket  prices  and  demand  may  affect  the  level 
playing field for example:   

 

 

 

 

If  airlines  pay  different  carbon  costs  when  operating  on  the  same  route  or  if 
certain  airlines  bear  a  high  proportion  of  costs  because  a  larger  share  of  their 
operations are in higher carbon cost routes; 
If a reduction in demand due to higher carbon costs affects some airlines, but not 
others with which they are in competition;  
If  carbon  costs  lead  to  investment  in  airports  outside  higher  carbon  cost  areas 
instead of within the higher cost area;  
If  policies  implemented  equally  across  routes  are  not  enforced  equally  by 
different states.   

In  the  policy  options  regarding  both  CORSIA  implementation  and  auctioning  share 
increase assessed for this impact assessment, the costs and impacts on ticket prices and 
demand are too low to have a significant impact. With significant pass through of carbon 
costs to customers, European companies will not face significant disadvantage as result 
of carbon pricing in the EEA in terms of overall margin for manoeuvre when competing 
with airlines from jurisdictions without carbon pricing.    

For  example,  the  impact  differences  between  the  immediate  full  auctioning  and  swift 
phase-out  options  are  small,  and  mainly  concern  years  2023  and  2024.  Because  this  is 
part of the pandemic recovery period, all estimates of impact during this time period are 
uncertain.  After this point, differences between the two options are basically negligible 
(for example, there is not an appreciable ongoing difference in airline fleets, operations 
or  ticket  prices  for  any  of  the  policy  options).  The  main  difference  between  the  two 
auctioning options is  that  the increase in  airline  costs and ticket  prices from  moving to 
full  auctioning  comes  into  effect  in  a  single  year  in  the  immediate  full  auctioning 
scenario, and is phased in over the time period to 2025 in the swift phase-out scenario. 
This means that year 2023 and 2024 demand are slightly lower, and ticket prices higher 
(0.2%), for the immediate phase-out option. 

97 ICF Study pp. 249-250 

53 

 
 
 
                                                 
6.2.2.1. 

 Competition between airlines 

Competitive  distortions  may  arise  when  policies  do  not  apply  equally  on  routes,  and 
where they are not enforced equally. Enforcement has been crucial for the success of the 
EU  ETS  to  date98.  Options  apply  uniformly  to  all  airlines  so  do  not  create  direct 
distortions.  

There is also a risk that airlines that have a higher proportion of flights on high carbon 
cost  routes  than  other  airlines  are  less  able  to  cross-subsidise  them  from  lower  carbon 
cost routes. Several studies nevertheless argue that such cross-subsidisation is minimal99. 
This is consistent with the 2017 Aviation ETS  Impact Assessment100, which considered 
the  risk  of  indirect  distortion  of  competition  to  be  theoretical,  mainly  due  to  low  extra 
allowance costs. 

Airlines also compete with other transport sectors. With a small increase in ticket prices 
for the options considered, there may limited impact on choice of travel mode.  

6.2.2.2.  Competition between airports 

For airports, the largest risk of competitive distortion is between EEA airports and major 
non-EEA airports close enough to the policy area to provide an alternative. Looking for 
example  at  London  airports  versus  Paris  or  Amsterdam,  Option  C0WIDE,  the  option 
with the highest impact, leads to a 0.54% lower demand in million passenger movements 
per  annum  (mppa)  when  compared  to  the  baseline  C1BASE.  All  other  options  have  a 
similar  impact  to  option  C1BASE  or  when  compared  to  one  another.  For  Paris  and 
Amsterdam, the difference in impact on mppa varies from 1% to 1.4 % for the different 
options. A similar impact  is  seen when looking at  Istanbul and Athens. The  ICF Study 
suggests  that  higher  intra-EU  costs  will  reduce  demand  at  both  EEA  and  nearby  non-
EEA airports, with the latter marginally less affected.  

In  the  longer-term,  a  risk  is  that  airlines  could  move  their  operations  to  less-affected 
airports, for example in regions close to the EU with lower carbon costs (e.g. Istanbul). 

The carbon costs associated with the options assessed are unlikely to have a significant 
impact on hub choice for passenger airlines, given the high costs of changing networks 
and hub location. Freight airlines are more likely to move cargo services for cost reasons, 
but  do  so  primarily  in  the  same  catchment  area101,  suggesting  a  limited  impact  on 

98 Following some airlines paying millions of euros of fines for non-compliance for their flights within the 
EU, all major airlines have maintained compliance with the system. 
99 CE Delft , 2005, Giving wings to emissions trading: inclusion of aviation under the European emissions 
trading scheme (ETS): design and impacts; CE Delft and MVA (2007). Implications of EU emissions 
trading scheme for competition between EU and non-EU airlines. 
100 https://ec.europa.eu/clima/sites/clima/files/swd_2017_31_en.pdf  
101 Uen A. Zhang A., Van Hui Y, Leung L and Fung M, 2017. Is developing air cargo airports in hinterland 
the way of the future? Journal of Air Transport Management , 61 155-25. 

54 

 
 
                                                 
changes in freight hub. The carbon costs of the options considered are also typically not 
sufficient to lead to network changes for freight airlines. This is further made less likely 
due  to  bilateral  air  service  agreements  and  ownership  regulations.  In  any  case, 
fluctuations in fuel price easily outweigh fluctuations in carbon costs both in the medium 
and longer term. 

Only 25 % of the respondents to the open public consultation provided views on the hub 
leakage risk. According to some respondents, the EU should consider taking measures to 
mitigate  the  competitive  distortions  between  feeder  services  of  EEA-airlines  that  are 
subject  to  the  EU  ETS  and  feeder  services  from  airlines  from  neighbouring  non-EEA-
countries  related  to  these  hubs.  Concrete  suggestions  to  address  the  competitive 
distortion  included  introduction  of  a  carbon  border  adjustment  mechanism,  and 
alleviating the financial burden on EEA feeder flights by inter alia excluding them from 
EU ETS. 

6.2.2.3.  Competition between Tourist Destinations 

When looking at whether tourist destinations subject to higher aviation carbon costs may 
lose  market  share,  the  ICF  Study  concluded  that  tourism  demand  has  historically  been 
relatively  insensitive  to  cost  changes.  While  there  may  be  transport  mode  shift  and 
changes in destination choice, any impacts are likely to be small at the carbon cost levels 
projected for the options considered. 

6.2.3.  Cumulative Impacts of Fit for 55 Initiatives 

With  all  policy  options  (except  C0WIDE)  modelled  to  have  no  impact  demand102,  and 
with modelling for other ‘Fit for 55’ initiatives of importance for aviation completed later 
than  for  this  impact  assessment,  no  cumulative  impacts  were  modelled.  However,  a 
qualitative assessment has been undertaken, building on available information at the time 
of  drafting  and  the  sensitivity  analysis  undertaken  on  the  modelling  for  this  impact 
assessment. This also concludes that cumulative impacts are expected to be negligible or 
very small.  

The Energy Taxation Directive Impact Assessment103 suggests that the proposed aviation 
fuel tax will have a greater impact than the price signal resulting from any of the options 
considered in this impact assessment. Adding the small carbon cost impacts of ETS and 

102 For example in the ICF study 2030 carbon costs as a percentage of airline operating costs for intra-
EU/EFTA were modelled as 0.006-1.1%, with a slightly wider range of 0.0%-2.1% for extra-EU/EFTA.  
103 Commission Staff Working Document, Impact Assessment Report accompanying the document 
‘Proposal for a Council Directive restructuring the Union framework for the taxation of energy products 
and electricity’, Box 4 [to be published].  

55 

 
 
 
                                                 
CORSIA options assessed here to the ETD impacts will not make a significant difference 
to the ETD costs as a proportion of operating costs, fares or competitiveness. 

The cumulative impacts when considering the effect of ReFuelEU and the increased use 
of  Sustainable  Aviation  Fuels  (SAF)  will  also  be  limited.    Higher  use  of  SAFs  should 
lead  to  a  reduction  demand  for  ETS  allowances  and  CORSIA  offsets  (zero  emission 
factor applies for sustainable fuels in the EU ETS and SAFs can be used for compliance 
under CORSIA). This will lead to a reduction in carbon costs though this reduction will 
be small compared to the fuel price increase, because the carbon costs, especially under 
CORSIA are small.  

Though the fuel price increase will outweigh any change in carbon costs, the fuel price 
increase is estimated to be well within the fuel price sensitivities assessed for this impact 
assessment.  Airline  costs  and  ticket  prices  for  the  options  in  this  impact  assessment, 
along with RefuelEU preferred options are expected to be closer to the central or nominal 
scenario  modelled  for  this  study  than  the  high  fuel  cost  sensitivity  analysis.  While  the 
effective  fuel  price  for  airlines  would  be  higher,  the  impact  is  also  small,  the  Impact 
Assessment  for  ReFuelEU  foresees  a  0.8%  air  ticket  price  increase  by  2030  under  its 
preferred  scenarios.  Therefore  the  overall  cumulative  impact  on  prices,  demand  and 
competitiveness is expected to be small.  

6.2.4.  Impact on auction revenues 

In  accordance  with  Article  3d(3)  of  the  ETS  Directive,  the  revenue  from  auctioning 
aviation allowances is proportionate to the share of the total attributed aviation emissions 
for all Member States for the reference year, which is the calendar year ending 24 months 
before  the  start  of  the  trading  period.  For  the  fourth  trading  period  of  the  ETS  (which 
began  on  1  January  2021)  this  means  that  the  reference  year  for  the  distribution  of 
aviation revenues is 2018. For the increased revenues from an increased share of auctions 
from the allocation of aviation allowances, the same rule would apply. 

Following  the  inter-institutional  agreement  of  16  December  2020,  the  Commission 
committed to table in June 2021 proposals for new own resources based on the revision 
of  the  Emission  Trading  System,  including  its  possible  extension  to  aviation  and 
maritime, a new Carbon Border Adjustment Mechanism and a new digital levy. The EU 
budget  plays  an  increasingly  important  role  for  the  EU  to  meet  its  commitment  to 
become  the  first  climate  neutral  continent  by  2050.  30%  of  the  expenditures  under  the 
MFF 2021-2027 and NextGenerationEU will be dedicated to climate-related projects. 

The  coverage  of  aviation  ETS  and  in  particular  the  speed  of  free  allocation  phase-out 
strongly affect  aviation allowances auctioning revenue over the 2023-2030 time period. 
As the auctioning revenue is currently directed to Member States’ budgets, the revenue 

56 

 
 
 
may  enable  lowering  other  taxes,  such  as  income  tax,  or  increasing  government 
expenditure.  

6.2.4.1.  CORSIA implementation options 

Option  C2CONLY  -  CORSIA  only  -  would  remove  all  existing  and  future  auction 
revenues  to  Member  States  or  for  other  uses  within  the  EU,  including  funding  for 
innovation, modernisation and other support for transition to climate neutrality.  

Option C0WIDE’s larger coverage means that auctioning revenues from aviation are the 
highest. Options C3CLEAN and C4MIX have similar levels of impact on revenues. 

When  taking  into  account  the  effect  of  ETS  revenue  recycling  to  increase  government 
expenditure or reduce taxes, extending the EU ETS to cover all flights (option C0WIDE) 
would have the greatest positive impact on EU27 employment and GVA. The full-scope 
CORSIA  scheme  (option  C2CONLY)  is  associated  with  the  lowest  macro-economic 
outcome,  whilst  other  options  with  a  mix  of  CORSIA  and  ETS  scopes  are  expected  to 
have  broadly  similar,  intermediate  outcomes.  However,  the  variation  in  expected 
macroeconomic effects between policy options is small. 

6.2.4.2. 

 Auctioning share increase options 

Immediate full auctioning yields 50% more total revenue between 2023-2030 than a slow 
phase-out.  In  contrast,  aviation  demand  for  general  EU  allowances  is  only  weakly 
affected  by  the  chosen  auctioning  option,  with  typically  only  1-3%  difference  in  total 
year 2023-2030 EUA demand between the status quo and immediate phase-out options.  

Table 6.13. : ETS revenue estimates including funds and solidarity for aviation (in bn 
EUR) 104 

Cap 
scenario 

Sector 

Annual average 2021-
2025, 2020€ billions 

C0WIDE 

Aviation 

0.38 – 2.27 

Annual average 
2026-2030, 2020€ 
billions 

0.90 – 6.03 

104 Estimated range of  revenues for CORSIA policy options, for different auctioning options, using price 
assumptions, as in the broader ETS impact assessment, of (in €2020): €40 as average for the whole period 
2021 to 2030, €45 as average for the period 2026 to 2030 (drawing on the results of the PRIMES MIX and 
MIX-CP  scenarios),  €35  as  average  for  the  period  2021  to  2025.  Note  also  that  these  values  are 
approximate,  produced  by  multiplying  the  number  of  auctioned  allowances  by  given  average  allowance 
price  (individual  year values will likely differ from  the 5-year average and different  years have different 
auctioned allowance totals). This calculation assumes that CO2 emissions  will be above the aviation cap 
level as modelled in all years. 

57 

 
 
 
                                                 
 
C1BASE 
Aviation 
C2CONLY  Aviation 
C3CLEAN  Aviation 

C4MIX 

Aviation 

0.12 – 0.53 
0 - 0 
0.12 – 0.53 

0.12 – 0.53 

0.14 -0. 93 
0 - 0 
0.14 -0. 96 

0.14 – 0.96 

Table  6.14: Year  2021-2030  EU  ETS  allowance  auctioning  revenue,  by  ETS/CORSIA 
policy  and  auctioning  option,  using  the  assumptions  of  the  general  ETS  impact 
assessment to ensure consistency in estimation of revenues (assuming an average carbon 
price of €35 for 2021-2030 and €45 for 2026-2030. see footnote 103). These are presented 
as  cumulative  amounts  or  totals  across  all  years  for  2021-2022,  2023-2025  and  2026-
2030. 

Total Auctioning Revenue, billion €2020 

OPTIONS 

C0WIDE 

Cumulative revenues 2021-2022 

Cumulative revenues 2023-2025 

Cumulative revenues 2026-2030 

C1BASE 

Cumulative revenues 2021-2022 

Cumulative revenues 2023-2025 

Cumulative revenues 2026-2030 

C2CONLY 

Cumulative revenues 2021-2022 

Cumulative revenues 2023-2025 

Cumulative revenues 2026-2030 

C3CLEAN 

Cumulative revenues 2021-2022 

Cumulative revenues 2023-2025 

Cumulative revenues 2026-2030 

C4MIX 

Cumulative revenues 2021-2022 

Cumulative revenues 2023-2025 

Cumulative revenues 2026-2030 

A0BASE 

A1FULL 

A2SWIFT  A3SLOW  A4RED 

0,255 

1,663 

4,522 

0,255 

0,363 

0,701 

0 

0 

0 

0,255 

0,363 

0,701 

0,255 

0,363 

0,701 

0,255 

11,084 

30,15 

0,255 

2,413 

4,671 

0 

0 

0 

0,255 

2,413 

4,671 

0,255 

2,413 

4,671 

0,255 

9,714 

30,16 

0,255 

1,923 

4,671 

0 

0 

0 

0,255 

1,923 

4,781 

0,255 

1,923 

4,781 

0,255 

3,965 

23,08 

0,255 

0,754 

3,576 

0 

0 

0 

0,255 

2,985 

13,48 

0,255 

0,601 

2,09 

0 

0 

0 

0,255 

0,255 

0,754 

3,576 

0,255 

0,754 

3,576 

0,601 

2,09 

0,255 

0,601 

2,09 

6.2.5.  Administrative effort 

Administrative tasks related to the EU ETS and CORSIA are shared between the aircraft 
operators, national competent authorities and the European Commission. Operators face 
the costs of monitoring, reporting and verification of emissions and the effort needed for 
compliance,  i.e.  purchase  and  surrender  of  EU  ETS  allowances  and  CORSIA  eligible 

58 

 
 
 
 
credits  and  their  surrender.  National  authorities  manage  the  system  for  reporting 
emissions, control free allocation, administer the accounts in the Union Registry, follow 
up  and  enforce  compliance  and  are  in  direct  contact  with  aircraft  operators.  The 
Commission provides for the Union Registry, approves free allocation, publishes the list 
of  aircraft  operators  with  the  administering  Member  States  and  proposes/adopts 
legislation  and  provides  for  guidance  documents  in  order  to  ensure  harmonised 
implementation of the system. 

6.2.5.1.  CORSIA implementation options 

The  application  of  CORSIA  requires  aircraft  operators  to  monitor  and  report  their 
emissions  from  international  flights  covered  by  CORSIA.  For  routes  where  there  are 
already  EU  ETS  MRV  requirements  in  place  now  (intra-EEA  international  flights), 
CORSIA may not present a particularly high additional administrative burden for aircraft 
operators. But for those routes that are not covered by MRV ETS requirements prior to 
2019,  complying  with  CORSIA  requirements  adds  administrative  effort  and  associated 
costs  for  data  collection,  reporting,  quality  assurance  and  verification105.  In  addition, 
aircraft  operators  engaging  in  routes  covered  by  CORSIA  will  need  to  acquire  and 
surrender  eligible  units  for  compliance,  an  activity  that  is  likely  to  be  outsourced  at  a 
cost.  

The  size  of  an  aircraft  operator  is  likely  to  have  an  effect  on  the  relative  scale  of 
additional costs as a share of their overall costs. Whilst some costs, including emissions 
data collection, reporting and quality control, typically increase in-line with the number 
of  flights,  larger  operators  may  be  better  placed  to  benefit  from  economies  of  scale  by 
investing in automated IT solutions that reduce manual effort. Larger operators will tend 
to face relatively lower one-off costs as a share of their total costs, than smaller operators. 
These one-off costs include tasks such as setting up administrative systems and internal 
processes,  understanding  the  detailed  design  and  rules  of  CORSIA,  as  well  as 
establishing knowledge of the carbon offset credit market in general and, specifically, the 
procurement of credits. 

Option C0WIDE: increased administrative effort on aircraft operators as the geographical 
coverage  is  broader  compared  to  the  current  situation,  although  this  is  a  quantitative 
difference  as  airlines  are  subject  to  only  one  regulation.  Increased  effort  for  enforcing 
compliance can be expected for national authorities and the Commission.  

Option  C1BASE:  no  change  in  administrative  costs  as  this  is  the  continuation  of  the 
current system.  

105 Based on Article 28c of the ETS Directive, the Commission adopted Delegated Regulation 2019/1603, 
which defined the scope of CORSIA reporting. This Regulation is binding in its entirety and directly 
applicable. The purpose of this delegated act was to draw on existing rules and frameworks as far as 
possible in order to reduce the aircraft operators and verifiers' administrative burden and to specify how the 
relevant information will be transmitted to the ICAO's secretariat. 

59 

 
 
                                                 
Option  C2CONLY:  airlines  are  subject  only 
the 
administrative costs are comparable to the current level, with additional one-off cost due 
to the change from EU ETS to CORSIA.   

to  one  regulation, 

therefore 

Option  C3CLEAN:  increased  level  of  administrative  costs  as  the  aircraft  operators  are 
subject to two sets of rules. However, the EU ETS part is the continuation of the existing 
administrative  procedures,  and  the  separation  of  the  two  regimes  is  simple  as  the  two 
regulations apply to different routes. 

Option  C4MIX:  the  level  of  administrative  effort  would  be  considerably  higher  for  all 
players  in  the  system  compared  to  the  current  situation,  as  the  same  routes  would  be 
subject to two compliance obligations. 

6.2.5.2.  Auctioning share increase options 

Full  auctioning  would  reduce  the  administrative  burden  immediately  and  considerably. 
These administrative costs  are mainly on competent  authorities and the Commission.  It 
would  mean  that  all  administrative  procedures  relating  to  the  free  allocation  would  be 
abolished.  All  other  options  maintain  the  current  level  of  administrative  burden,  either 
until  the  end  of  the  trading  period  (A0BASE  and  A4RED)  or  with  a  phase  out  time 
(A2SWIFT  and  A3SLOW),  because  the  level  of  free  allocation  does  not  influence  the 
level of administrative effort necessary for delivering it. The assessed options entail the 
condition  that  the  free  allocation  is  distributed  on  the  current  basis,  namely  based  on 
2010  traffic.  Any  other  choice,  i.e.  changing  the  base  year  for  distribution  in  order  to 
reflect current market condition, would cause significant administrative burden both for 
the aircraft operators and for the regulators, because this would mean a new collection of 
tonne-kilometre data. 

6.3. Social impacts 

6.3.1.  Impact on employment 

The overall impacts on value added and employment of the different policy options are 
small: less than 0.05% in terms of both value added and employment in all cases at the 
EU27  level.  This  includes  the  impacts  on  the  aviation  and  fuel  supply  sectors,  their 
supply chain and multiplier effects, as well as the impact of recycling EU ETS revenues 
to increase government expenditure or reduce taxes.  It should be noted however, that the 
impacts  of  different  policy  options  on  flight  frequencies  and  capacities  will  affect  the 
connectivity  between  regions  and  countries.  These  changes  may  have  more  substantial 
macroeconomic  impacts  than  the  changes  concerning  directly  the  aviation  sector  and 
associated supply changes, and have not been assessed in the modelling. 

60 

 
 
 
 
Most of the impacts of each option can be attributed to recycled EU ETS revenues. With 
increased  auctioning  revenues,  for  instance,  governments  could  reduce  taxes,  which 
would result in increased spending across different sectors of the economy. Options with 
more  positive  outcomes  on  value  added  and  employment  are  generally  those  with  a 
larger volume of projected revenues from the EU ETS. Due to decrease of demand for air 
transport, a negative impact on employment in the sector is to be anticipated. However, 
the  impact  is  estimated  to  be  negligible  (-0.13%)  even  in  Option  C0WIDE,  where  the 
impact is strongest. 

The  figure  below  shows  the  range  of  macroeconomic  impacts  (the  relative  difference 
between  options  with  the  strongest  and  weakest  macroeconomic  outcomes,  Option 
C0WIDE and Option C2CONLY, respectively) for all current EU Member States under 
the  assumption  that  additional  government  revenues  are  recycled  in  the  economy.  This 
range appears to be to be generally widest where the projected possible EU ETS revenues 
is  largest  relative to  GDP. These examples  include Cyprus, Malta and the Netherlands. 
The other policy options show broadly similar trends to Option C2CONLY.  Without the 
effect of revenue recycling, the outcomes  for individual Member States are much more 
uniform across policy options.  

Figure 6.1. Differences in GVA and employment by 2035 between Options C0WIDE and C2CONLY, by 
country.106  

6.3.2.  Impact on households 

Evidence suggests that carbon pricing on aviation is likely to be socially progressive, i.e 
the impact of carbon price is likely to be lower in respect of lower income households.  

106 ICF Study, Figure 49. 

61 

 
 
 
                                                 
High-income households are more likely to fly and spend larger portions of their income 
on air travel, as air transport is in much higher demand in higher-income households, and 
therefore larger portion of its emissions can be attributed to  higher-income households. 
Thus,  increased  carbon  pricing  on  air  travel  is  likely  to  be  socially  progressive  as  it 
primarily affects higher-income households, while increasing equal treatment with other 
modes of transport such as railways and road transport which are subject  to taxation and 
VAT.  

Citizens use air transport unevenly, with a small proportion flying very frequently, some 
occasionally, and most rarely (or not at all) in any particular year. It is still predominantly 
and  disproportionally  used  by  higher  income  groups.  By  way  of  example,  a  study 
representative of adults in Germany shows that 11% of respondents accounted for 29% 
of  the  flights  in  2019.  The  highest  income  group  reported  three  times  higher  average 
flight  distances  than  the  lowest  income  group.107.  Results  suggest  that  the  share  of  the 
world’s  population  travelling  by  air  in  2018  was  11%,  with  at  most  4%  taking 
international  flights.  Global  data  also  shows  a  similar  pattern,  suggesting  that  a  minor 
share of air travellers is responsible for a large share of warming: The percentile of the 
most frequent fliers – at most 1% of the world population - likely accounts for more than 
half of the total emissions from passenger air travel108. 

6.4. Impacts on outermost regions (OMR) 

In general, most flights to outermost regions are either domestic (e.g. Guadeloupe - Paris) 
or  local  short-haul  flights  with  small  aircraft,  with  the  exception  of  the  Canary  Islands 
where  flights  are  both  domestic  and  international  short  haul  flights  (since  the  Canary 
Islands are a touristic destination). Therefore, it is likely that differences in how flights to 
and from outermost regions are handled will impact mainly the Canary Islands and, to a 
lesser extent, flights to and from Madeira. 

Changes in the cost of flying or the frequency of available flights can affect the access by 
outermost region  residents  to  education, training, goods and services to  a much  greater 
extent than for other, less-isolated regions. For outermost regions other than the Canary 
Islands, access costs to national capital cities, as a fraction of the local minimum wage, 
are 2-3 times greater than they are in other insular European regions. This means that the 
same level of cost increase in ticket prices for outermost region routes as for other routes 
can represent a significantly higher cost burden for residents of these regions. In turn, this 

107Stefan Gössling, Andreas Humpe, Thomas Bausch, Does ’flight shame’ affect social norms? Changing 
perspectives on the desirability of air travel in Germany, Journal of Cleaner Production, Volume 266, 2020, 
https://doi.org/10.1016/j.jclepro.2020.122015. 
108 Stefan Gössling, Andreas Humpe, The global scale, distribution and growth of aviation: Implications for 
climate change, Global Environmental Change, Volume 65, 2020, 
https://doi.org/10.1016/j.gloenvcha.2020.102194.  

62 

 
 
 
                                                 
may affect the economic development of these regions. Flights within outermost regions 
that  have  been  deemed  socially  necessary,  however,  are  operated  under  Public  Service 
Obligations (PSOs)109. As these flights are excluded from the Annex I activity in the ETS 
Directive, they may remain excluded from the EU ETS due to their PSO status even if 
the  temporary  exclusion  of  routes  to  and  from  outermost  regions  in  Article  28a  of  the 
ETS Directive ends. 

6.4.1.  CORSIA implementation options 

C0WIDE:  includes  EEA  flights  to/from  and  within  the  outermost  regions,  as  well  as 
flights between outermost regions and non-EEA destinations. This option would lead to 
EU ETS application for nearly all outermost region arriving and departing flights. This is 
the  only  option  that  has  non-negligible  impact  on  OMR.  Because  OMRs  are  typically 
geographically  distant  from  mainland  Europe,  the  impact  of  applying  the  EU  ETS  to 
flights to and from OMRs is similar to that of applying the EU ETS to extra-EEA flights, 
i.e., around €2.20 per one way flight or 1.2% of ticket price, for nominal values in 2035 
(the central  scenario) for uncertain  variables. At  the upper end of the uncertainty range 
impacts could be up to 4.8% of ticket price (€9 per one way flight) – see Table 6.15. This 
impact became smaller due to the COVID-19 crisis. If looking at the impact of the high 
carbon cost scenario alone, with other uncertain variable at nominal values, a high carbon 
cost  leads to  a difference of €4.68 per one  way  flight  or 2.6%  of the ticket  price  when 
applying the EU ETS to flights to and from OMRs.  

C1BASE:  this  would  continue  the  current  situation  (flights  within  a  given  outermost 
region included in the EU ETS, flights to and from outermost regions to both EEA and 
non-EEA  destinations  excluded).  There  would  also  be  no  change  of  status  for  UK-
Canary Islands or Switzerland-Canary Islands flights.  

regions  and 

international  destinations 
C2CONLY:  Flights  between  outermost 
participating in CORSIA would be included (at CORSIA-appropriate carbon prices), but 
domestic flights,  including flights  within a given outermost region,  would be excluded. 
The majority of flights to and from outermost regions other than Madeira and the Canary 
Islands are domestic. Because CORSIA carbon prices are projected to be low, and only 
apply to emissions above the CORSIA baseline, this option is likely to have only limited 
impacts. As far as EU outermost regions in the Caribbean are concerned, few Central and 
South American nations are likely to be CORSIA participants, so short and medium-haul 
flights for EU outermost regions in this region are unlikely to be covered.  

109 On public service obligations see Interpretative guidelines on Regulation (EC) No 1008/2008 of the 
European Parliament and of the Council; https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A52017XC0617%2801%29  

63 

 
 
                                                 
C3CLEAN:  This option would be broadly similar to option C1BASE, but non-EEA non-
domestic flights to and from outermost regions would be covered under CORSIA. Thus 
e.g. flights from the UK to the Canary Islands would have a small extra carbon cost. 

C4MIX:  This  option  would  have  a  similar  impact  to  option  C3CLEAN  (i.e.  non-EEA 
non-domestic flights to and from outermost regions would be covered under CORSIA) .  

Table  6.15.  Projected  carbon  costs  and  numbers  of  flights  on  routes  to  and  from 
outermost regions, 2030.  

Policy 
option 

Projected carbon costs as a 
percentage of total segment 
operating cost on routes 
to/from/within outermost regions in 
2030 

Projected number of flights 
to/from/within outermost regions, 
thousand in 2030 

C0WIDE  

C1BASE  

C2CONLY  

C3CLEAN  

C4MIX  

Compared to 
baseline 
1.67 

- 

1.74  

0.07  

0.003   

-0,067 

0.07  

0.07  

0 

0 

2030 

422  

426 

427 

426  

426 

Compared to 
baseline 
-4 

- 

1 

0 

0 

Table  6.16.  Average  one-way  fare  for  routes  to/from/within  EU  outermost  regions  by 
policy option, 2015 and 2030 for all uncertain variables set to nominal values  

Policy 
option 

C0WIDE  

C1BASE  

C2CONLY  

C3CLEAN  

C4MIX  

Avg. one-way fare, to/from/within OMRs, €2018 

2015 

2030 

2030 Compared to 
baseline 

161.11  

161.11  

161.11  

161.11  

161.11 

175.94  

174.43  

174.27  

174.43  

174.43  

1.51 

- 

-0.16 

0 

0 

6.4.2.  Auctioning share increase options 

Changes  in  auctioning  are  also  likely  to  have  impacts  on  the  outermost  regions.  This 
mainly  affects  option  C0WIDE,  because  flights  to  and  from  outermost  regions  are 

64 

 
 
 
 
 
 
exempted  in  options  C1BASE-C4MIX  (though  there  is  still  a  small  impact  via  the 
coverage of flights within each outermost region).  

Applying immediate full auctioning under option C0WIDE implies that ticket prices will 
increase  by  around  2%  as  cost  pass  through  is  expected  (as  for  air  passenger  duties, 
which are often higher in comparison). Costs would normally be passed on, as the initial 
average pass-through rates on routes to and from EU outermost regions are estimated at 
74-77%.  If  there  were  zero  cost  pass  through,  there  would  be  an  increase  in  operating 
costs  per  RPK  for  flights  operating  to/from  or  within  OMRs  in  2024  of  around  4%. 
Depending on the operating margins of airlines running flights to and from the outermost 
regions,  there  may  be  a  reduction  of  profits  on  these  routes,  noting  that  some  are 
supported  by  other  means  (e.g.  PSOs).  However,  most  routes  to/from  OMRs  and  the 
continent  are  not  supported  by  PSO  as  most  PSO  schemes  apply  to  flights  within  one 
given outermost region (e.g. from one island of Azores to another island of Azores). 

The other auctioning options, in combination with C0WIDE, take effect more gradually, 
but have similar impact by 2030. Impacts on passengers are likely to be limited, with cost 
increases  for  option  C0WIDE  and  full  auctioning  of  around  €3  per  one-way  flight  and 
demand reductions of 2-3% compared to scenarios where flights to and from outermost 
regions are exempted. 

As a summary, the impact on outermost regions of the changes in auctioning are minimal 
for all options except C0WIDE, where these may be significant. 

6.4.3.  Conclusions 

The  impact  on  outermost  regions  of  changing  ETS  eligibility  is  likely  to  consist  of 
changes to air fares and flight frequency. Longer-term impacts might include decreases in 
the number of  carriers operating on non-PSO routes if carbon  costs substantially affect 
the  operating  margin  on  outermost  region-associated  routes.  Changing  flight  costs  and 
frequency  may  also  affect  the  attractiveness  of  the  outermost  regions  as  tourist 
destinations. 

Reducing flights by tourists would have an impact on local economies. Reducing flights 
by  residents  would  affect  residents’  access  to  employment,  education  and  other 
opportunities. This in turn may act to limit the economic development of these regions. 

Changing flight costs and frequency may also affect air freight to the outermost regions. 
However,  impacts  on  overall  freight  volume  are  likely  to  be  limited,  as  the  outermost 
regions depend primarily on shipping for the transport of goods. 

Because  of  their  remote  locations,  flights  to  and  from  outermost  regions  are  typically 
long-haul flights for which fuel is a relatively high percentage of total costs. Airline cost 
and ticket  price impacts  for applying carbon prices  on these flights  are similar to  those 

65 

 
 
for applying carbon prices on extra-EEA flights, and typically exceed impacts for intra-
EEA flights. 

The cost pass-through for these routes is estimated to be around 74-77%, which is similar 
to  the  level  of  pass-through  on  extra-EEA  routes.  Outermost  regions  typically  have 
limited  connectivity,  meaning  that  a  high  percentage  of  destinations  may  only  be 
reachable  from  outermost  regions  via  a  multi-segment  journey.  This  means  that  also 
policy options, which exclude direct flights to and from OMRs, will have an impact on 
average ticket price to and from outermost regions. However, it is to be noted that price 
increase would be smaller than many air passenger duties which are applied. One means 
to  help  palliate  the  impact  of  lifting  the  exemption  for  OMRs  would  be  that  OMRs 
benefit from the revenues resulting from auctions, which was the case already in the past.  

Overall,  however,  in  spite  of  the  considerations  made  in  this  section,  impacts  on  fares 
show  that  the  levels  of  change  in  ticket  price  are  small  compared  to  variations  arising 
from changes in other variables, most notably fluctuations in fuel price. 

6.5. Cross-cutting issues 

6.5.1.  Small emitters 

As also stated in the impact assessment of 2017110, the Commission published in 2014 a 
study by PWC et al.111 that investigated the costs and benefits of the inclusion of small 
emitters in the EU ETS. It revealed amongst other things that the obligations with regard 
to  MRV  generate  relatively  higher  administrative  costs  for  small  than  large  operators. 
Compared  to  the  level  of  EU  ETS  revenues  raised  from  a  small  emitter,  the 
administrative  cost  can  be  up  to  4  times  higher.  This  study  also  showed  that  small 
emitters represent 90% of aircraft operators while contributing to 2.2% of emissions. 

Regulation (EU) No 421/2014 introduced a number of simplifications for small emitters. 
Regulation  2017/2392  further  simplified  the  MRV  requirements  for  operators  emitting 
less than 3 000 tonnes of CO2 per year under the current geographic scope (intra-EEA) of 
the EU ETS, allowing the use of the small emitters tool underpinned by Eurocontrol and 
exempt them from verification. If aircraft operators meet the EU ETS thresholds for the 
use of Small Emitters Tool (SET) (<3 000 tonnes CO2 full scope; <25 000 tonnes CO2 
reduced scope; for data gaps), then they can also use SET for their CORSIA related data. 

Implementing  Regulation  2018/2066  defines  ‘small  emitters’  as  aircraft  operators 
operating fewer than 243 flights per period for three consecutive four-month periods and 
aircraft  operators  operating  flights  with  a  total  annual  emission’s  lower  than  25  000 

110 SWD(2017)31. 
111 https://ec.europa.eu/clima/sites/clima/files/transport/aviation/docs/report_ets_avaiation_small_en.pdf  

66 

 
 
 
                                                 
tonnes  CO2.  In  this  situation  the  aircraft  operator  is  allowed  to  estimate  the  fuel 
consumption  using  tools  implemented  by  Eurocontrol  or  another  relevant  organisation 
once their use is approved by the Commission. Delegated Regulation 2019/1603 requires 
commercial  aircraft  operators  to  report  their  CORSIA  emissions  even  if  they  operate 
fewer than 243 flights departing in or arriving in an aerodrome situated in the territory of 
a Member State. 

In  addition,  Regulation  (EU)  No  421/2014  introduced  in  Annex  I  (k)  of  the  EU  ETS 
Directive  a  de-minimis  threshold  to  remove  any  obligations  for  small,  non-commercial 
aircraft operators operating flights  with  total  annual  emissions lower than 1 000 tonnes 
per  year.  This  exemption  was  extended  until  the  end  of  2030  by  Regulation  (EU) 
2017/2392. 

Business  aviation  belongs  typically  to  small  emitters.  Any  policy  choice  that  re-
introduces  parts  or  all  of  them  into  the  scope  of  the  EU  ETS  would  increase  the 
administrative costs of these emitters, on top of the compliance costs.   

6.5.2.  Legal  considerations  and  relationship  with  third  countries,  ICAO  and 

UNFCCC 

The legal considerations contained in Chapter 5.5.2 of the 2017 Impact Assessment are 
still valid and not repeated here. 

Option  C0WIDE:  This  option  would  avoid  an  overlap  between  the  EU  ETS  and 
CORSIA, as their scopes of application would be distinct. Airlines, whether European or 
non-European,  would  be  required  to  apply  the  same  mechanism  on  the  same  routes, 
which avoids any distortion of competition. This option would amount to the EU’s non-
participation  in  CORSIA,  which  would  differ  from  Council’s  notification  to  the  ICAO 
Secretariat  (while  noting  that  the  EU  has  reserved  its  full  policy  autonomy  by  filing 
differences to the CORSIA SARPs: they limit the scope of CORSIA application to be in 
accordance with whatever amendments are made to the EU ETS Directive). 

Option C1BASE: This option would avoid an overlap between the implementation of the 
EU ETS and CORSIA as their scopes of application would be distinct. Airlines, whether 
European or non-European, would be required to apply the same mechanism on the same 
routes, which avoids any distortion of competition. In this option, however, flights to and 
from the EEA are not covered, either by the EU ETS, or by CORSIA. This option would 
amount  to  the  EU’s  non-participation  in  CORSIA,  which  would  differ  from  Council’s 
notification to the ICAO Secretariat. 

Option  C2CONLY:  Without  considering  domestic  flights,  this  option  would  avoid  the 
overlap  in  relation  to  implementation  for  intra  EEA  flights,  as  these  flights  would  be 
covered only by CORSIA. However, domestic flights  within the EEA would no longer 
be  covered,  leaving  over  20%  of  the  currently  covered  aviation  emissions  without  any 
compliance obligation, which is a regression compared to the current situation. 

67 

 
 
Option C3CLEAN: This option would avoid an overlap between the implementation of 
the EU ETS and CORSIA as their scopes of application would be distinct. Compared to 
option C1BASE, all flights would be covered by one of the two mechanisms. Airlines, 
whether  European  or  non-European,  would  be  required  to  apply  the  same  mechanism 
when  operating  the  same  flights,  which  would  avoid  any  distortion  of  competition  on 
routes. 

Option C4MIX: This option would avoid overlap between the implementation of the EU 
ETS  and  CORSIA,  as  their  scopes  of  application  would  be  distinct.  Airlines,  whether 
European  or  non-European,  would  be  required  to  apply  the  same  mechanism  when 
operating the same flights, which would avoid distortion of competition.  

All flights departing from the EU are covered by the EU’s updated nationally determined 
contribution (NDC) under the Paris Agreement (on the basis of fuels sold in the EU). The 
European  aviation  industry  also  supports  action  to  achieve  net  zero  CO2  emissions  by 
2050 in relation to all flights within and departing from the EU112. Furthermore, the NDC 
states that “emissions from aviation are currently addressed by EU legislation and will 
be  partially  addressed  by  international  measures  under  ICAO”.  Therefore,  option 
C2CONLY  that  abolishes  the  EU  ETS  coverage  of  aviation  emissions  and  render 
CORSIA  exclusive would contradict the updated NDC, as well as option C0WIDE, by 
excluding  CORSIA  implementation.  Options  that  reduce  the  EU  ETS  current  scope 
would run against the objectives laid down in the NDC.  

6.5.3.  Fuels 

ICAO developed a framework to reduce offsetting requirements under CORSIA through 
the  use  of  eligible  aviation  fuels  that  are  subject  to  compliance  with  sustainability 
criteria.  Based  on  the  sustainability  criteria,  CORSIA  Eligible  Fuels  (CEF)  include 
Sustainable  Aviation  Fuels  (SAF,  a  renewable  or  waste-derived  aviation  fuel)  and  in 
principle but not yet, Lower Carbon Aviation Fuels (LCAF, a fossil-based aviation fuel). 
As of January 2021, no LCAF have been identified as eligible fuels, only SAFs. 

As all options maintain the zero emission factor approach for sustainable fuels in the EU 
ETS,  there  is  no  difference  between  the  options  in  this  regard.  The  question  of  how 
sustainable fuels are treated will be assessed in the frame of the general ETS review. The 
EU ETS provides for an incentive for the use of SAF of over 100 EUR per tonne fuel.  

Options  that  increase  the  auction  part  of  the  allocation  can  potentially  contribute  to  a 
higher degree to the better uptake of SAF by using the auction revenue for reducing the 
price gap from conventional fuels or by contributing to relevant innovation projects. 

112 https://www.destination2050.eu/commitments/  

68 

 
 
                                                 
The  revision  of  the  Energy  Taxation  Directive  would  aim  at  incentives  through  the 
taxation  of  fuels.  The  taxation  of  traditional  fossil  fuels  used  in  aviation  would 
complement the review of the ETS for aviation. Taken together, these initiatives would 
reinforce the carbon price signal and the economic attractiveness of mitigation measures 
such  as  the  implementation  of  energy  efficiency  measures  or  the  switch  to  SAF.  Both 
measures  can be modelled in  a similar way,  as a carbon price or a  fuel  tax.  It  is  worth 
noting,  however,  that  the  carbon  price  signal  resulting  from  the  options  considered  for 
application of ETS and CORSIA to aviation emissions are expected to be lower than the 
impact of the proposed taxes in aviation. The ReFuelEU Aviation initiative would aim at 
boosting  the  production  and  the  demand  of  SAF.  More  specifically,  the  ReFuelEU 
Aviation initiative would likely oblige fuel suppliers to supply a minimum share of SAF 
and it would likely to impose on airlines a minimum share of SAF use. The revision of 
the  Renewable  Energy  Directive  also  has  the  objective  to  further  support  the  use  of 
SAFs. All initiatives would have an interplay with this revision of the EU ETS as regards 
the uptake of SAF. 

7.  HOW DO THE OPTIONS COMPARE? 

7.1. Effectiveness 

7.1.1.  Environmental effectiveness 

The  options  have  different  coverage  of  emissions  by  CORSIA,  the  EU  ETS  or  a 
combination of the two.  Both  CORSIA  and the  EU ETS  are market-based measures  to 
address  CO2  emissions.  However,  there  are  important  differences  between  them113, 
which have been studied extensively in advance of preparing this Impact Assessment and 
were already looked at in the previous Impact Assessment (2016).  

The  environmental  difference  is  twofold:  ambition  (reduction  versus  stabilisation)  and 
units used (aviation, power or industrial EU sector vs international credits).  

The EU ETS is a cap and trade system setting a limit on the total GHG emissions of the 
participating sectors so as to reduce them in absolute terms within the EU. CORSIA is a 
carbon-offsetting scheme, which allows emissions from the aviation sector to grow above 
the  baseline  (2019  emissions),  and  foresees  offsetting  with  credits  from  reductions  in 
other sectors worldwide (international offsetting).  

Through the EU ETS, aviation has contributed to an average reduction of 25 Mt per year 
over  the  past  8  years  mainly  due  to  reductions  in  the  EU  power  sector.  While  the  in-
sector  aviation  emissions  for  intra-EEA  flights  kept  growing,  from  53.5  million  tonnes 

113 On the differences see heading 1.3. 

69 

 
 
 
                                                 
CO2  in  2013  to  69  million  in  2019,  the  flexibility  of  the  EU  ETS,  whereby  aircraft 
operators may use any allowances to cover their emissions, meant that the CO2 impacts is 
reduced at a rate of 2.2% per year. 

However, the third difference from a global environmental perspective is its scale: while 
the EU ETS allows EU goals to be met, as CORSIA is going to be implemented by 88 
countries,  the  impact  at  global  level  has  the  potential  to  move  towards  stabilizing  the 
aviation emissions from international participants to a much larger degree than a regional 
approach. 

CORSIA relies on international  offsets.  The quality of international  offsets  is  harder to 
control and raises concerns over additionality, permanence, net harm and the applicable 
accounting rules to avoid double counting.  

Quantitative analysis 

First,  there is  very little difference in  direct CO2 emissions,  i.e. emissions from  aircraft 
without considering any reductions either by ETS allowances or by CORSIA offsetting, 
across  the  different  options  in  2030.    The  carbon  costs  for  the  different  options  are 
insufficient to drive significant reductions within the aviation sector: 

-  Full EU ETS scope (C0WIDE) leads to lower direct CO2 emissions than all other 

options for global, extra and intra-EEA flights. 

-  Applying CORSIA to international flights (C2CONLY) leads to the highest direct 

CO2 emissions in all cases.   

This is due to the collective effect of CORSIA explained in Chapter 6 introduction.  

Looking at net emissions (emissions after reductions in other ETS sectors or from use of 
CORSIA  offsets),  the  picture  is  more  complex.  The  reductions  below  will  not  include 
reductions from SAF as they are considered therefore come from use of ETS allowances 
and use of CORSIA offsets.   

For global net emissions in 2030: 

  Return  to  full-scope  (C0WIDE)  leads  to  the  lowest  net  global  emissions.  These 
are projected to even be 74 Mt or 7.5% below the baseline C1BASE, which does 
not cover extra-EEA flights. 

  Option  C2CONLY,  CORSIA  only,  leads  to  the  highest  net  global  emissions,  at 

55Mt or 5.5% above the baseline.  

  After C1BASE, the next best options in terms of net global emissions are Option 
C3CLEAN,  clean  cut,  with  emissions  1.1%  above  baseline  and  Option  C4MIX 
with emissions 3% above the baseline. 

70 

 
 
 
Global net emissions are lowest under C0WIDE, followed by C1BASE (see Table 6.1). 
Note that in both cases CORSIA offset use is at its highest at 61 Mt in 2030.  C0WIDE, 
like C1BASE, leads to a higher use of CORSIA offsets in 2030 for routes not related to 
the  EU,  because  the  absence  of  extra-EEA  and  intra-EEA  emissions  from  CORSIA  
(unlike  in  other  options)  leads  to  a  lower  CORSIA  baseline  and  greater  offsetting 
requirements  for other routes within CORSIA. C1BASE has no coverage of extra-EEA 
emissions,  but  these  are  covered  under  C0WIDE,  as  reflected  in  the  higher  use  of  EU 
ETS  allowances  by  the  aviation  sector  to  cover  emissions,  further  amplifying  the 
reduction in net global emissions. 

For extra-EEA net emissions: 

the highest net extra-EEA emissions at 170 Mt in 2030  

  C1BASE is the baseline that holds  
 
  C3CLEAN is 9.4% below baseline levels  
  C2CONLY and C4MIX are 5.3% below the baseline  
  C0WIDE  leads  to  the  lowest  net  extra-EEA  emissions  as  it  includes  full  ETS 
(reduction not stabilisation) and it applies to all routes independently of whether 
the  country  of  the  airline  has  implemented  CORSIA  or  not.  In  this  case, 
emissions would be 45% lower than the baseline C1BASE. 

For intra-EEA net emissions:  

  Option C4MIX is projected to lead to the lowest net intra-EEA emissions, at 23.9 

Mt in 2030, 1.1% below the baseline, C1BASE with emissions of 27Mt. 

  C3CLEAN (clean cut) also leads to net intra-EEA emissions of 27Mt equal to the 

baseline C1BASE.    

  Option C2CONLY leads to the highest net intra-EEA emissions, 82% above the 

baseline.  

Some  of  the  outcomes,  especially  for  net  intra-EEA  emissions,  may  seem  counter-
intuitive, in that they are not in line with the impact expected of the relative carbon 
costs  under  the  EU  ETS  and  CORSIA.  This  is  due  to  the  different  approach  to 
covering emissions under ETS and CORSIA, in particular: 

1)  The  EU  ETS  requires  EU  allowances  to  be  surrendered  to  cover  all  emissions 
from  flights  covered,  whereas  under  CORSIA,  growth  in  emissions  above  the 
baseline (now 2019 for a limited period) should be offset. 

2)  The EU ETS regulates the actual emissions of CO2 from flights covered, so that 
each  extra tonne of emissions leads to  use of one extra EU  allowances  whereas 
the  number  of  offset  credits  to  be  used  under  CORSIA  is  not  equal  to  the 
emissions  from  EU-related  CORSIA  routes.  It  is  based  on  a  share  of  the  total 

71 

 
 
 
 
emissions  above  2019  levels  from  all  flights  covered  by  CORSIA  across  the 
World.  The  EU’s  contribution  changes  as  participation  in  CORSIA  changes  (as 
explained  in  more  detail  in  text  box  7.1  below).  The  EU  share  of  offsets 
surrendered  under  CORSIA  grows  not  just  as  more  routes  and  emissions  are 
covered, but also at a rate which changes depending on whether EU routes grow 
slower or faster than other routes under CORSIA.  

Under  collective  offsetting,  airlines  in  slow-growing  regions,  such  as  Europe,  have 
higher CORSIA offset requirements than would be expected based on their own growth, 
and airlines in fast-growing regions have lower requirements. This distribution of effort 
provides an incentive for faster growing regions to implement CORSIA. But, along with 
use of a baseline, it also leads to some counter-intuitive outcomes. For example:  

  Option  C1BASE,  where  there  is  no  implementation  of  CORSIA,  leads  to  lower 
extra-EEA emissions than Option C3CLEAN where CORSIA is applied to flights 
to  and  from  the  EU.  Including  slow-growing  flights  to  and  from  the  EU,  as  in 
options  C3CLEAN  and  C4MIX  makes  the  CORSIA  baseline  higher,  as  the 
number  of  flights  and  emissions  covered  is  increased,  but  growth  above  the 
baseline relatively smaller. The net result is that more CO2 is offset in CORSIA 
under C1BASE, where extra-EEA flights are excluded from CORSIA and not the 
EU ETS, than under C3CLEAN when they are covered by CORSIA. 

  Option  C4MIX  leads  to  a  larger  drop  in  intra-EEA  net  emissions  than  option 
C3CLEAN,  even  though  under  C3CLEAN  all  emissions  are  under  the  higher 
carbon price ETS and C4MIX has part of these emissions covered by CORSIA, 
with  lower  carbon  costs.  Intra-EEA  flights  are  growing  slowly  compared  to 
flights on other routes outside the EEA. Under CORSIA, airlines operating flights 
on these slower growing intra-EEA routes,  should surrender offsets to cover not 
only the growth in their emissions, but also a share of  the emissions growth on 
other faster growing flights covered by CORSIA. However, looking at the impact 
on  extra-EEA  emissions  and  global  emissions,  option  C4MIX  leads  to 
significantly  higher  emissions  than  C3CLEAN,  as    airlines  on  faster-growing 
routes  offset  less  than  if  they  were  had  to  cover  each  tonne  of  their  emissions 
above 2019 levels themselves114.  

Given the complex effects of the sector-wide provisions of CORSIA, described above, it 
is  important  to  look  at  the  whole  picture  of  net  emissions  –  looking  both  within  the 
Europe and at global level.  

114 · 
Comparing  COWIDE  and  C2CONLY  provides  an  indication  of  the  difference  in  impact  of 
CORSIA and EU ETS for net extra-EEA emissions. Emissions from flights to and from the EEA, covered 
by  the  EU  ETS  under  C0WIDE,  are  94  Mt  in  2030  (see  Table  61),  whereas  they  are  161  Mt  under 
C2CONLY where these are covered under CORSIA. That means use of the EU ETS to cover extra-EEA 
emissions results in a saving of 67 Mt for the climate in the year 2030. 

72 

 
 
 
                                                 
The higher emissions under CORSIA options when compared to options with greater EU 
ETS  coverage  can  be  explained  also  by  the  fact  that  CORSIA  is  designed  to  stabilise 
emissions  at  2019  levels,  whereas  the  EU  ETS  is  designed  to  reduce  emissions  in  line 
with the EU’s 2030 target. 

Text Box 7.1 How the CORSIA sector-wide requirements work:  

Until  2030,  stabilisation  of  emissions  at  2019  levels  applies  to  emissions  of  the  sector  as  a 
whole, or the  total emissions from the sector that are covered by CORSIA, not stabilisation of 
emissions for an individual route, airline or state. 

Until 2030, the baseline and the offsetting required for each operator under CORSIA is based 
on the emissions in 2019 (the baseline year) and growth in emissions above these 2019 levels 
for all routes included in CORSIA.  

This is a dynamic system. Addition or removal of routes from the scope of CORSIA changes 
both: 

The baseline: the sector-wide baseline is re-calculated when there is a change of routes 
included in CORSIA – if a State decides to participate or to withdraw. The baseline is 
also different for the options considered in the Impact Assessment where these have 
differences in the routes covered by CORSIA.  
The level of emissions above the baseline to be offset by all operators covered by 
CORSIA. 

In addition as the relative growth rate of routes included in CORSIA changes, so does the share 
of the total growth that each operator need to offset to stabilise emissions at 2019 levels. The 
amount  of  offsetting  required  for  each  airline  or  state  depends  not  just  on  the  growth  in 
emissions on its own CORSIA-covered routes, but also on the growth in emissions of all the 
routes covered under CORSIA and whether its emissions grow faster or slower than others. 

The formula for estimating each airline’s offsetting requirements for routes under CORSIA:  

Offset 
requirements 
for airline 

= 

own 
emissions for 
the year y 

x 

growth factor for all CORSIA emissions  
(Sector emissions in year y- Sector emissions in 
2019) / Sector emissions in year y) 

Under this formula, operators and countries with relatively low growth in emissions will cover 
a larger share of the total growth in emissions above the baseline than those with high growth 
in emissions. 
This can be illustrated with an example taken from an ICAO training presentation on CORSIA, 
part  of  which  is  reproduced  in  the  table  below.  It  shows  a  very  simplified  case  where  two 
airlines – one with fast growth and one with slow growth in emissions- make up all CORSIA 
emissions.  Here we show the case for 2021-2029, when CORSIA is 100% sectoral. (Note that 
for 2030-2032 he requirement shifts to 20% individual and 80% sectoral, and from 2033-2035 
to 70% individual and 30% sectoral).  
The offsetting requirements in year y in the table below are calculated using the formula above, 
so for the fast growing airline, offsetting in year y is given by: 

73 

 
 
 
 
 
 
 
 
 
  
 
 125 x (230-200) / 230= 16 

Table:  simplified  case  illustrating  calculation  of  offsetting  requirements  for  operators  and 
different routes 

CO2 emissions Mt 

Baseline 2019 

Year y 

Growth Factor 
for year y 

Offsetting 
requirements in year y 

B-

Operator  A  – 
Fast Growth 
Operator 
Slow Growth 
Total  emissions 
under  CORSIA/ 
sector wide  

100 

100 

200 

125 

105 

230 

20% 

4.8% 

13% 

16 

14 

30 

This  simple  example  shows  the  impact  of  including  routes,  which  grow  more  slowly  than 
others, as is the case for both intra-EEA routes and extra-EEA routes when compared to routes 
elsewhere covered by CORSIA. A decision of other large, emerging economies with a faster 
growing  sector  in  CORSIA  (such  as  China  or  India)  would  under  this  system  lead  to  EEA 
related routes under CORSIA offsetting a larger share of emissions. 

Note that these results assume an initial implementation and participation in CORSIA by 
the 88 states (including the US) listed on the ICAO website in December 2020, but not 
China, Russia, India, Brazil. The results in Tables 6.2 and 6.3 in chapter 6 show the high 
sensitivity of the results to assumptions about participation. As domestic implementation 
by  third  countries  is  necessary  and  participation  in  CORSIA  can  be  discontinued,  this 
issue needs to be kept under review on an ongoing basis.  

The  figures  presented  assume  full  implementation  and  enforcement  by  the  countries 
participating  in  CORSIA.  Option  C0WIDE  assumes  that  third  countries  implement 
CORSIA,  even  when  the  EU  does  not;  C0WIDE  risks  lower  participation  in  CORSIA 
than presented, with global emissions somewhat higher than projected. 

In terms of the 2030 target, C3CLEAN and C1BASE are the options that lead to greatest 
reduction  in  intra-EEA  emissions  through  reductions  in  the  EU  and  without  use  of 
international  offsets.  They  are  the  policy  options  that  lead  to  the  greatest  domestic 
contribution  to  meeting  the  net  domestic  reduction  of  at  least  55%  in  greenhouse  gas 
emissions by 2030. 

From  the  quantitative  analysis  of  the  options,  C0WIDE  and  C1BASE  both  lead  to  the 
lowest  projected  net  global  emissions.  These  are  the  options  where  ETS  coverage  is 
widest. Option C3CLEAN promotes broader implementation and continued participation 
in CORSIA and is the next best option in terms of net global greenhouse gas emissions. 
In  terms  of  giving  CORSIA  support  and  incentives  to  actually  deliver  while  still 

74 

 
 
 
  
  
  
  
  
 
contributing  to  the  global  goals  of  the  Paris  Agreement,  C3CLEAN  is  the  preferred 
option. 

Price signal 

It is also important to look beyond the quantitative analysis to qualitative attributes that 
have an impact on different policy options’ environmental effectiveness. In doing so, it is 
important to look both at transition by the aviation sector and the impact of the options 
on other sectors and the economy wide transition to be achieved by Europe and all other 
countries affected by the options assessed. 

The analysis shows that none of the policy options will significantly alter direct aviation 
emissions by 2030. However, scenarios diverge when reductions acquired through offsets 
or  allowances  are  taken  into  account.  The  projected  carbon  costs  remain  relatively  low 
compared  to  the  cost  of  measures  to  reduce  emissions  within  the  aviation  sector.  The 
CORSIA offsets’ cheaper price levels mean lower carbon price for the aviation industry, 
whereas under EU ETS, the aviation sector is subject to the same carbon price as other 
ETS sectors and contributes to EU’s climate targets alongside other sectors. The EU ETS 
price signal is 6 to 31 times higher, depending on the scenario, than any price signal that 
airlines would pay under CORSIA. The policy options where EU ETS coverage is wider 
provide a stronger price signal for airlines.  

To  complement  the  EU  ETS  price  signal,  EU  ETS  auctioning  revenues  can  be  used  to 
support transition towards climate neutrality. Under the EU ETS, Member States report 
that  from  2012  until  2020,  over  €45  billion  of  ETS  auction  revenue  has  been  used  to 
tackle  climate  change115,  and  additional  support  is  available  under  the  existing  ETS 
Innovation  Fund  that  is  expected  to  deploy  upwards  of  €12  billion  in  the  period  2021-
2030.  Only  options  where  ETS  is  retained  yield  auctioning  revenues,  with  highest 
revenues  coming  from  options  where  ETS  coverage  is  widest  and  auctioning  share  is 
highest. 

CORSIA’s  support  for  the  climate  transition  would  come  from  the  impacts  in  the  host 
countries from which airlines purchase carbon credits.  

Participation and implementation of CORSIA 

Wide participation in CORSIA is a key element of its global effectiveness. The aviation 
sector’s  net  emissions  are  reduced  most  when  State  implementation  and  continued 
participation in CORSIA is highest. 

115 See the Reports on the functioning of the European carbon market, issued each year by the Commission. 

75 

 
 
 
 
                                                 
The  quantitative  results  presented  in  this  impact  assessment  are  based  on  the  ‘initial 
assumed implementation’ of CORSIA, which includes the 88 states listed on the ICAO 
website in December 2020. These include the US, but exclude major economies such as 
Brazil, China, India, and Russia. 

Table 6.3 in Chapter 6 shows how offset demand under CORSIA changes under high and 
low  participation,  giving  an  indication  of  the  importance  of  engaging  other  major 
economies for making CORSIA a success.  

However,  if  we  were  to  look  at  CORSIA  Phase  2,  that  is  the  time  when  CORSIA 
foresees  full  implementation,  including  China  and  other  major  economies  (high 
implementation)116,  we  would  see  increasing  offset  demand  over  the  period  by  72%  to 
109  %  depending  on  the  option,  compared  to  the  results  presented  in  this  Impact 
Assessment.  For  C3CLEAN,  the  amount  of  emissions  offset  rises  to  902  Mt  CO2,  or 
about 100Mt per year over the 9 years of CORSIA Phase 2. For C4MIX the amount of 
CO2 offset rises to 781 Mt CO2 over the 9 years under high participation or 87Mt CO2 
per year. In other words, the total level of offsetting under the highest level of CORSIA 
implementation is equivalent, in annual terms, to the current GHG emissions of Greece 
or around 7% of the emissions of Brazil. It is important to note though, that these offsets 
would result in the same level of emissions reductions only if there is no double counting 
and the offsets are additional. 

Unit quality 

The emission projections, especially for global and extra-EEA flights, are very sensitive 
to assumptions about CORSIA offset quality. The modelling looked at only one aspect of 
offset  quality:  additionality.  An  emission  reduction  project  or  programme  is  deemed 
additional if it would not have taken place in the absence of a market for offset credits. 
The results of the assessment in Table 6.4 show that net global emissions are 32 to 61 Mt 
CO2  higher  across  the  options  in  2030  if  CORSIA  offsets  are  not  additional  at  all.  
Additionality also affects the ranking of options if looking at intra-EEA emissions. Under 
the  assumption  of  0%  additionality,  options  C2CONLY  and  C4MIX  see  an  increase  in 
net emissions, so that option C3CLEAN, clean cut, performs better than C4MIX, mix, in 
terms of emissions reductions. 

Looking  only  at  the  impact  of  ‘no  additionality’  may  underestimate  the  full  impacts  of 
other determinants of offset quality. 

116 Defined as participation throughout the period 2021-2035 of the 81 States listed by ICAO on its website 
in July 2019, plus participation from 2027 of the currently five additional States - China, Russia, India, 
Brazil and Vietnam. 

76 

 
 
 
                                                 
As  described  in  Annex  10,  ICAO  established  the  CORSIA  Emissions  Unit  Eligibility 
Criteria  (EUC),  as  well  as  a  Technical  Advisory  Body  (TAB)  to  provide  the  ICAO 
Council with recommendations on units that should be ‘eligible’, based on assessment of 
programmes  applying  for  eligibility  under  CORSIA.  The  TAB’s  assessment  is  at 
programme level rather than on individual project or unit level.  In its assessments so far, 
the TAB has found that while most programmes meet most of the criteria, only one of the 
programmes meets all the criteria. Programmes also approach some of the critical issues 
such  as  safeguards,  additionality,  baselines,  sustainability,  MRV,  permanence,  leakage 
and no net harm differently. There are no powers under ICAO’s founding instrument for 
offset  standards  to  be  enforced117.  It  should  be  noted  that  CORSIA  eligible  credits 
include removals, i.e. credits that are based on carbon sequestration rather than reducing 
emissions.  These  credits  are  subject  to  specific  quality  risks  such  as  permanence  and 
leakage.  

Accounting 

Environmental integrity under the Paris Agreement requires going beyond the traditional 
concept  of  additionality  to  ensure  that  there  are  measures  in  place  to  avoid  double 
counting  and  to  ensure  that  the  market-based  mechanisms  generating  the  credits  are  in 
line with host parties’ NDCs and long-term strategies.  

CORSIA does not have provisions to ensure that offsets used come from Parties that are 
implementing  the  Paris  Agreement  and  have  taken  into  account  the  impact  of  issuing 
these offsets on their ability to meet their NDC.  

None  of  the  CORSIA  eligible  programmes  have  comprehensive  provisions  which 
guarantee  avoidance  of  double  counting  with  pre-2020  commitments118.  The  risk  of 
double-counting  extends  to  post-2020  commitments  as  well.  As  regards  accounting  for 
Parties’  nationally  determined  contributions  under  the  Paris  Agreement,  CORSIA 
requires offset credit programmes to ensure that double counting is avoided. While one 
of the eligible programmes fulfils this condition, Parties to the Paris Agreement have not 
concluded on accounting rules for the use of CORSIA offsets. This means that absence 
of  UNFCCC  decision  on  robust  accounting  and  adjustment  may  lead  to  emission 
reductions  being  used  and  counted  twice,  or  more  than  twice,  leading  to  higher  than 

117 See https://ec.europa.eu/clima/sites/clima/files/transport/aviation/docs/gmbm_legal_study_en.pdf. The 
lack of enforceability has also been noted by countries such as China. [see 
https://www.icao.int/Meetings/a40/Documents/Resolutions/china_EN.pdf] 
118 Whilst the eligible projects are typically not located in countries that have adopted binding climate 
commitments under the Kyoto Protocol and its subsequent Doha Amendment, number of eligible projects 
are located in countries which made pre-2020 emission reduction pledges under the Cancun Agreements. 
As there are no provisions to avoid double-counting with Cancun Pledges there is a risk that emission 
reduction outcomes are used both by the host country towards its Cancun Pledge and an aeroplane operator 
towards it compliance obligation under CORSIA. 

77 

 
 
 
                                                 
perceived global greenhouse gas emissions. The CORSIA Central Registry (CCR) alone 
cannot  address  the  risk  of  double  counting  at  country  level,  given  the  wide  potential 
sources and uses for eligible offsets. 

A  large  share  of  offset  projects  ar25e  delivering  emission  reductions  within  their  host 
country’s NDC scope119. Use of offsets in a way that may undermine the host country’s 
NDC or path to climate neutrality will make it more difficult for host countries to meet 
current and future more ambitious targets. 

Due  to  uncertainties  associated  with  CORSIA  participation,  additionality  of  offset 
credits, and with accounting, the policy options with wider ETS coverage provide more 
certainty of environmental effectiveness. 

7.1.2.  Increasing the auctioning share of aviation allowances 

Aviation  sector  emissions  are  projected  to  be  higher  than  the  aviation  cap  under  all 
scenarios.  At  the  outset,  the  environmental  impacts  between  different  options  for 
auctioning share increase do not vary as allocation method does not affect the emission 
cap.  

Different options for increase of auctioning share may have different impacts on carbon 
leakage or perceived risk thereof. In general, the results of the ICF Study suggest there is 
a low risk of positive carbon leakage when switching to a higher auctioning percentage, 
and that changes in cost associated with auctioning changes are still well within the range 
of cost variability due to fluctuations in fuel price. While airline profits may be impacted, 
effects  on  passengers  are  likely  to  be  limited.  Significant  impacts  are  also  unlikely  for 
access to mobility for outermost regions. 

7.1.3.  Enforceability 

these  only  receive  binding  force 

CORSIA is based on a resolution adopted by ICAO which is not a binding international 
agreement. Detailed implementing rules are adopted in the form of ICAO Standards and 
their 
Recommended  Practices,  and 
implementation  in  national  law  but  the  stringency  with  which  they  are  implemented 
varies  from  one  state  to  another.  As  the  implementation  of  CORSIA  depends  on 
legislative action by third countries, and hence entails some uncertainty, this needs to be 
kept  under  scrutiny.  Continued  participation  in  CORSIA  is  also  not  guaranteed,  as 
countries  can  withdraw  from  it.  In  comparison,  the  EU  ETS  Directive  applies  in  a 
consistent manner across all EU Member States (the question of participation opt-out is 
irrelevant),  irrespective  of  the  nationality  of  the  aeroplane  operator  and  it  is  further 
enforced through effective financial penalties that also require the environment shortfall 

through 

119 Fearnehough, Warnecke, Schneider, Broekhoff, La Hoz Theuer, Offset credit supply potential for 
CORSIA, October 2019. 

78 

 
 
                                                 
to  be  made  up.  By  contrast,  ICAO  has  no  instruments  at  its  disposal  to  enforce 
compliance, and thus no penalties can be enforced by ICAO in case of non-compliance 
with CORSIA. 

While  most  of  the  options  avoid  an  overlap  between  CORSIA  and  the  EU  ETS  (see 
section 6.5.2 above), thus also ensuring that enforceability remains separated between the 
two  instruments,  some  of  those  options  ensure  that  all  flights  are  covered  by  an 
instrument  (cf.  options  C3CLEAN  and  C4MIX).  C0WIDE  would  present  a  harder 
enforceability to implement provided its extra-EEA ETS scope, while C2CONLY would 
be  defined  by  a  weaker  enforceability  degree,  provided  the  low  binding  character  of 
CORSIA legal instruments. C4MIX presents additional enforceability challenges related 
to  the  additional  legal  complexity  that  may  arise  for  the  implementation  for  aircraft 
operators. 

Based on enforceability assessment in the ICF Study, enforceability is stronger in options 
where ETS scope is wider.  

7.2. Efficiency 

7.2.1.  Impacts on operating costs, prices and demand 

7.2.1.1.  CORSIA implementation options 

There is very little difference between the options in terms of costs. Carbon costs remain 
very small or negligible relative to operating costs and fuel costs for all options, for intra- 
and extra-EEA flights, with the highest cost impact for C0WIDE (full scope ETS), which 
is projected to have carbon costs of 1% and 1.8% of operating costs for intra and extra- 
EEA flights, respectively.  

As a result, the impact of the different options on fares paid by customers is small and 
varies by less than €1 for intra-EEA flights between C0WIDE the highest cost and other 
options in 2030 and less than €2 for extra-EEA flights. Even at the upper-most end of the 
uncertainty range, Option C0WIDE is at most €7 higher for one way for extra-EEA fares 
in 2030, around 2.6% of the total average fare.   

With  such  small  increases  in  price  for  customers,  the  assessment  also  predicts  small 
changes in demand across all options for both passenger travel and freight, measured in 
Revenue Passenger Kilometres and Revenue Tonne Kilometres (RTK).   

For Revenue Passenger Kilometre, all options have the same level of demand apart from 
C0WIDE which leads to the lowest demand, but with RPK just 1% below other options 
for extra-EEA flights. 

79 

 
 
 
For  freight  demand,  the  situation  is  very  similar,  with  the  same  level  of  demand  apart 
from C0WIDE, with RTK just 2% lower than other options.  

The ICF Study also looked at sensitivity to carbon prices where these follow the higher 
prices from the uncertainty range analysis. The impact of using the higher price has little 
impact  on  demand.  For  example,  the  difference  between  option  C0WIDE  and  option 
C2CONLY, the options with the highest and lowest impact on demand, is only 2.5% for 
intra-EEA freight demand (in RTK) and 3.7% for extra-EEA RTK in 2030.  

7.2.1.2. 

 Auctioning share increase options  

By  far  the  largest  carbon  cost  for  airlines  is  incurred  in  policy  option  C0WIDE,  which 
includes  flights  to  and  from  EEA  within  the  EU  ETS  scope.  In  the  case  of  extra-EEA 
flights  with  immediate  full  auctioning  combined  with  option C0WIDE,  carbon  costs  in 
2024 add around 3.6% to total operating cost per RPK compared to a situation where no 
carbon price is applied to these routes, and about 3.5% by 2035. This is still well below 
the impact of recent fluctuations in oil price, which can change total operating cost by 10 
or more percent. 

7.2.2.  Level playing field 

7.2.2.1.  CORSIA implementation options 

Competitive distortions would arise when policies do not apply equally across routes, or 
where they are not enforced equally. EU ETS options avoid any distortion of competition 
on routes, as has been demonstrated over the past 8 years. The CORSIA options require 
widespread implementation and continued enforcement by participating States if they are 
to  apply  uniformly  to  all  airlines  and  not  create  direct  distortions.  The  EU  obviously 
cannot enforce CORSIA on routes operated by non-EEA carriers not involving airports 
in  the  EEA,  and  so  States  should  be  incentivised  to  apply  CORSIA  in  a  meaningful 
manner.  The  carbon  costs  of  the  options  covered  are  unlikely  to  lead  to  significant 
competition distortion between airports as passenger hubs or freight hubs.  

As  Europe  and  other  countries  and  regions  transition  to  climate  neutrality,  C0WIDE, 
followed  by  C1BASE  and  C3CLEAN,  with  the  highest  coverage  of  flights  by  the  EU 
ETS, have the greatest potential to support the deployment of new, low carbon solutions. 
This  will  reduce  the  costs  of  transition  and  boost  the  competitiveness  of  European 
airlines  as  carbon  budgets  or  amount  of  greenhouse  gas  that  can  be  emitted  whilst 
meeting the goals of the Paris Agreement gradually decline to zero. 

For CORSIA  implementation options, opinions  differed between  and within  stakeholder 
groups. For business associations, the most preferable options were CORSIA ONLY and 
MIX  option  with  33%  of  responses  for  each  option.  The  least  preferable  options  were 

80 

 
 
 
ETS  full  legal  scope  and  MIX  BIS  with  33%  of  responses  for  each  option. For  public 
authorities,  30%  found  CORSIA  ONLY the  most  preferable  option,  and  40%  found 
CORSIA ONLY the least preferable option. For NGOs, EU ETS full legal scope was the 
most  preferable  option  with  89%  of  responses,  and  CORSIA  only  the  least  preferable 
option with 44% of responses.  

Some  stakeholders  from  business  associations  including  the  aviation  industry  make 
arguments  for  the  importance  of  a  harmonised  coexistence  of  EU  ETS  and  CORSIA, 
focusing especially on the level playing field between EEA and non-EEA airlines and the 
need to avoid more exemptions for the aviation sector. These stakeholders, with similar 
views presented in position papers, believe the aviation rules review should prevent and 
remove  market  distortion  between  EEA  and  third  country  carriers;  prevent  double 
regulation of emissions; ensure long-term regulatory stability by preventing international 
opposition;  minimize  deviation  from  CORSIA  or  the  EU  ETS  principles;  limit  the 
increase in administrative burden; and limit the increase in cost (especially regarding the 
impact of COVID-19).  

7.2.2.2.  Auctioning share increase options 

The  option  that  maintains  a  share  of  free  allocation  for  airlines,  option  A4RED,  would 
partially maintain the  current  methodology of free allocation. The  current  methodology 
of  free  allocation  is  based  on  historical  emissions  and  has  the  potential  to  create 
competitive  distortion  between  incumbent  and  newcomer  airlines.  Option  A1FULL 
removes the competitive distortion as all airlines are treated the same. The other options 
would lead to same result as A1FULL, but over a longer period of time. 

Stakeholders’  views  were  divided  on  the  question  of  auctioning  share  increase. 
Immediate full auctioning was the most preferred option in 28 responses, and status quo 
was the most preferred option in 18 responses out of 79. At the same time, immediate full 
auctioning  was  the  least  preferred  option  in  33  responses  and  status  quo  was  the  least 
preferred option in 25 responses out of 87. 

Most of the respondents supporting immediate full auctioning are EU citizens and NGOs. 
Respondents  choosing  status  quo  were  dominantly  aviation  industry  respondents  i.e. 
beneficiaries of free allocation. 

Several  stakeholders  make  the  argument  that  the  inclusion  of  free  allocation  was 
originally  included  in  the  original  EU  ETS  on  aviation  to  protect  against  the  risk  of 
carbon leakage, but that there is no risk of carbon leakage with the today’s level playing 
field and high compliance with the EU ETS rules, especially for intra-EU flights.  

The business sector argued that following the current decline in the aviation sector, a 
reduction of free allowances would severely limit the sector’s ability to recover. The 
business sector also argued to retain free allocation for the part of the emissions subject 
to market distortion, especially referring to the feeder flights into intra-EEA hubs. One 

81 

 
 
public authority remarked that a combination of ‘status quo’ and ‘phase out’ could be 
combined, where status quo is maintained for a few years to provide stability and time 
for recovery before the phase out process is launched. 

7.2.3.  Auction revenues 

Option  A1FULL  combined  with  option  C0WIDE  yields  the  largest  revenues  from 
auctioning  aviation  allowances  and  the  auctioning  of  general  allowances  additionally 
demanded  by  the  aviation  sector.  For  other  policy  option  combinations,  auctioning 
revenues are dependent on the timeline of increased auctioning share and on the extent of 
the  ETS  coverage.  Option  C2CONLY  removes  all  aviation  auctioning  revenues  from 
Member States’ budgets or from EU own resources. 

7.2.4.  Social impacts 

The  modelling  suggests  that,  among  the  policy  options  explored,  and  when  taking  into 
account the effect of revenue recycling, the option of extending the EU ETS to cover all 
flights (Option C0WIDE) would have the greatest positive impact on EU27 employment 
and  GVA.  The  full-scope  CORSIA  scheme  (Option  C2CONLY)  is  associated  with  the 
weakest,  albeit  still  positive,  macroeconomic  outcomes,  while  the  other  options  with  a 
mix  of  CORSIA  and  ETS  scopes  are  expected  to  have  broadly  similar  intermediate 
outcomes.  However,  the  variation  in  expected  macroeconomic  effects  between  policy 
options is small. For example, aggregate EU27 employment is projected to be just over 
50,000  workers  higher  by  2035  in  Option  C0WIDE  than  in  option  C2CONLY  (a 
difference of around 0.02%). 

At the EU aggregate level, employment in air transport is projected to be lowest in option 
C0WIDE  while  staying  at  a  similar  and  slightly  higher  level  for  all  other  options.  The 
impact on air transport GVA, however, is more in line with the whole economy impact, 
with  option  C0WIDE  expected  to  generate  the  most  positive  outcome  and  option 
C2CONLY the least positive. The difference in impact on GVA and employment implies 
that where taxation and regulation result in lower demand for air transport, workers are 
likely to take a hit while airline operators have more options to maintain profits such as 
cutting back on intermediate purchases and investment. 

The modelling shows that household impacts are mainly due to recycling of auctioning 
revenues. Policy options with higher auctioning shares, most prominently A1FULL, the 
option with immediate full auctioning, are more likely to yield positive impacts to low-
income households in the form of lower income taxes or income transfers. 

82 

 
 
7.2.5.  Administrative effort 

7.2.5.1.  CORSIA implementation options 

Option  C1BASE  represents  the  least  administrative  costs  (the  current  level).  Options 
C0WIDE  and  C2CONLY  are  the  next  lowest  costs  as  airlines  are  subject  only  to  one 
regulation  (i.e.  only  one  MRV  regime  applies),  followed  by  option  C3CLEAN  where 
either CORSIA or EU ETS applies on a specific route. Options C4MIX is likely to have 
the  highest  administrative  costs  due  to  the  increased  complexity  of  applying  CORSIA 
and EU ETS  on the same routes. Eurocontrol can effectively support the reporting  and 
compliance process for all options, therefore this does not influence the relative ranking. 

7.2.5.2.  Auctioning share increase options 

The bulk of the administrative burden is linked to the mere existence of free allocation, 
not to the level of free allocation. Therefore, the only difference in administrative effort 
between the options on increasing the auctioning share is whether there is free allocation 
or  not.  Accordingly,  option  A1FULL  means  the  least  administrative  effort,  while  the 
other options maintain the current level at least for a certain transition time (A2SWIFT, 
A3SLOW), or perpetuate it (A0BASE, A4RED). 

7.2.6.  Outermost regions 

The  overall  macroeconomic  impacts  of  the  different  options,  when  evaluated  through 
impacts on the aviation sector, fuel supply sectors, and through linked supply chains and 
associated multiplier effects, are relatively small: less than 0.05% in terms of both value 
added and employment in all cases at the EU27 level. The impacts are similarly small in 
the outermost regions, once a regionalisation method is applied to convert MS impacts: 
differences are always smaller than 0.1% between any of the options.  

However, it is important to note that this presents only a partial analysis of the expected 
effects; there are changes in flight frequency and capacity as a result of different policy 
options, and these will affect  the connectivity between regions  and countries. Although 
modelling such effects is beyond the scope of this analysis, it is reasonable to expect that 
such  impacts  may  be  more  substantial,  in  macroeconomic  terms,  than  the  changes  felt 
through the aviation sector and associated supply changes. 

7.3. Coherence 

This  section  looks  at  the  coherence  of  policy  options  with  both  EU  and  international 
policies. 

83 

 
 
 
EU policies 

The  European  Green  Deal  calls  for  all  sectors  to  contribute  to  the  target  of  climate 
neutrality by 2050. To achieve economy-wide climate neutrality, at least a 90% reduction 
in  EU  transport  emissions  is  needed  by  2050  and  aviation  needs  to  contribute  to  these 
significant  reductions.  In  the  European  Green  Deal,  the  Commission  recalled  that  “the 
price of transport must reflect the impact it has on the environment and on health”. This 
must be taken into account when considering options for the implementation of CORSIA 
and  reducing  the  share  of  free  allocation  of  EU  allowances  to  airlines.  The  Impact 
Assessments on Aviation Taxation and the revision of the Energy Taxation Directive are 
also  important  contributions  to  ensuring  the  price  of  aviation  promotes  this  economy-
wide effort.  

In September 2020, the European Commission adopted the 2030 Climate Target Plan, to 
raise  the  EU's  ambition  from  reducing  greenhouse  gas  emissions  from  40%  to  at  least 
55% below 1990 levels by 2030. In December 2020, the European Council confirmed the 
EU’s  target  for  2030,  endorsing  a  net  domestic  reduction  of  at  least  55%  in  economy-
wide emissions below 1990 levels:  

‘To meet the objective of a climate-neutral EU by 2050 in line with the objectives of the 
Paris  Agreement,  the  EU  needs  to  increase  its  ambition  for  the  coming  decade  and 
update  its  climate  and  energy  policy  framework.  To  that  end,  the  European  Council 
endorses a binding EU target of a net domestic reduction of at least 55% in greenhouse 
gas emissions by 2030 compared to 1990. It calls on the co-legislators to reflect this new 
target in the European Climate Law proposal and to adopt the latter swiftly.’ 

Subsequently,  the  Union  and  its  Member  States  submitted  this  revised  economy-wide 
target for 2030 as its nationally determined contribution (NDC) to the Paris Agreement. 
The  EU  ETS  facilitates  the  EU  meeting  its  NDC  commitment  by  ensuring  all  ETS 
sectors contribute in an efficient and cost-effective way. The EU ETS for other sectors is 
also now being reviewed to be consistent with the domestic 55% reduction for 2030 and 
economy-wide  climate  neutrality  by  2050.  The  communication  on  the  2030  climate 
ambition  requires  that  “in  accordance  with  its  international  commitment  to  economy-
wide action under the Paris Agreement, the EU should continue to regulate at least intra-
EU aviation emissions in the EU ETS”120. It is also important to ensure consistency with 
the Climate Law, which is enshrining economy-wide climate neutrality in Union law for 
no later than 2050. The scope of the Climate Law covers all emissions regulated in Union 
law, including emissions from aviation that are the subject of this Impact Assessment. 

As was already the case for the existing 40% target for 2030, a domestic reduction of at 
least  55% means  that offset  credits  resulting from  emissions reductions  outside the EU 

120 COM(2020) 562 final. 

84 

 
 
                                                 
should  not  be  used  towards  this  target.  This  argues  against  C4MIX,  where  CORSIA  is 
used to cover intra-EEA emissions. 

Given  the  limited  impact  of  the  various  options  on  direct  emissions  from  the  aviation 
sector,  it  is  necessary  to  look  at  the  impacts  of  the  various  policy  options  on  the 
complementary measures that support further emission reductions in the sector, including 
the transition to sustainable alternative fuels. 

With respect to the decarbonisation of aviation through the uptake of SAF, the revision 
of the EU ETS for aviation is coherent with the ReFuelEU Aviation initiative. ReFuelEU 
Aviation  would  aim  at  encouraging  the  uptake  of  SAF  by  airlines,  through  actions  on 
both the supply and demand sides. All policy options proposed for the revision of the EU 
ETS for aviation provide incentives for the use of SAF. In particular, all policy options 
will contribute to bridging the price gap between conventional and alternative fuels. The 
ReFuelEU assessment projects a SAF share of 4-8% in 2030. The effective fuel price to 
airlines will therefore be higher, but with limited impact: while the ICF study a high oil 
price  reduces  intra-EEA  RPK  by  about  4%,  the  corresponding  impact  of  ReFuelEU  is 
likely to be only around 1%. ReFuelEU policies should also lead to a greater number of 
EU  ETS  biofuel  recognitions,  but  emissions  would  nevertheless  remain  well  above  the 
cap. Overall this may lead to a small increase in net CO2 emissions on EU ETS routes,121 
and decreases on any routes where the SAFs mandate applies but the EU ETS does not. 

With  respect  to  the  taxation  of  aviation,  the  ongoing  revision  of  the  Energy  Taxation 
Directive  would  also  contribute  to  achieving  the  EU’s  climate  policy  objectives. 
Different  policy  options  are  being  considered  in  relation  to  the  air  transport  sector, 
including  the  introduction  of  intra-EU  harmonized  fuel  tax  and/or  a  harmonized  ticket 
tax.  These  measures  are  likely  to  increase  the  price  incentives  to  switch  to  SAF  by 
ensuring that ticket and fuel prices reflect costs of climate impacts and other costs to the 
environment.  All  policy  options  are  coherent  with  the  ongoing  revision  of  the  Energy 
Taxation Directive.   

Considering  the  developments  in  the  years  following  the  adoption  of  the  Energy 
Efficiency  Directive  (i.e.  2013-2018),  transport  energy  consumption  rose  by  33  Mtoe 
explaining 87% of the gap (38 Mtoe) to the EU final energy consumption target in 2020. 
Aviation, accounting for a growing proportion of overall EU energy consumption (over 
5%),  alone  would  explain  over  27%  of  this  gap.  On  aviation,  world  demand  for  air 
transport has more than doubled since 2000. It is worth noting that the growth in aviation 
energy  consumption  would  be  much  higher  without  energy  efficiency  improvements. 
While  policy  and  industry’s  efforts  have  shown  concrete  improvements  over  the  past 
years  (for  example  fuel  burn  per  passenger  has  dropped  by  24%  from  2005  to  2017), 

121 Because SAF is fully exempt from the EU ETS, but SAF fuel lifecycle CO2 is not zero, there is the 
possibility of a small increase in net CO2, though this may be balanced out by SAF use on non-ETS routes. 

85 

 
 
                                                 
these  benefits  have  been  outpaced  by  the  sustained  growth  in  traffic.122  As  the  EU 
increases the ambition towards 2030 and 2050 and the economy recovers from COVID-
19, energy efficiency efforts will have to be increased also in the aviation sector.  

International climate action 

The  EU  is  committed  to  promoting  global  climate  action  through  multilateral 
cooperation.  Working  with  third  countries  to  support  implementation  of  the  Paris 
Agreement is  a fundamental part of EU Climate  Diplomacy  under the European Green 
Deal.  The  EU’s  nationally  determined  contribution  to  the  Paris  Agreement  reflects  the 
EU’s climate ambition and is the cornerstone of EU participation in international climate 
action. High ambition is also the driver in EU’s participation in CORSIA. 

Under  all  scenarios  considered  in  the  analysis  underlying  this  impact  assessment, 
emissions from international aviation rise to levels in the order of 1 billion t CO2 by 2035 
(the current end date of CORSIA). Emissions from domestic flights, which are over 40% 
of the global total, are not covered by CORSIA, which aims at carbon-neutral growth of 
international aviation only from 2019.  

CORSIA’s current aim, carbon-neutral growth of international aviation emissions above 
2020  levels,  is  not  ambitious  enough  to  deliver  a  significant  contribution  from  the 
international aviation sector towards the Paris Agreement’s global goal. However, if fully 
implemented,  CORSIA  would  stabilize  aviation  emission  levels  at  global  scale.  At  the 
same  time,  the  risk  of  double  counting  (in  particular  as  countries  include  aviation  in 
domestic  reduction  targets  while  selling  offsetting  credits),  and  hence,  undermining  of 
NDC or Paris Agreement achievements, needs to be addressed at international level. The 
likely  partial  participation  in  CORSIA  and  inefficient  enforcement  further  increase 
uncertainties related to the aviation sector’s contribution to global emission reductions. 

Through its participation in international market mechanisms, the EU was a large source 
of  demand  for  carbon  credits.  In  the  light  of  the  EU’s  experience  with  international 
credits  and  in  line  with  the  EU  contribution  to  the  Paris  Agreement,  no  international 
credits  can  be  used  after  2020  in  the  EU  ETS.  The  decisions  that  the  EU  takes  about 
which  offsets  or  credits  could  or  could  not  be  used  to  meet  EU  targets,  send  a  strong 
message  to  other  parties  on  the  level  of  ambition  and  safeguards  needed  for  the  future 
development of offsets and credits for implementation of the Paris Agreement. Decisions 
on the use of CORSIA eligible credits for intra-EU emissions, such as in option C4MIX, 
need  to  carefully  balance  the  benefits  to  multilateral  action  on  international  aviation 
against the risks of undermining the EU’s leadership on environmental integrity for the 

122 COM/2020/326 final. 

86 

 
 
 
                                                 
international carbon market and weakening the ambition of climate policies in countries 
combining domestic action with sale of credits. 

The  EU  needs  to  remain  consistent  with  its  high  climate  ambition  and  support  for 
multilateral  climate  action.  This  can  be  done  by  maintaining  the  necessary  EU  policy 
space  to  ensure  credible  NDC  achievement  while  participating  and  implementing 
CORSIA and encouraging wide participation by others. 

EU Member States have notified differences in their implementation of CORSIA due to 
the need not  to  invalidate existing Union law, in  particular Directive 2003/87/EC123, as 
well as to safeguard the roles of the EU co-legislator. Options that would equal to non-
implementation  of  CORSIA  (C0WIDE  and  C1BASE)  would  therefore  not  raise  legal 
concerns,  but  would  be  politically  undesirable  if  other  countries  including  the  US  and 
China are implementing.  

The  implementation  of  CORSIA  depends  on  legislative  action  by  third  countries,  and 
hence  entails  some  uncertainty;  this  needs  to  be  kept  under  scrutiny.  Continued 
participation in CORSIA is also not guaranteed, as countries can withdraw and, as noted, 
can  make  it  challenging  to  ensure  equal  treatment  on  certain  routes.  It  is  important  to 
note  that  the  EU  ETS  has  ensured  equal  treatment  on  routes  and  a  high  level  of 
compliance  based  on  oversight  by  Member  States  and  the  Court  of  Justice  of  the 
European Union.  

Quality  of  offsets  and  their  robust  accounting  are  central  to  the  overall  environmental 
integrity  of  CORSIA.  Therefore,  even  under  option  C3CLEAN  it  is  proposed  to  build 
further on the ICAO list of eligible credits, for airlines subject to EU jurisdiction. To this 
end,  in  order  to  ensure  that  the  EU’s  implementation  of  CORSIA  supports  the  Paris 
Agreement goals and gives incentives for broad participation in CORSIA, the EU should 
only  accept  offsets  as  compliance  credits  under  CORSIA  that  meet  the  following  three 
conditions: 

- 

- 

credits are from projects in countries that are party to the Paris Agreement;  

credits are from projects in countries that participate in CORSIA; and 

-  double-counting of credits is avoided. 

Other states should be encouraged to implement CORSIA also in this way. If this would 
not be the case, European airlines would potentially be put at a disadvantage. The way to 
avoid  this  would  be  to  provide  EU  airlines  an  exemption  from  CORSIA  compliance 
obligations on routes where there would not be equal conditions of competition, if there 
was a risk of meaningful divergence of costs.  

123 European countries notified differences, notably in order to safeguard the ability of the European 
Parliament and Council to decide on implementation of CORSIA as appropriate. Public documents refer to 
the differences notified by China, but the ICAO Secretariat has not yet published any of the differences 
notified to it. 

87 

 
 
                                                 
In  the  open  public  consultation,  stakeholders  were  asked  to  provide  their  opinion  on 
whether market-based measures like the EU ETS and CORSIA should be combined with 
other  policies.  A  majority  of  respondents  (82%)  agreed  with  the  statement,  most 
supportive groups being business associations, companies or business organisations, and 
EU  citizens.  Among  other  measures,  stakeholders  argued  for  governmental  support  in 
aircraft  technology,  operational  and  infrastructure  development  and  SAF  deployment. 
Taxation measures were however criticized for being environmentally inefficient and for 
tax revenues not being directed towards decarbonisation of the sector. 

7.4. Conclusions 

The  above  comparison  shows  that  while  ETS  price  incentives  are  orders  of  magnitude 
more  meaningful  than  the  price  of  CORSIA  quality  offsets,  the  overall  environmental 
impact  at  global  level  across  policy  options  is  limited  as  the  EU  ETS  has  a  limited 
geographical scope. This is shown in Table 7.1. 

Table  7.1  Estimated  net  global  aviation  CO2  emissions  in  2030.  The  results  are  the 
nominal  or  central  values.  They  assume  ‘initial  assumed  implementation’  of  CORSIA- 
that  means  implementation  of  CORSIA  by  the  88  states  listed  on  the  ICAO  website  in 
December  2020.  These  include  the  US,  but  exclude  countries  that  have  opposed 
CORSIA: Brazil, China, India, Russia, Vietnam. (Extract from Table 6.1) 

Policy Options 

Emissions 2030 
in Mt 

C0WIDE 
Return to full legal scope:  The EU ETS applies to flights within Member 
States, between Member States and extra-EEA flights to and from Member 
States 
No implementation of CORSIA by the EU, but CORSIA is implemented by 
others under initial assumed implementation. 

C1BASE 
Existing EU policy implementation: the EU ETS applies to flights within 
Member States and between Member States.  
No implementation of CORSIA by the EU, but CORSIA is implemented by 
others under initial assumed implementation. 

C2CONLY 
EU ETS applies to flights within Member States only 
CORSIA covers all flights between Member States  and extra-EEA flights 
to/from Member States, excluding those to/from countries not participating 
in CORSIA 
CORSIA is implemented by others under initial assumed implementation 

C3CLEAN 
EU ETS applies to flights inside Member States and between Member 
States.  
CORSIA applies to flights to/from Member States 
CORSIA is implemented by others under initial assumed implementation 

918 

992 

1047 

1003 

88 

 
 
 
Policy Options 

C4MIX 
EU ETS applies to flights inside Member States and between Member 
States for emissions up to the level of the CORSIA baseline (sector-wide 
baseline  - 2019 emissions for all CORSIA covered routes) 
CORSIA applies to flights to/from Member States 
CORSIA is implemented by others under initial assumed implementation 

Emissions 2030 
in Mt 

1022 

However,  there  are  significant  differences  between  the  options  as  regards  the 
contribution  to  the  EU’s  emission  reduction  target.  There  are  also  considerable 
differences in terms of revenues stemming from the different policy option combinations, 
as CORSIA, by design, does not generate any public revenue from airlines. 

The effectiveness of the CORSIA implementation choice is not entirely in the hands of 
the EU regulators, option C3CLEAN is the one showing the best impacts with an active 
foothold in the CORSIA setup. 

The  comparison  of  the  analysed  options  shows  a  strong  case  for  moving  to  full 
auctioning  from  the  date  of  entry  into  force  of  the  revised  legislation.  While  free 
allowances  have  been  allocated  notably  to  address  potential  adverse  competitiveness 
impacts  and  carbon  leakage,  they  constitute  a  derogation  from  the  ‘polluter  pays’ 
principle.  The  ICF  Study  suggests  a  low  risk  of  carbon  leakage  when  increasing  the 
auctioning share. Switching to full auctioning implies stabilising the cap for aviation  at 
current levels as auctioning is currently a fixed percentage of free allocations. This would 
maintain current levels of environmental integrity, and be subject to the linear reduction 
factor, as already required by the co-legislators and as is the case for all other operators in 
the  EU  ETS.  The  fastest  possible  abolition  of  free  allocation  in  the  EU  ETS  would 
reinforce its environmental integrity (by fully implementing the ‘polluter pays’ principle) 
and  thus  support  maintaining  its  coverage  for  intra-EEA  flights,  instead  of  introducing 
CORSIA there. 

The  interlinkage  and  supportive  incentives  for  emission  reductions  coming  from  other 
policy  instruments  that  should  ensure  the  contribution  to  the  Climate  Target  Plan,  like 
RefuelEU and the revision of the taxation of aviation fuels, should be ensured throughout 
the legislative process. 

89 

 
 
 
 
8.  PREFERRED OPTION 

When proposing its updated 2030 greenhouse gas emissions reduction target of at least 
55%124,  the  European  Commission  also  described  the  actions  across  all  sectors  of  the 
economy  that  would  complement  national  efforts  to  achieve  the  increased  ambition.  A 
number of impact assessments have been prepared to support the envisaged revisions of 
key legislative instruments.  

Against  this  background,  this  impact  assessment  has  analysed  the  various  options 
through  which  a  revision  of  EU  ETS  in  respect  of  aviation  could  effectively  and 
efficiently contribute to the delivery of the updated target as part of a wider “Fit for 55” 
policy package. 

Methodological approach 

Drawing  conclusions  about  preferred  options  from  this  analysis  requires  tackling  two 
methodological issues.  

First,  as  often  the  case  in  impact  assessment  analysis,  ranking  options  may  not  be 
straightforward as it may not be possible to compare options through a single metric and 
no option may clearly dominate the others across relevant criteria. Ranking then requires 
an  implicit  weighting  of  the  different  criteria  that  can  only  be  justifiably  established  at 
the political level. In such cases, an impact assessment should wean out as many inferior 
options  as  possible  while  transparently  provide  the  information  required  for  political 
decision- making.  

Secondly, the package involves a high number of interlinked initiatives underpinned by 
individual  impact  assessments.  Therefore,  there  is  a  need  to  ensure  coherence  between 
the preferred options of various impact assessments. 

Policy interactions 

Given  the  complex  interdependence  across  policy  tools  and  the  interplay  with  the 
previous  methodological  issue  outlined  above,  no  simultaneous  determination  of  a 
preferred policy package is thus possible. A sequential approach was therefore necessary.  

First,  the  common  economic  assessment125,126  underpinning  the  “Communication  on 
Stepping  up  Europe’s  2030  climate  ambition”  looked  at  the  feasibility  of  achieving  a 
higher climate target and provided insights into the efforts that individual sectors would 
have to make. It could not, however, discuss precise sectoral ambitions or detailed policy 
tools. Rather, it looked at a range of possible pathways/scenarios to explore the delivery 

124 Communication on Stepping up Europe’s 2030 climate ambition - Com(2020)562. 
125  https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020SC0176 
126  https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020SC0331 

90 

 
 
                                                 
 
of the increased climate ambition. It noted particular benefits in deploying a broad mix of 
policy  instruments,  including  strengthened  carbon  pricing  and  increased  regulatory 
policy ambition. 

An update of the pathway/scenario focusing on a combination of extended use of carbon 
pricing  and  medium  intensification  of  regulatory  measures  in  the  economy,  while  also 
reflecting  the  COVID-19  pandemic  and  the  National  Energy  and  Climate  Plans, 
confirmed these findings.  

Taking  this  pathway  and  the  Communication  on  Stepping  up  Europe’s  2030  climate 
ambition  as  central  reference,  individual  impact  assessments  for  all  “Fit  for  55” 
initiatives were then developed with a view to provide the required evidence base for the 
final step of detailing an effective, efficient and coherent “Fit for 55” package. 

At the aggregate level, these impact assessments provide considerable reassurances about 
the policy indications adopted by the Commission in the Communication on Stepping up 
Europe’s  2030  climate  ambition.  This  concerns  notably  a  stronger  and  more 
comprehensive role of carbon pricing, energy efficiency and renewable energy policies, 
land  sector,  and  the  instruments  supporting  sustainable  mobility  and  transport.  These 
would be complemented by  a  carbon border  adjustment mechanism and phasing out  of 
free allowances. This would allow to continue to address the risk of carbon leakage in an 
efficient manner. It would also preserve the full scope of the Effort Sharing Regulation 
for achieving the increased climate target.  

Various elements of the analyses also suggest that parts of the revenues of a strengthened 
and extended ETS should be used to counter any undesirable distributional impacts such 
a package would entail (between and within Member States). While the best way to do 
this  is  still  to  be  determined,  this  would  seem  a  superior  alternative  to  foregoing  the 
relevant  measures  all  together  or  simply  disregarding  the  uneven  nature  of  their 
distributional impacts. Under both these alternatives, the eventual success of any package 
proposed would be at risk.  

Preferred policy options 

Preliminarily  assuming  this  fact  and  the  analysis  above  as  the  framework  for  the 
aggregate “Fit for 55” package, the specific analysis carried out in this impact assessment 
comes  to  the  main  following  conclusions  and  would  suggest  the  following  preferred 
policy options for the revision of the EU ETS in respect of aviation:  

Since  2012,  the  EU  ETS  has  been  an  effective  and  demonstrated  policy  instrument 
incentivising emission reductions in the aviation sector in Europe while also maintaining 
equal  competition  of  airlines  on  the  routes  covered.  Mitigation  measures  are  solid  and 
demonstrated  under  the  EU  ETS.  Maintaining  non-regression  means  preferring  policy 
options  that  do  not  result  in  a  reduced  or  abolished  environmental  ambition  within  the 
EU ETS (i.e. other than C2CONLY, C4MIX, C5MIX2). 

91 

 
 
It  needs  also  to  bear  in  mind  that  the  EU  wants  to  provide  a  constructive  international 
signal and wants the CORSIA global emission scheme to succeed and deliver meaningful 
emission  reductions.  Therefore,  policy  options  that  do  not  apply  CORSIA  at  all 
(C0WIDE, C1BASE) should not be the preferred option. 

Considering these two important elements the preferred option is option C3CLEAN. This 
option  maintains  the  EU  ETS  for  the  current  intra-European  scope  and  introduces 
CORSIA for extra-European flights to and from third countries which participate in the 
scheme.  CORSIA  Units  should  come  from  countries  covered  by  the  Paris  Agreement, 
which  implement  CORSIA,  and  double-counting  should  be  excluded  to  preserve  the 
environmental integrity. C3CLEAN option will maintain both domestic ambition with a 
successful carbon scheme while providing a constructive international signal.  

For  increasing  the  auction  share,  the  investigated  aspects  favour  full  auctioning  of 
allowances  for  aviation  to  align  the  coverage  of  intra-European  flights  in  the  EU  ETS 
with  the  “Fit  for  55”  ambition  because  of  the  limited  risk  of  carbon  leakage  (low 
probability  of  changing/diverting  route  driven  by  climate  policies)  as  well  as  the 
opportunity cost pass through that takes place. The rate of phase out of free allocation is 
subject to political decision to be taken.  

92 

 
 
 
 
 
9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

The Commission will continue to monitor and evaluate the implementation and results of 
the proposed initiative (C3CLEAN and A1FULL). In particular, the effectiveness of the 
proposed  initiative  in  achieving  the  policy  objectives  identified  in  Chapter  4  will  be 
assessed with the help of a set of indicators, as proposed in the table below.  

Policy objectives 

Specific objectives  Operational 

Address 
aviation 
emissions  to  meet 
economy-wide 
2030 
targets 

2050 

and 

Lead international 
efforts, build 
alliances with the 
like-minded, 
maintain 
competitiveness 
and 
ensure a level 
playing field and 
fairness 

objectives 

Sufficiently  reduce 
aviation  emissions 
to 
and  contribute 
(and  global) 
EU 
efforts 
with 
reductions  in  other 
sectors. 
Achieve real cost-
effective emission 
reductions. 

Encourage third 
countries to take 
meaningful action 
and avoid ‘hub 
leakage’ (i.e. 
preserve the 
competitiveness of 
EU hubs compared 
to non-EU hubs 
where carbon 
pricing is not 
applied). 

Preserve the 
competitiveness of 
EU tourist 
destinations. 

Objective 1: 
Environmental 

Objective 2: 
Economic 

93 

Potential 
measuring 
indicators 
Aviation emissions. 
Reductions 
achieved 
sectors. 

in  other 

Meaningful carbon 
price that 
incentivises 
emission reductions 
and efficiency 
improvements.  

Concrete 
international 
developments 
Equal treatment 
maintained on 
routes in practice as 
well as theory. 
Units prices 
multiplied by offset 
emissions 
compared to 
aviation operational 
costs. 
Ability to pass 
through carbon 
costs. 
Any change in 
airline behaviour 
(e.g. network 
changes and shift of 
hubs to countries 
taking less climate 
action). 

 
 
  
 
  
  
  
  
  
 
 
 
  
  
  
  
 
 
Evolution of the 
demand for certain 
tourist destinations. 
Evolution of 
employment in the 
aviation, tourism 
and fuel supply 
sectors. 

The  EU  ETS  implementation  provides  transparent  information  that  allow,  by  large, 
monitoring  the  abovementioned  objectives;  for  CORSIA,  the  ICAO  Secretariat  is 
expected to provide information on global aviation emissions. 

The general policy objective of ensuring aviation's contribution to reducing the impacts 
of  climate  change  and  meeting  corresponding  climate  targets  (Objective  1)  will  be 
monitored on a yearly basis through the information provided by compliance data under 
the EU ETS and CORSIA.  

More specifically, under the EU ETS, every year, aircraft operators report their emissions 
and  surrender  the  corresponding  amount  of  allowances.  Compliance  actions  take  place 
electronically  through  the  Union  Registry,  which  allows  collecting  individual  and 
aggregated  information,  and  Member  States  have  an  established  track  record  of 
enforcement on a level-playing field basis. The Union Registry also includes data on the 
allocation issued under the EU ETS. The data easily allow the monitoring and evaluation 
of the extent to which the aviation sector is contributing to meet the EU climate targets 
either  by  reducing  emissions  or  through  the  purchase  of  units  from  other  sectors  under 
the EU ETS cap for stationary installations, as well as the economic impacts it represents. 
The  Commission  will  assess  those  aspects  in  its  reports,  including  its  annual  Carbon 
Market Report. 

The monitoring and reporting mechanism for CORSIA is already in place in the EU, and 
EU-based  airlines’  emission  reports  have  already  been  made  public.  The  CORSIA 
registry  has  been  established,  which  should  provide  information  on  its  functioning  at 
global level. 

Market  analysts  regularly  closely  follow  various  aspects  of  the  carbon  market  and  its 
functioning;  the  Commission  will  continue  to  monitor  this  work.  In  addition,  through 
regular  contacts  with  stakeholders  the  Commission  is  alert  to  their  views  and  concerns 
about the functioning of the EU ETS. 

The impact of this initiative in relation to Objective 2 (i.e. leading international action, 
building  alliances  with  the  like-minded,  maintaining  competitiveness  and  ensuring  a 
level-playing field in the sectors affected by the initiative, such as air transport services 

94 

 
 
 
  
and tourism) will be monitored through the indicators described in the table above. With 
respect to the policy objective of encouraging third countries to take meaningful actions 
will require a qualitative assessment rather than a quantitative one. The Commission will 
closely  follow  the  international  developments  in  the  coming  years,  including  the 
implementation  by  third-countries  of  CORSIA  and  the  establishment  of  national 
emissions  trading  systems.  As  regards  the  policy  objective  of  ensuring  a  level-playing 
field,  the  Commission  will  regularly  carry  out  studies  in  order  to  assess  the  risk  of 
competition distortions caused by this policy initiative. In relation to the policy objective 
of maintaining competitiveness of the relevant sectors, market analysts regularly closely 
follow various aspects of the EU carbon market and their impact on the competitiveness 
of  these  relevant  sectors.  The  Commission  will  continue  to  monitor  their  work.  The 
Commission also entertains regular contacts with stakeholders and is alert to their views 
and concerns about the functioning of the EU ETS.  

The  initiative  will  be  periodically  evaluated  in  light  of  its  operational  objectives.  In 
particular,  it  is  recommended  that  the  Commission  reports  regularly  on  international 
developments  to  the  European  Parliament  and  the  Council,  and  makes  proposals,  as 
appropriate,  to  adapt  the  EU  system  to  these  developments  (e.g.  with  a  view  to 
preserving competitiveness of EU airlines). 

95 

 
 
 
  
 
 
Annex 1: Procedural information 

Lead DG, DEcide Planning/CWP references 

The Directorate-General (DG) for Climate Action has led the preparation of this initiative 
and  the  work  on  the  Impact  Assessment  in  the  European  Commission.  The  planning 
entry  was  approved  in  Decide  Planning  under  the  reference  PLAN/2019/5485.  It  is 
included  in  the  2021  Commission  Work  Programme127  under  the  headline  ambition 
‘European Green Deal’ and the policy objective ‘Fit for 55 package’. 

Organisation and timing 

The planned adoption date (Q2 2021) was included in the Commission Work Programme 
and has remained unchanged. 

The Inter-service Steering Group (‘ISSG’) was set up by the Secretariat-General to assist 
in  the  preparation  of  the  initiative.  The  representatives  of  the  following  Directorates 
General  participated  in  the  ISSG  work:  SG,  LS,  AGRI,  BUDG,  COMM,  COMP, 
CNECT,  DEFIS,  DGT,  DIGIT,  EAC,  ECFIN,  ECHO,  EMPL,  ENER,  ENV,  ESTAT, 
FISMA,  FPI, GROW, HOME, HR,  IAS,  INTPA, JRC, JUST,  MARE, MOVE, NEAR, 
OLAF, REFORM, REGIO, RTD, SANTE, TAXUD, TRADE. 

A total of 4 ISSG meetings took place. The ISSG discussed the draft contractor study on 
22  September  2020,  the  questionnaires  for  the  open  public  consultation  on  13  October 
2020, the concept of the impact assessment on 14 December 2020, and the draft impact 
assessment report on 9 March 2021.  

Consultation of the Regulatory Scrutiny Board 

The Regulatory Scrutiny Board (RSB) received the draft version of this impact 
assessment report on 18 March 2021. The RSB meeting took place on 14 April 2021. On 
19 April 2021, the RSB gave a positive opinion on the report, with reservations. The 
RSB made three main observations:  

  The  report  is  overly  complex  and  does  not  clearly  identify  the  political  choices 
for the decision makers. It does not describe well the constraints imposed by the 
EU’s international commitments. It does not present a clear intervention logic. 

  The  report  does  not  assess  the  proposed  initiative  in  the  context  of  parallel 
initiatives pursuing similar objectives. It does not sufficiently reflect the impact of 
the multiple initiatives on the aviation sector. 

127 COM(2020) 690 final.  

96 

 
 
                                                 
  The  impact  analysis  does  not  compare  well  the  merits  of  the  retained  policy 
options  and  does  not  sufficiently  take  into  account  the  views  of  the  different 
stakeholder groups. The report does not identify who will be affected and how. It 
does not present the main costs and benefits of the preferred options. 

The RSB also made a number of recommendations, which were addressed in this impact 
assessment report as follows:  

RSB recommendations 

Modification of the IA report 

The report should simplify its presentation 
and clearly identify the key policy choices. 
It should better describe how existing 
international EU commitments in the 
climate policy area (such as the Paris 
Agreement) and in support of international 
aviation emission reduction efforts (via 
CORSIA) limit the choice of the policy 
options. The impact analysis should more 
clearly focus on the most relevant policy 
options, weigh the advantages against the 
disadvantages and consider critical 
implementation aspects. 
The report should clarify the coherence 
between this initiative, the broader ETS 
revision and other parallel initiatives 
tackling aviation emissions (in particular 
the ReFuelEU Aviation initiative). The 
report should better describe how the 
various initiatives act together and what 
their respective objectives and expected 
emissions contributions are. 
The report should clarify and simplify the 
intervention logic by establishing a clear 
link between the problems, the policy 
objectives and the policy options. For 
example, the specific objective on 
alternative fuels does not fit into the 
intervention logic as it is not analysed in 
the problems section and rather 
corresponds to the parallel RefuelEU 
Aviation initiative. 
The report should discuss the cumulative 
impacts (in the medium and longer term) 
on costs and the competitiveness of EU 
airport hubs and EU network carriers, 
particularly resulting from a loss of 
transfer passengers and more limited flight 

The report has been amended to present 
more clearly the key policy choices, 
notably taking into account the existing 
international commitments as regards 
climate policy.  

The revised report clarifies the coherence 
between this initiative and the parallel 
initiative tackling aviation emissions, in 
particular the ReFuelEU Aviation 
initiative, in Section 6.  
Section 6.2.3 has been introduced in order 
to present the cumulative impacts of the 
other Fit for 55 initiatives.   

A new Section 5.4 has been introduced in 
order to clarify the intervention logic.  
In light of the RSB’s comments, the uptake 
of SAF has been removed from Section 4.2 
as specific objective.  

The revised report presents the cumulative 
impacts on costs and the competitiveness 
of EU airport hubs and EU network 
carriers in Section 6.2.3.  

97 

 
 
options. 
The impact analysis and the option 
comparison should better describe the pros 
and cons of the policy options. First, the 
impacts should be assessed in comparison 
with the baseline. Second, the report 
should systematically take into account the 
comments made by stakeholders and 
confront them with the findings of the 
analysis throughout the report. 
Third, the analysis should better explain 
the sometimes counterintuitive impacts of 
the options on emissions. 
The methodological section (in the annex), 
including methods, key assumptions, and 
baseline, should be harmonised as much as 
possible across all ‘Fit for 55’ initiatives. 
Key methodological elements and 
assumptions should be included concisely 
in the main report under the baseline 
section and the introduction to the options. 
The report should refer explicitly to 
uncertainties linked to the modelling. 
Where relevant, the methodological 
presentation should be adapted to the 
specific initiative. 
Annex 3 should follow the standard format 
and present a summary of costs and 
benefits with all key information, 
including quantified estimates. 

In order to better describe the pros and 
cons of the policy options, the following 
changes have been made.  
First, a comparison of the policy options 
against the baseline has been included, in 
particular in Section 6.  
Second, the stakeholders’ views are now 
presented throughout the document, where 
relevant.  
Third, the counterintuitive impacts are 
further explained in section 7.  

Annex 4 has been amended in order to 
explain that the key assumptions have been 
harmonised across all ‘Fit for 55’ 
initiatives.  
The key methodological elements are 
included in Section 5.  
Section 5 also include an explanation for 
the uncertainties linked to the modeling.  

Annex 3 now includes a summary of the 
costs and benefits of the preferred policy 
options, compared to the baseline. 
Quantified estimates are presented in 
overview tables.  

Evidence, sources and quality 

This initiative builds upon evidence gathered in the Impact Assessment for the previous 
ETS  revision  concluded  in  2018,  the  Impact  Assessment  accompanying  the  2030 
Communication, analysis conducted in support of the Commission’s Long-Term Strategy 
and any relevant evidence compiled in other concurrent Green Deal initiatives. It builds 
on  emissions  data  and  experiences  from  the  implementation  of  the  EU  monitoring, 
reporting  and  verification  systems,  and  in  particular  data  from  the  Union  Registry.  In 
addition, the Commission contracted an external, independent consortium of consultants 
(led  by  ICF)  to  support  this  impact  assessment  report,  notably  with  respect  to  the 
underlying  econometric  modelling  and  analysis  of  this  impact  assessment  report.  The 
analytical  methods  are  further  described  in  Annex  4.  The  results  of  the  open  public 
consultation are described in Annex 2.  

98 

 
 
 
 
 
Annex 2: Stakeholder consultations 

The  Inception  Impact  Assessment  for  updated  rules  for  aviation  was  published  3  July 
2020 with a feedback period lasting until 28 August 2020. The open public consultation 
was conducted through an online survey between 1 October 2020 and 14 January 2021. 
Other stakeholder meetings were not organised for ETS aviation rules update. 

Inception Impact Assessment 

Feedback was invited to six policy options on CORSIA implementation: 

1) EU ETS full legal scope; 
2) Intra-EU/EFTA ETS only; 
3) CORSIA only; 
4) ETS-CORSIA “clean cut”; 
5) ETS-CORSIA “mix”; and 
6) ETS-CORSIA “mix” according to licence of aircraft operators. 

Feedback was invited to five policy options on auctioning share increase: 

0) Status quo; 
1) Immediate phase-out; 
3) Slow phase-out;  and 
4) Slow reduction. 

54 entities submitted their feedback to the Inception Impact Assessment.  

Respondents by type 

1 

6 

7 

5 

2 

20 

13 

States

NGOs

Companies and Business associations

Academic Institutions

Citizens

Anonymous

Other

99 

 
 
 
 
 
Five  Member  States,  Canada  and  the  USA  provided  feedback.  EU  MS  support  a 
coexistence of the EU ETS and CORSIA. Non-EU countries are concerned with overlap 
between  EU  ETS  and  CORSIA,  partial  implementation  of  CORSIA,  treatment  of  non-
EU carriers and the exclusivity of CORSIA.  

The  vast  majority  of  NGOs  favour  option  1  (EU  ETS  full  scope)  and/or  options 
maintaining  at  minimum  the  current  scope  or  hybrid  options  in  between.  They  also 
support an immediate phase out of free allowances (option 1).  

Most  business  associations  and  companies  give  preference  to  option  3  (CORSIA  only) 
with  openness  to  option  5  (ETS-CORSIA  mix).  On  auctioning,  most  business 
associations  and  companies  favour  the  status  quo  (option  0)  or  the  slowest  reduction 
(option 4) and the use of the revenues for the aviation industry.  

Among  the  citizens  that  participated  in  the  consultations,  the  majority  is  in  favour  of 
more ambition either through the EU ETS full scope, full auctioning or taxation measure. 
One  citizen  considers  that  EU  should  lead  by  example  and  implement  international 
agreements.  

Results of the open public consultation 

1.  Overview of respondents 

The OPC on the EU ETS on updated rules for aviation received a total of 81 replies from 
different  stakeholder  types.  The  largest  group  was  private  sector  stakeholders  (45%), 
followed  by  EU  citizens 
(15%),  non-governmental 
(20%),  public  authorities 
organisations  (NGOs)  (11%),  environmental  organisations  (5%),  academic/research 
institutions (2%), non-EU citizens (1%) and trade unions (1%).  

100 

 
 
 
 
Figure 2-1- Distribution of respondents by type and country* 

Source: Technopolis. [*map based on data related to EU-based respondents] 

Most  of  the  respondents  (90%  )  came  from  17  EU  countries.  The  largest  number  of 
replies  came  from  Belgium  (27%)128,  followed  by  Germany  (14%)  and  France  (9%). 
Respondents  from  outside  the  EU  were  from  the  United  Kingdom,  Canada,  Japan, 
Singapore,  Taiwan,  and  the  United  States.  In  addition,  27  papers  were  submitted  as 
attachments by 12 stakeholders. 

The  analysis  of  the  stakeholder  type  by  economic  sector  shows  a  heterogenous 
combination of stakeholders, with the most represented NACE sectors being Other sector 
activities  (29%),  Transportation  and  storage  (26%)  and  Professional,  scientific  and 
technical activities (20%). Nine per cent indicated they are active in Administrative and 
support  service  activities  sector  followed  by  Public  administration  and  defence,  and 
Compulsory social security (6%). 

2.  Methodology for data processing 

The  percentages  presented  below  refer  to  the  total  respondents  that  answered  the 
concerned  questions.  Some  questions  allowed  respondents  to  ‘rate’  options  (very 
negative-very  positive).  On  these  ratings,  the  report  generally  provides  figures  for  the 
highest  rating  as  well  as  for  the  lowest  one,  as  these  are  indicative  of  most  relevant 
positions. 

The responses from the online survey were processed statistically and thematically, with 
a correlation analysis being conducted for each question. Position papers were processed 
via  cataloguing.  The  papers  were  selected  for  analysis  based  on  a  series  of  criteria  to 
capture the respondents’ sentiment regarding the role of the current EU ETS as regards 

128 This result is influenced by the fact that a large number of business associations and NGOs that responded are based in Belgium. 

101 

 
 
 
 
                                                 
aviation in light of the increased climate ambition, the interaction between EU ETS and 
CORSIA, the opportunity to review free allocation and auctioning, and recommendations 
about policy options. 

3.  Questionnaire 

The  questionnaire  was  composed  of  two  parts.  The  first  part  dealt  with  the 
implementation  of  CORSIA  through  the  EU  ETS  Directive,  including  the  interaction 
between  CORSIA  and  the  EU  ETS  for  aviation.  The  second  one  addressed  possible 
policy  changes  on  free  allocation  and  auctioning  of  allowances  in  the  EU  ETS  for 
aviation. 

3.1 PART I: Market-based measures: EU ETS and CORSIA (from Q1 to Q7) 

The  vast  majority  of  the  respondents  from  all  categories  (91%,  71)  agreed  that  the 
aviation sector should contribute more to climate actions than it currently does and that 
market-based measures can be effective to tackle aviation emissions in line with the EU 
Green  Deal  objectives  (88%;  69).  Respondents  also  stressed  the  need  for  market-based 
measures to better contribute to promote fair competition amongst EU air operators, EU 
and third-party operators, and between competing modes of transport.  

The stakeholders were asked to give their opinion on their most preferable option(s) 
regarding the way to implement CORSIA by the EU. The total number of responses was 
94, while the total number of respondents were 77.  The question allowed for multiple-
choice options. As such, respondents could choose more than one of the most preferred 
options, resulting in a combination of responses.   

Over  one-third  of  responses  (30),  mostly  individuals  and  NGOs,  but  also  including  the 
only trade union who participated in the survey, preferred Option 1 - EU ETS full legal 
scope. The second most preferred option was Option 3 - CORSIA only (27%; 25), mainly 
supported  by  the  private  sector  and  public  authorities.  The  third  most  favoured  option 
was Option 5 – ETS-CORSIA “mix” which received one-fifth of preferences (21%; 20), 
again  due  to  the  private  sector  and  public  authorities.  Next  came  Option  4  –  ETS-
CORSIA “clean cut” with 16% (15 responses), mainly from private sector stakeholders 
and public authorities.129 

The results also indicate that the least favoured options if Option 3 – CORSIA only (27%, 
42), due to the responses from individuals, NGOs, almost half of Public authorities that 
participated,  and  one  fourth  of  private  sector  respondents.  Option  6  –  ETS-CORSIA 
“mix” according to licence of aircraft operators (21%, 33) and Option 1 – EU ETS full 
legal  scope  (20%,  31)  follow  closely  as  the  second  and  third  least  favoured  options, 

129 This was a multiple choice questions and respondents could select several options. 

102 

 
 
 
                                                 
 
respectively due to 60% of total private sector responses for the former and, for the latter, 
to the responses from half of the public authorities and 64% of private sector.130 

Overall, most of the respondents assessed the CORSIA aspects of the EU ETS Directive 
as  rather  positive.  More  that  half  of  them  (55%;  37),  mainly  from  the  private  sector, 
appreciated the reference made in the EU ETS to the CORSIA’s general ambition of the 
targets under the Paris Agreement. A similar pattern of responses emerged regarding the 
level  of  participation  and  implementation  of  CORSIA  in  the  EU  ETS  (53%,  36). 
Likewise,  most  of  respondents  from  private  sector  and  public  authorities  considered 
registries as a positive aspect (42%, 28). On the assurance of equal treatment of airlines 
operating  on  the  same  routes,  the  responses  showed  a  comparatively  overwhelming 
positive  response  (62%,  41),  represented  mainly  by  the  private  sector,  individuals,  and 
public authorities.  

Respondents  from  the  private  sector,  NGOs,  and  individuals  (59%)  agreed  upon  the 
continuation of flights  within  an outermost region in  the current  scope of the EU ETS. 
More than half of the respondents (58%) from all categories were in favour of including 
international flights to or from outermost regions under CORSIA.  

A  large  majority  of  respondents  (82%;  62)  agreed  to  combine  market-based  measures 
such  as  the  EU  ETS  and  CORSIA  with  other  policies  such  as  support  for  innovative 
aviation  technologies,  operational  (ATM)  improvements,  taxation,  and  the  production 
and use of sustainable aviation fuels.  

Responses  from  across  all  stakeholder  types  overall  acknowledged  the  need  for  the 
aviation  sector  to  contribute  to  fight  climate  change  (60%),  with  most  of  the  private 
sector demanding such contributions to focus on technological improvements. 

3.2 PART II: Free allocation and auctioning (from Q8 to Q11) 

Regarding  the  effects  of  a  reduction  or  removal  of  the  free  allocation  of  allowances  to 
airlines,  most  of  the  respondents,  mainly  from  the  private  sector,  individuals,  public 
authorities  and  NGOs  (79%,  55)  found  that  this  measure  would  increase  the  cost  of 
flying for both operators and consumers, although more than 60% (40) agreed it would 
increase the impact of climate change mitigation by the EU ETS.  

As regards the assessment of the five options for amending the current modulation of the 
share  of  free  allocation  in  the  EU  ETS,  respondents  most  of  all  preferred  Option  2  – 
Immediate  phase-out,  with  35%  support  (28  responses)  mainly  from  individuals  and 
NGOs.  With  38%  of  responses  (33),  primarily  from  individuals  and  NGOs,  the  status 
quo (Option 1) resulted to be the least preferable choice. The importance of the risk of 
carbon  leakage,  which  might  arise  for  flights  to  destinations  outside  the  scope  of  the 

130 This was a multiple choice questions and respondents could select several options. 

103 

 
 
                                                 
 
ETS,  was  also  underlined  as  a  relevant  factor  to  consider  when  assessing  whether  full 
phase-out is to be preferred over reduction131.  

In  relation  to  how the revenues from  the auctioning of aviation  allowances  can be best 
used  to  meet  the  EU  Green  Deal  climate  objectives  suggestions  were  made  by  69%  of 
respondents (56). Most of them from all stakeholder types agreed that revenues collected 
through such measures should be utilised to support research & innovation to accelerate 
the decarbonisation of aviation. 

More  than  one-third  of  respondents  (38%;  31)  provided  additional  comments  beyond 
what  already  shared  within  each  survey  question.  Private  sector  stakeholders  requested 
more  time  before  changing  the  allocation  of  allowances  during  the  current  pandemic 
situation, due to its hard impact on the EU aviation sector. Environmental organizations 
and private sector respondents emphasised the possibility of regulatory improvement of a 
“methodology  to  account  for  the  use  of  sustainable  aviation  fuels  and  other  aviation 
decarbonisation technologies such as hydrogen or electric-propulsion engines in the EU 
ETS”.  The  NGOs  remarked  the  necessity  for  the  European  Commission  to  release  an 
assessment on CORSIA’s environmental integrity before proposing new EU legislation. 
The trade union that participated in the survey expressed concern that the newly installed 
revision of EU ETS will be properly assessed and allow for revisions, and pricing. 

4.  Position papers 

Key messages of the position papers 

›  The  papers  mainly  focused  on  the  following  themes:  co-existence  and  articulation 
between  EU  ETS  and  CORSIA,  coverage  of  EU  ETS,  increase  of  the  share  of 
allowances to be auctioned 

›  The implementation aspects of CORSIA in the EU mainly centered on the coverage 
of the flights. Aspects such as enforcement, MRV and other implementation aspects 
were  only  briefly  mentioned.  There  was  limited  response  on  the  coverage  of 
outermost regions in the EU ETS, connectivity and regional impacts.  

›  All papers assumed that market based mechanisms, in particular CORSIA and/or EU 
ETS,  will  be  used  in  reducing  emissions  in  the  aviation  sector.  A  majority  of 
respondents  support  additional  measures  (e.g.  sustainable  aviation  fuels,  clean 
technologies and improving airline operations and infrastructure).  

›  Especially  public  authorities,  non-governmental  organisations  and  citizens  were  of 
the opinion that EU ETS should be the main instrument for reducing emissions and 
that CORSIA should play a supplementary role because it has a less positive effect 
on the environmental integrity.  

›  The main challenges listed on implementing CORSIA and EU ETS include double 
regulation,  carbon leakage in  hubs, unfair competition between EEA and non EEA 

131 In particular, respondents suggested to analyse whether long-haul flights with connections in non-European hubs (not subject to the 
EU ETS) will have a competitive advantage compared to flights with connections in European hubs (subject to ETS). If so, this might 
lead to increased emissions due to longer routes, in addition to distorting competition. 

104 

 
 
                                                 
airlines. Several respondents made suggestions to fine-tune the options listed in the 
questionnaire  or  to  provide  additional  options.  Several  measures  were  raised  by 
some respondents to mitigate the challenges of implementing CORSIA and EU ETS, 
notably the introduction of a carbon border adjustment mechanism.  

›  Opinions in the papers differed on whether and how the free allocation of allowances 
should be decreased. COVID-19 played an important role in the selection of options. 
›  Nearly  all  positions  papers  emphasised  the  impact  of  COVID-19  on  the  aviation 
sector and called the Commission to analyse these impacts in the impact assessment 
and  tailor  policy  options  if  that  is  necessary  in  view  of  COVID-19  recovery  plans 
and environmental investments. 

4.1 Sector coverage 

The  OPC  on  the  EU  ETS  on  updated  rules  for  aviation  received  a  total  of  47  position 
papers (27 came from the IIA on EU ETS, 12 from the OPC). Eight papers found online 
were added to the analysis. 

The  largest  group  was  business  association  (34%),  followed  by  Company/Business 
organizations  (25%),  NGO  (16%),  Public  authorities  (14%),  Academic/research 
institutions (5%) and EU Citizen (5%). 

Most of the respondents (84%) came from 8 EU countries, notably Belgium (36%) and 
Germany (18%). Respondents from outside the EU were from the United Kingdom, the 
United States, Switzerland and Japan. 

4.2 Adequacy of market based mechanisms 

59% of papers expressed an opinion on the adequacy of market-based measures (MBMs) 
to address emissions in the aviation sector.  

Almost  a  third  (32%)  commented  that  MBMs  is  a  key  solution,  while  some  argued  it 
should be part of a bundle of measures. 54% noted that additional measures are needed to 
make the Green Deal a success and to decarbonise the aviation sector, either as a bundle 
of instruments or with CORSIA or EU ETS as the key instrument. Among the 17 papers 
identifying  those  measures,  most  popular  ones  include  the  use  of  sustainable  aviation 
fuels (75%), the introduction of clean technologies (53%) and operational improvements 
(41%)  and  infrastructural  improvement  (24%)  including  promoting  the  use  of  other 
transport modes on short-haul distances. 

4.3 Implementation of CORSIA in the EU 

Two thirds of the respondents expressed views on the supported policy options. Opinions 
differed on how CORSIA should be implemented in the EU. Option 3 (CORSIA only), 
Option 4 or another way of coexistence between EU ETS and CORSIA, Option 5, Option 
1 (EU ETS full scope, mostly NGOs and EU citizens) were the most favoured options. 
Option 6 was discarded by respondents.   

105 

 
 
 
Some respondents expressed concerns if EU ETS and CORSIA remain parallel system, 
e.g.  creation  of  market  distortion,  double  regulation,  increased  administrative  budget, 
non-compliance  with  the  Chicago  Convention  and  other  international  commitments. 
Several  papers  asked  for  alignment  between  CORSIA  and  EU  ETS:  i.e.  implementing 
CORSIA MRV requirements fully in the EU ETS.  

4.4 Outermost regions: coverage, connectivity and regional impacts 

Only a few papers (4, 9%) addressed coverage of flights regarding the outermost regions 
directly,  and  the  comments  are  varied.  Two  proposed  including  in  the  EU  ETS,  one 
wanted them addressed via CORSIA and another stated the existing exemption should be 
maintained.  

Little feedback (7%) was also provided on the impact of implementing CORSIA and EU 
ETS  on  small  regions  and  connectivity  of  those  regions.  Respondents  did  however 
recognise  the  importance  of  assessing  overall  impacts  of  the  policy  options  to  these 
regions, as air traffic plays a vital role.  

4.5 Hub leakage, destination shift and modal shift 

If the current scope of the EU ETS will be maintained and only flights to and from EEA 
countries  are  included,  a  feeder  flight  from  an  EEA  country  with  a  transfer  at  an 
European  hub  will  be  included  in  the  EU  ETS.  According  to  most  of  the  respondents 
(25%)  that  mentioned  the  risk  of  hub  leakage,  this  could  mean  unfair  competition 
between long-haul flights with connections in non-European hubs and flights connnected 
to European hubs. Traffic might be diverted to non-EEA hubs132 and there could be a risk 
of carbon leakage (increased emissions due to longer routes). A proposal to implement a 
Carbon  Border  Adjustment  Mechanism  (CBAM)  to  address  this  competitive  distortion 
was made by a respondent.  

A limited number of position papers addressed the issue of investing into other modes of 
green  transport  such  as  sustainable  rail  transport  on  short-haul  distances  and  building 
railway  connections  between  hubs  to  better  integrate  transport  modes  and  facilitate  a 
modal shift towards sustainable transport modes.  

4.6 Revisions in the free allocation of allowances and share to be auctioned 

59% of papers expressed a view on the revision of the allowances system. A majority did 
not specifically indicate whether the share of emission allowances to be auctioned should 
be  increased.  Respondents  supported  in  general  a  decrease  or  a  phase  out  in  the  free 
allocation of allowances, although they  expressed variations in  the speed or reduction / 
phasing  out.  Some  argued  that  an  evolution  of  the  share  between  free  and  auctioned 
allowances will not mitigate CO2 emissions, as the environmental impact is determined 

132 The risk of carbon leakage and destination shifts are most prominent in the hubs located near the EEA, the Middle East, Turkey 
and - because of Brexit - the UK. The impact of Brexit on destination shift and hub leakage was explicitly mentioned by respondents. 

106 

 
 
                                                 
by the overall “cap”. Some responses were influenced by the impact of COVID-19 on air 
traffic and mentioned that increasing the auctioning share swiftly could distort the market 
and endanger COVID-19 recovery plans and environmental investments.  

The  top  priorities  for  investing  the  revenues  of  auctioning  include  technologies  that 
would promote decarbonisation of the sector, such as uptake of sustainable aviation fuels, 
research  and  development  in  the  aviation  sector,  better  infrastructure  and  operational 
issues and green aviation technologies.  

5.  Conclusions  

The  vast  majority  of  the  respondents  (91%)  from  all  categories,  including  from  the 
aviation  sector,  agree  that  the  aviation  sector  should  contribute  more  to  climate 
actions.  Those  in  disagreement  argue  that  the  sector  is  already  implementing  the 
necessary  measures  to  reduce  its  carbon  footprint  and  that  no  further  measures  are 
required. 

A very large majority of respondents (88%) believe that market-based measures can be 
effective to tackle aviation emissions in line with the climate objectives. This view is 
supported mainly by the business sector and EU Citizens, and they represent almost 60% 
of  all  the  respondents.  A  majority  of  position  papers  advocate  for  additional  measures 
(e.g. use of sustainable aviation fuels, introduction of new technologies, operational and 
infrastructural improvements).  

The  main  challenges  listed  on  implementing  CORSIA  and  EU  ETS  include  double 
regulation,  carbon  leakage  in  hubs,  unfair  competition  between  EEA  and  non-EEA 
airlines. Several measures were raised by some respondents to mitigate the challenges of 
implementing  CORSIA  and  EU  ETS,  notably  the  introduction  of  a  carbon  border 
adjustment mechanism.  

With  regards  to  the  different  policy  options  to  assess  whether  and  how  the  EU  can 
implement CORSIA, the most preferable option out of the six presented is  Option 1  - 
EU ETS full legal scope, supported by 32% of responses, mainly EU Citizens and NGOs. 
The  second  most  preferred  option  with  27%  support  from  most  of  business  sector 
stakeholders  and  Public  authorities  is  Option  3  -  CORSIA  only,  which  together  with 
Option 5 ETS-Corsia mix is also the preferred choice for aviation industry stakeholders. 
Option 4 ETS CORSIA “clean cut” is the fourth most preferred with 16% of responses, 
whereas Option 6 ETS - CORSIA “mix” according to licence aircraft operators only and 
Option  2  –  Intra-EU/EFTA  ETS  had  the  least  number  of  responses,  with  3%  and  1% 
respectively.  

The majority of respondents (59%), including most of EU citizens, some private sector 
stakeholders and NGOs agree on keeping flights within an outermost region within the 
scope of the EU ETS.  Almost  half of respondents  agree on the inclusion under the EU 
ETS of domestic flights to or from outermost regions (currently excluded until the end 

107 

 
 
 
of 2023), with half of positive responses coming from EU Citizens and NGOs, although 
also  other  stakeholder  types  support  this.  About  half  of  respondents,  primarily  EU 
citizens and NGOs, support the inclusion in the EU ETS of non-domestic flights to or 
from outermost regions. A large majority of respondents from all categories, as well as 
75% of the respondents from the aviation sector supports the inclusion under CORSIA 
of  international  flights  to  or  from  outermost  regions.  NGOs  confirmed  their 
scepticism about CORSIA as a long-term solution and disagreement against the inclusion 
of international flights under CORSIA. 

A large majority of respondents (69%) gathering mostly NGOs and EU citizens agreed 
that  a  reduction  or  removal  of  the  free  allocation  of  allowances  to  airlines  would 
increase  the  climate  change  mitigation  impact  by  the  EU,  although  most  of  the 
respondents  from  the  aviation  sector  oppose  this  view.  In  position  papers,  expressed 
opinions  were  mixed,  with  a  slight  preference  for  removal  of  all  free  allocations, 
followed closely by a preference to either decrease or not decrease the allocations.  

With regards to the effect of the reduction or removal of the free allocation of allowances 
to  airlines,  a  majority  of  respondents  gathering  mainly  EU  Citizens,  NGOs,  and  Public 
authorities  agree  that  it  would  increase  fairness  between  those  airlines  eligible  to 
receive  the  allocation  and  those  that  are  not.  The  private  sector  disagrees  with  the 
statement or does not know. 

As  regards  the  modulation  of  the  share  of  free  allocation,  relative  to  the  current 
situation the two most preferred options, "status quo" and "immediate phase-out", are at 
the same time the least preferred options showing a clear split in the distribution of the 
respondents preferences. As regards aviation sector respondents, status quo is their most 
preferred option and immediate phase out the least favoured. 

On the topic of improving the level playing field among transport modes, over 50% 
of  responses  coming  from  a  mixed  group  of  stakeholders  agree  that  a  reduction  or 
removal of the free allocation of allowances to airlines would be beneficial. 

Most  stakeholders  across  all  user  types  agree  that  revenues  from  the  auctioning  of 
aviation  allowances  should  be  focused  on  decarbonisation  along  the  whole  value 
chain of the aviation sector. This opinion is particularly supported by aviation industry 
respondents, and is shared in position papers.  

Several respondents emphasise both in the survey and the position papers the impact of 
COVID-19 on the aviation sector and call the Commission to analyse these impacts in 
the impact assessment and tailor policy options accordingly in future recovery plans and 
environmental investments. 

108 

 
 
 
 
 
Annex 3: Who is affected and how? 

The  EU  ETS  for  aviation  has  been  in  force  since  2012,  covering  approximately  500 
airlines.  The  covered  entities  have  become  very  familiar  with  the  EU  ETS’s  annual 
compliance cycle based  on obligations related monitoring, reporting  and  verification of 
emissions. Compliance with these rules is almost 100%. This also holds for the national 
authorities  responsible  for  various  implementing  tasks,  such  as  the  issuing  of  emission 
permits, the assessment of monitoring plans and emission data, as well as the allocation 
of free allowances.  

The  initiative  does  not  affect  these  regular  activities.  However,  the  coverage  of  extra-
EEA  flights  by  CORSIA  and  immediate  full  auctioning  are  likely  to  have  practical 
implications for certain stakeholders.    

1.  Practical implications of the initiative 

Member States 

On  the  one  hand,  the  initiative  will  lead  to  an  increased  administrative  burden  for 
Member  States,  as  they  will  have  to  commit  resources  to  continued  governance  of 
CORSIA over its duration.  

increased  administrative  burden 

The 
the  preparation  and 
is 
implementation of national regulations and ongoing engagement with CORSIA decision-
making (including reviews) at ICAO. 

include 

likely 

to 

On  the  other  hand,  immediate  full  auctioning  (option  A1FULL)  means  that  the 
administrative  burden  linked  to  free  allocation  is  completely  removed.  Under  the 
preferred policy options (C3CLEAN and A1FULL), the estimate of possible cumulative  
auction revenues is €2.41 billion for  the 3  years from 2023-2025 and €4.67 billion for 
the  following  five  years  from    2026-2030,  based  on  the  same  approach  to  estimating 
auction revenues as used in the broader ETS impact assessment. 

National competent authorities 

National  competent  authorities  are  significantly  involved  in  the  implementation  and 
enforcement  of  the  initiative,  including  CORSIA.  This  involvement  will  result  in  an 
administrative burden, which will relate to the training of staff, calculating the offsetting 
obligations  for  aircraft  operators,  monitoring  and  enforcing  compliance.  However,  full 
auctioning would reduce the administrative burden and costs related to the allocation of 
free allowances immediately and considerably..   

109 

 
 
Outermost regions 

The macro-economic impacts  of this initiative on outermost regions  are  likely to  affect 
residents’ access  to  employment, education and other opportunities. This initiative may 
have  an  impact  on  the  connectivity  between  regions  and  limit  their  economic 
development. 

Aircraft operators 

This  initiative  will  result  in  an  increased  level  of  administrative  costs  as  the  aircraft 
operators are subject to two sets of rules. However, the EU ETS part is the continuation 
of the existing administrative procedures, and the separation of the two regimes is simple 
as the two rule sets  would  apply  to  different  routes. To  comply  with  CORSIA,  aircraft 
operators will likely need to engage in procuring and surrendering carbon offset credits.  

However,  these  costs  are  expected  to  be  relatively  small  compared  to  the  overall 
operating costs. Finally, major part of the costs incurred by aircraft operators are likely to 
be passed through to the end-consumers. 

Society at large 

Society  will  benefit  from  the  emission  reductions  achieved  through  the  initiative  and 
from  a  slight  increase  in  employment.  The  initiative  is  expected  to  have  no  negative 
impact  on  low-income  groups  due  to  the  insignificant  increase  in  prices  resulting  from 
the measure. 

2.  Summary of costs and benefits 

The  estimates  of  the  costs  and  benefits  for  the  preferred  option  are  relative  to  the 
baseline.  

The administrative costs related to CORSIA implementation are based on estimates made 
by ICAO.133 The administrative costs presented in the table below are ceiling costs and 
are likely to overestimate them. It is worth noting that the increased administrative costs 
incurred by airlines in relation to the implementation of CORSIA for extra-EEA flights 
represents  a small share  of the airlines’ operating costs. This  increase in  administrative 
costs for extra-EEA flights is likely to be passed through to end-consumers. 

133 
from CORSIA. 

ICAO, 2019. Analysis on the estimation of CO2 emissions reductions and costs expected to result 

110 

 
 
 
                                                 
I. Overview of Benefits (total for all provisions) – Preferred Option (C3CLEAN+A1FULL)(relative to 
the baseline) 

Description 

Reduction of net extra-
EU/EFTA air transport 
CO2 emissions in 2030 
compared to the 
baseline  

No change in net intra-
EU/EFTA air transport 
CO2 emissions in 2030 
compared to the 
baseline 

Recyling of carbon 
revenues 

Abolishment of the 
administrative costs 
related to free 
allocation 

Distributional effects 

Amount 

Direct benefits 

Comments 

-9.4% compared to the baseline 
(Table 6.1) 

Direct benefits to the society at large.  

Same amount of net intra-EU/EFTA air 
transport CO2 emissions as in the baseline: 
27 Million tonnes.  

Direct benefits to the society at large 

The preferred policy options generate 
cumulative EU ETS auctioning revenues of 
EUR 2,413 billion compared to EUR 0,363 
billion under the baseline 

EU ETS auctioning revenues are 
expected to benefit to the society at 
large, as Member States increase their 
government expenditure or reduce taxes 

Indirect benefits 

Compared to the baseline which maintains 
free allowances for aviation until 2030, the 
preferred option A1FULL removes free 
allowances from the entry into force of the 
revision 

Compared to the baseline, the preferred 
option A1FULL will yield positive impact 
on lower-income households as auctioning 
revenues are recycled by Member States.  
The increased carbon price under the 
preferred option compared to the baseline is 
likely to have a positive impact on lower-
income households. 

Direct benefits to national competent 
authorities and the Commission, as the 
administrative burden is abolished.  

The increase carbon price is likely to be 
socially progressive as it affects 
predominantly higher-income 
households, which are more likely to fly 
than lower-income households. 

111 

 
 
 
 
II. Overview of costs – Preferred option 

Citizens/Consumers  

Businesses 

Administrations 

One-off 

Recurrent 

One-off 

Recurrent 

One-off  Recurrent 

Negligible 
increase in the 
2030 operating 
costs for extra-
EEA flights 
under the 
preferred 
option 
compared to 
the baseline 
(carbon costs 
as 0.01% of the 
total operating 
costs) 

Negligible 
increase in the 
2030 ticket 
price for extra-
EEA flights 
compared to 
the baseline 
(+0.03 €) 

Initial setting 
up of the 
monitoring 
and reporting 
systems 
under 
CORSIA for 
extra-EEA 
flights 
(approx. 
EUR 4 000-
400 000 per 
large airline, 
EUR 0-800 
per small 
airline, or 
under EUR 
0.05/passeng
er in setup 
year) 

Additional 
costs for the 
offsetting of 
emissions 
under CORSIA 
for extra-EEA 
flights  
(approx. yearly 
per-airline 
ceiling of EUR 
4 000-17 000 
for airlines that 
are eligible to 
use simplified 
reporting 
procedures,  
EUR 8 000-
80 000 for 
those that are 
not) 

Initial 
setting up 
of the 
monitoring 
and 
reporting 
systems 
under 
CORSIA 
for extra-
EEA 
flights for 
Member 
States and 
EU 
authorities 
(approx. 
EUR 
4 000-
400 000 
million) 

Administrati
ve costs for 
Member 
States and 
EU 
authorities 
as regards 
the 
participation 
in the 
governance, 
the 
implementati
on and the 
enforcement 
of CORSIA 
 (approx. 
EUR 
140 000-
260 000 per 
year in total) 

Direct costs 

Indirect costs 

Direct costs 

Compli
ance 
with 
CORSI
A for 
extra-
EEA 
flights  

Adminis
trative 
and 
enforce
ment 
costs of 
CORSI
A for 
extra-
EEA 
flights 

Indirect costs 

112 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 4: Analytical methods 

This  Annex  contains  two  sections.  Section  1.1  describes  the  common  analytical 
framework for the fit for 55 proposals. For this Impact Assessment, the most important 
element  is  the  REF  scenario,  which  was  used  for  input  variables  for  the  aviation 
modelling for this impact assessment.  

Section 1.2 describes the specific analytical approach used for this impact assessment.  

Common analytical framework for the Impact Assessments of the revision of ESR, ETS, 
LULUCF, RED and EED Annex Methodology 

1.  COMMON  ANALYTICAL  FRAMEWORK  FOR  THE  IMPACT  ASSESSMENTS  OF  THE 

REVISION OF ESR, ETS, LULUCF, RED AND EED  

1.1.1 

Introduction 

Aiming  at  covering  the  entire  GHG  emissions  from  the  EU  economy,  and  combining 
horizontal  and  sectoral  instruments,  the  various  pieces  of  legislation  under  the  “Fit  for 
55” package strongly interlink, either because they cover common economic sectors (e.g. 
buildings sector is  currently  addressed by energy  efficiency and renewables polices but 
would  be  also  falling  in  the  scope  of  extended  ETS)  or  by  the  direct  and  indirect 
interactions between these sectors (e.g. electricity supply sector and final demand sectors 
using electricity). 

As a consequence, it is crucial to ensure consistency of the analysis across all initiatives. 
For  this  purpose,  the  impact  assessments  underpinning  the  “Fit  for  55”  policy  package 
are using a collection of integrated modelling tools covering the entire GHG emissions of 
the EU economy.  

These tools are used to produce a common Baseline and a set of core scenarios reflecting 
internally  coherent  policy  packages  aligned  with  the  revised  2030  climate  target,  key 
policy findings of the CTP (see annex 1) and building on the Reference Scenario 2020, a 
projection of the evolution of EU and national energy systems and GHG emissions under 
the current policy framework134. These core scenarios serve as a common analytical basis 
for use across different “Fit for 55” policy initiatives, and are complemented by specific 
variants as well as additional tools and analyses relevant for the different initiatives. 

This  Annex  describes  the  tools  used  to  produce  the  common  baseline  (the  Reference 
Scenario  2020)  and  the  core  policy  scenarios,  the  key  assumptions  underpinning  the 
analysis, and the policy packages reflected in the core policy scenarios.  

134 The “current policy framework” includes EU initiatives adopted as of end of 2019 and the national 
objectives and policies and measures as set out in the final National Energy and Climate Plans – see the EU 
Reference Scenario 2020 publication. 

113 

 
 
                                                 
1.1.2  Modelling tools for assessments of policies 

1.1.2.1  Main modelling suite 

The main model suite used to produce the scenarios presented in this impact assessment 
has a successful record of use in the Commission's energy, transport and climate policy 
assessments.  In  particular,  it  has  been  used  for  the  Commission’s  proposals  for  the 
Climate  Target  Plan135  to  analyse  the  increased  2030  mitigation  target,  the  Sustainable 
and  Smart  Mobility  Strategy136,  the  Long  Term  Strategy137  as  well  as  for  the  2020 and 
2030 EU’s climate and energy policy framework.  

The PRIMES and PRIMES-TREMOVE models are the core elements of the modelling 
framework  for  energy,  transport  and  CO2  emission  projections.  The  GAINS  model  is 
used for non-CO2 greenhouse gas emission projections, the GLOBIOM-G4M models for 
projections  of  LULUCF  emissions  and  removals  and  the  CAPRI  model  is  used  for 
agricultural activity projections.  

The model suite thus covers: 

  The entire energy system (energy demand, supply, prices and investments to 
the future) and all GHG emissions and removals from the EU economy. 

  Time horizon: 1990 to 2070 (5-year time steps). 
  Geography: individually all EU Member States, EU candidate countries and, 
where  relevant  the  United  Kingdom,  Norway,  Switzerland  and  Bosnia  and 
Herzegovina. 

  Impacts:  energy  system  (PRIMES  and  its  satellite  model  on  biomass), 
transport  (PRIMES-TREMOVE),  agriculture,  waste  and  other  non-CO2 
emissions  (GAINS),  forestry  and  land  use  (GLOBIOM-G4M),  atmospheric 
dispersion, health and ecosystems (acidification, eutrophication) (GAINS). 

The  modelling  suite  has  been  continuously  updated  over  the  past  decade.  Updates 
include the addition of a new buildings module in PRIMES, improved representation of 
the  electricity  sector,  more  granular  representation  of  hydrogen  (including  cross-border 
trade138)  and  other  innovative  fuels,  improved  representation  of  the  maritime  transport 
sector,  as  well  updated  interlinkages  of  the  models  to  improve  land  use  and  non-CO2 
modelling. Most recently a major update was done of the policy assumptions, technology 
costs  and  macro-economic  assumptions  in  the  context  of  the  Reference  scenario  2020 
update. 

135 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020SC0176 
136 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020SC0331 
137 https://ec.europa.eu/clima/sites/clima/files/docs/pages/com_2018_733_analysis_in_support_en_0.pdf  
138 While cross-border trade is possible, the assumption is that there are no imports from outside EU as the 
opposite would require global modelling of hydrogen trade. 

114 

 
 
                                                 
The  models  are  linked  with  each  other  in  such  a  way  to  ensure  consistency  in  the 
building of scenarios (Figure 1). These inter-linkages are necessary to provide the core of 
the analysis, which are interdependent energy, transport and GHG emissions trends.  

Figure 1: Interlinkages between models 

1.1.2.2  Energy: the PRIMES model 
The  PRIMES  model  (Price-Induced  Market  Equilibrium  System)139  is  a  large  scale 
applied  energy  system  model  that  provides  detailed  projections  of  energy  demand, 
supply, prices and investment to the future, covering the entire energy system including 
emissions.  The  distinctive  feature  of  PRIMES  is  the  combination  of  behavioural 
modelling (following  a  micro-economic foundation) with  engineering  aspects,  covering 
all energy sectors and markets.  

The model has a detailed representation of policy instruments related to energy markets 
and  climate,  including  market  drivers,  standards,  and  targets  by  sector  or  overall.  It 
simulates the EU Emissions Trading System. It handles multiple policy objectives, such 
as  GHG  emissions  reductions,  energy  efficiency,  and  renewable  energy  targets,  and 
provides pan-European simulation of internal markets for electricity and gas. 

The  model  covers  the  horizon  up  to  2070  in  5-year  interval  periods  and  includes  all 
Member States of the EU individually, as well as neighbouring and candidate countries.  

PRIMES  offer  the  possibility  of  handling  market  distortions,  barriers  to  rational 
decisions, behaviours and market coordination issues and it has full accounting of costs 
(CAPEX and OPEX) and investment on infrastructure needs.  

139 More information and model documentation: https://e3modelling.com/modelling-tools/primes/  

115 

 
 
 
 
                                                 
PRIMES  is  designed  to  analyse  complex  interactions  within  the  energy  system  in  a 
multiple agent – multiple markets framework. Decisions by agents are formulated based 
on  microeconomic  foundation  (utility  maximization,  cost  minimization  and  market 
equilibrium)  embedding  engineering  constraints  and  explicit 
representation  of 
technologies and vintages, thus allowing for foresight for the modelling of investment in 
all sectors. 

PRIMES allows simulating long-term transformations/transitions and includes non-linear 
formulation  of  potentials  by  type  (resources,  sites,  acceptability  etc.)  and  technology 
learning. Figure 2 shows a schematic representation of the PRIMES model. 

Figure 2: Schematic representation of the PRIMES model 

It  includes  a  detailed  numerical  model  on  biomass  supply,  namely  PRIMES-Biomass, 
which  simulates  the  economics  of  current  and  future  supply  of  biomass  and  waste  for 
energy  purposes.  The  model  calculates  the  inputs  in  terms  of  primary  feedstock  of 
biomass and waste to satisfy a given demand for bio-energy and provides quantification 
of  the  required  capacity  to  transform  feedstock  into  bioenergy  commodities.  The 
resulting  production  costs  and  prices  are  quantified.  The  PRIMES-Biomass  model  is  a 

116 

 
 
 
 
key link of communication between the energy system projections obtained by the core 
PRIMES energy system model and the projections on agriculture, forestry and non-CO2 
emissions provided by other modelling tools participating in the scenario modelling suite 
(CAPRI, GLOBIOM/G4M, GAINS).  

It also includes a simple module which projects industrial process GHG emissions.  

PRIMES  is  a  private  model  maintained  by  E3Modelling140,  originally  developed  in  the 
context  of  a  series  of  research  programmes  co-financed  by  the  European  Commission. 
The model has been successfully peer-reviewed, last in 2011141; team members regularly 
participate in international conferences and publish in scientific peer-reviewed journals. 

Sources for data inputs 

A summary of database sources, in the current version of PRIMES, is provided below: 

• 

• 

• 
• 

• 
• 

Eurostat and EEA:  Energy Balance sheets,  Energy prices (complemented by 
other sources, such IEA), macroeconomic and sectoral activity data (PRIMES 
sectors  correspond  to  NACE  3-digit  classification),  population  data  and 
projections,  physical  activity  data  (complemented  by  other  sources),  CHP 
surveys,  CO2  emission  factors  (sectoral  and  reference  approaches)  and  EU 
ETS registry for allocating emissions between ETS and non ETS 
Technology  databases:  ODYSSEE-MURE142,  ICARUS,  Eco-design,  VGB 
(power  technology  costs),  TECHPOL  –  supply  sector  technologies,  NEMS 
model database143, IPPC BAT Technologies144 
Power Plant Inventory: ESAP SA and PLATTS 
RES  capacities,  potential  and  availability:  JRC  ENSPRESO145,  JRC 
EMHIRES146, RES ninja147, ECN, DLR and Observer, IRENA 
Network infrastructure: ENTSOE, GIE, other operators 
Other  databases:  EU  GHG  inventories,  district  heating  surveys  (e.g.  from 
COGEN),  buildings  and  houses  statistics  and  surveys  (various  sources, 
including  ENTRANZE  project148, 
INSPIRE  archive,  BPIE149),  JRC-
IDEES150, update to the EU Building stock Observatory151 

140 E3Modelling (https://e3modelling.com/) is a private consulting, established as a spin-off inheriting staff, 
knowledge and software-modelling innovation of the laboratory E3MLab from the National Technical 
University of Athens (NTUA).  
141 SEC(2011)1569 : https://ec.europa.eu/energy/sites/ener/files/documents/sec_2011_1569_2.pdf  
142 https://www.odyssee-mure.eu/  
143 Source: https://www.eia.gov/outlooks/aeo/info_nems_archive.php  
144 Source: https://eippcb.jrc.ec.europa.eu/reference/  
145 Source: https://data.jrc.ec.europa.eu/collection/id-00138   
146 Source: https://data.jrc.ec.europa.eu/dataset/jrc-emhires-wind-generation-time-series   
147 Source: https://www.renewables.ninja/   
148 Source: https://www.entranze.eu/   
149Source:  http://bpie.eu/   
150 Source: https://ec.europa.eu/jrc/en/potencia/jrc-idees   

117 

 
 
                                                 
1.1.2.3  Transport: the PRIMES-TREMOVE model  

The  PRIMES-TREMOVE  transport  model  projects  the  evolution  of  demand  for 
passengers  and  freight  transport,  by  transport  mode,  and  transport  vehicle/technology, 
following  a  formulation  based  on  microeconomic  foundation  of  decisions  of  multiple 
actors. Operation, investment and emission costs, various policy measures, utility factors 
and  congestion  are  among  the  drivers  that  influence  the  projections  of  the  model.  The 
projections  of  activity,  equipment  (fleet),  usage  of  equipment,  energy  consumption  and 
emissions (and other externalities) constitute the set of model outputs.  

The PRIMES-TREMOVE transport model can therefore provide the quantitative analysis 
for  the  transport  sector  in  the  EU,  candidate  and  neighbouring  countries  covering 
activity,  equipment,  energy  and  emissions.  The  model  accounts  for  each  country 
separately which means that the detailed long-term outlooks are available both for each 
country and in aggregate forms (e.g. EU level). 

In the transport field, PRIMES-TREMOVE is suitable for modelling soft measures (e.g. 
eco-driving,  labelling);  economic  measures  (e.g.  subsidies  and  taxes  on  fuels,  vehicles, 
emissions; ETS for transport when linked with PRIMES; pricing of congestion and other 
externalities  such  as  air  pollution,  accidents  and  noise;  measures  supporting  R&D); 
regulatory  measures  (e.g.  CO2  emission  performance  standards  for  new  light  duty 
vehicles  and  heavy  duty  vehicles;  EURO  standards  on  road  transport  vehicles; 
technology  standards  for  non-road  transport  technologies,  deployment  of  Intelligent 
Transport Systems) and  infrastructure policies for  alternative fuels  (e.g.  deployment of 
refuelling/recharging  infrastructure  for  electricity,  hydrogen,  LNG,  CNG).  Used  as  a 
module  that  contributes  to  the  PRIMES  model  energy  system  model,  PRIMES-
TREMOVE  can  show  how  policies  and  trends  in  the  field  of  transport  contribute  to 
economy-wide trends in energy use and emissions. Using data disaggregated per Member 
State, the model can show differentiated trends across Member States.  

The PRIMES-TREMOVE has been developed and is maintained by E3Modelling, based 
on,  but  extending  features  of,  the  open  source  TREMOVE  model  developed  by  the 
TREMOVE152 modelling community. Part of the model (e.g. the utility nested tree) was 
built  following  the  TREMOVE  model.153  Other  parts,  like  the  component  on  fuel 
consumption and emissions, follow the COPERT model. 

151 Source: https://ec.europa.eu/energy/en/eubuildings  
152 Source: https://www.tmleuven.be/en/navigation/TREMOVE    
153 Several model enhancements were made compared to the standard TREMOVE model, as for example: 
for the number of vintages (allowing representation of the choice of second-hand cars); for the technology 
categories which include vehicle types using electricity from the grid and fuel cells. The model also 
incorporates additional fuel types, such as biofuels (when they differ from standard fossil fuel 
technologies), LPG, LNG, hydrogen and e-fuels. In addition, representation of infrastructure for refuelling 
and recharging are among the model refinements, influencing fuel choices. A major model enhancement 
concerns the inclusion of heterogeneity in the distance of stylised trips; the model considers that the trip 

118 

 
 
                                                                                                                                                 
 
Data inputs 

The main data sources for inputs to the PRIMES-TREMOVE model, such as for activity 
and  energy  consumption,  comes  from  EUROSTAT  database  and  from  the  Statistical 
Pocketbook  "EU  transport  in  figures154.  Excise  taxes  are  derived  from  DG  TAXUD 
excise  duty  tables.  Other  data  comes  from  different  sources  such  as  research  projects 
(e.g. TRACCS project) and reports. 

In the context of this exercise, the PRIMES-TREMOVE transport model is calibrated to 
2005, 2010 and 2015 historical data. Available data on 2020 market shares of different 
powertrain types have also been taken into account. 

1.1.2.4  Maritime transport: PRIMES-maritime model 

The  maritime  transport  model  is  a  specific  sub-module  of  the  PRIMES  and  PRIMES-
TREMOVE models aiming to  enhance the representation  of the maritime sector within 
the energy-economy-environment modelling nexus. The model, which can run in stand-
alone and/or linked mode with PRIMES and PRIMES-TREMOVE, produces long-term 
energy and emission projections, until 2070, separately for each EU Member-State. 

The coverage of the model includes the European intra-EU maritime sector as well as the 
extra-EU maritime shipping. The model covers both freight  and passenger international 
maritime.  PRIMES-maritime  focuses  only  on  the  EU  Member  State,  therefore  trade 
activity  between  non-EU  countries  is  outside  the  scope  of  the  model.  The  model 
considers the transactions (bilateral trade by product type) of the EU-Member States with 
non-EU  countries  and  aggregates  these  countries  in  regions.  Several  types  and  sizes  of 
vessels are considered. 

PRIMES-maritime  features  a  modular  approach  based  on  the  demand  and  the  supply 
modules. The demand module projects maritime activity for each EU Member State by 
type of cargo and by corresponding partner. Econometric functions correlate demand for 
maritime  transport  services  with  economic  indicators  considered  as  demand  drivers, 
including  GDP,  trade  of  energy  commodities  (oil,  coal,  LNG),  trade  of  non-energy 
commodities, international fuel prices, etc. The supply module simulates a representative 
operator  controlling the  EU fleet,  who offers the requested maritime transport services. 
The  operator  of  the  fleet  decides  the  allocation  of  the  vessels  activity  to  the  various 
markets  (representing  the  different  EU  MS)  where  different  regulatory  regimes  may 
apply  (e.g.  environmental  zones).  The  fleet  of  vessels  disaggregated  into  several 
categories is specific to cargo types. PRIMES maritime utilises a stock-flow relationship 
to simulate the evolution of the fleet of vessels throughout the projection period and the 
purchasing of new vessels. 

distances follow a distribution function with different distances and frequencies. The inclusion of 
heterogeneity was found to be of significant influence in the choice of vehicle-fuels especially for vehicles-
fuels with range limitations. 
154 Source: https://ec.europa.eu/transport/facts-fundings/statistics_en  

119 

 
 
                                                                                                                                                 
PRIMES-maritime  solves  a  virtual  market  equilibrium  problem,  where  demand  and 
supply interact dynamically in  each consecutive time period, influenced by a variety of 
exogenous  policy  variables,  notably  fuel  standards,  pricing  signals  (e.g.  ETS), 
environmental and efficiency/operational regulations and others. The PRIMES maritime 
model  projects  energy  consumption  by  fuel  type  and  purpose  as  well  as  CO2,  methane 
and N2O and other pollutant emissions. The model includes projections of costs, such as 
capital, fuel, operation costs, projections of investment expenditures in new vessels and 
negative externalities from air pollution. 

The model serves  to  quantify policy scenarios supporting the transition  towards carbon 
neutrality.  It  considers  the  handling  of  a  variety  of  fuels  such  as  fossil  fuels,  biofuels 
(bioheavy155, biodiesel, bio-LNG), synthetic fuels (synthetic diesel, fuel oil and gas, e-
ammonia and e-methanol) produced from renewable electricity, hydrogen produced from 
renewable  electricity  (for  direct  use  and  for  use  in  fuel  cell  vessels)  and  electricity  for 
electric  vessels.  Well-to-Wake  emissions  are  calculated  thanks  to  the  linkage  with  the 
PRIMES energy systems model which derives ways of producing such fuels. The model 
also  allows  to  explore  synergies  with  Onshore  Power  Supply  systems.  Environmental 
regulation, fuel blending mandates, GHG emission reduction targets, pricing signals and 
policies  increasing  the  availability  of  fuel  supply  and  supporting  the  alternative  fuel 
infrastructure are identified as drivers, along fuel costs, for the penetration of new fuels. 
As the model is dynamic and handles vessel vintages, capital turnover is explicit in the 
model influencing the pace of fuel and vessel substitution.  

Data inputs 

The  main  data  sources  for  inputs  to  the  PRIMES-maritime  model,  such  as  for  activity 
and  energy  consumption,  comes  from  EUROSTAT  database  and  from  the  Statistical 
Pocketbook "EU transport in figures156. Other data comes from different sources such as 
research projects (e.g. TRACCS project) and reports. PRIMES-maritime being part of the 
overall PRIMES model is it calibrated to the EUROSTAT energy balances and transport 
activity; hence the associated CO2 emissions are assumed to derive from the combustion 
of  these  fuel  quantities.  The  model  has  been  adapted  to  reflect  allocation  of  CO2 
emissions into intra-EU, extra-EU and berth, in line with data from the MRV database.157 
For air pollutants, the model draws on the EEA database. 

In the context of this exercise, the PRIMES-maritime model is calibrated to 2005, 2010 
and 2015 historical data. 

1.1.2.5  Non-CO2 GHG emissions and air pollution: GAINS  

The GAINS (Greenhouse gas and Air Pollution Information and Simulation) model is an 
integrated  assessment  model  of  air  pollutant  and  greenhouse  gas  emissions  and  their 

155  Bioheavy refers to bio heavy fuel oil.  
156  Source: https://ec.europa.eu/transport/facts-fundings/statistics_en  
157  https://mrv.emsa.europa.eu/#public/eumrv 

120 

 
 
                                                 
interactions.  GAINS  brings  together  data  on  economic  development,  the  structure, 
control  potential  and  costs  of  emission  sources  and  the  formation  and  dispersion  of 
pollutants in the atmosphere. 

In  addition  to  the  projection  and  mitigation  of  non-CO2  greenhouse  gas  emissions  at 
detailed sub-sectorial level, GAINS assesses air pollution impacts on human health from 
fine  particulate  matter  and  ground-level  ozone,  vegetation  damage  caused  by  ground-
level  ozone,  the  acidification  of  terrestrial  and  aquatic  ecosystems  and  excess  nitrogen 
deposition of soils. 

Model  uses  include  the  projection  of  non-CO2  GHG  emissions  and  air  pollutant 
emissions  for  the  EU  Reference  scenario  and  policy  scenarios,  calibrated  to  UNFCCC 
emission data as historical data source. This allows for an assessment, per Member State, 
of  the  (technical)  options  and  emission  potential  for  non-CO2  emissions.  Health  and 
environmental co-benefits  of climate and  energy  policies such as energy  efficiency can 
also be assessed. 

The  GAINS  model  is  accessible  for  expert  users  through  a  model  interface158  and  has 
been  developed  and  is  maintained  by  the  International  Institute  of  Applied  Systems 
Analysis159.  The  underlying  algorithms  are  described  in  publicly  available  literature. 
GAINS  and  its  predecessor  RAINS  have  been  peer  reviewed  multiple  times,  in  2004, 
2009 and 2011. 

Sources for data inputs 

The GAINS model assesses emissions to air for given externally produced activity data 
scenarios. For Europe, GAINS uses macroeconomic and energy sector scenarios from the 
PRIMES model, for agricultural sector activity data GAINS adopts historical data from 
EUROSTAT and aligns these with future projections from the CAPRI model. Projections 
for  waste  generation,  organic  content  of  wastewater  and  consumption  of  F-gases  are 
projected in GAINS in consistency with macroeconomic and population scenarios from 
PRIMES.  For  global  scenarios,  GAINS  uses  macroeconomic  and  energy  sector 
projections from IEA World Energy Outlook scenarios and agricultural sector projections 
from FAO. All other input data to GAINS, i.e., sector- and technology- specific emission 
factors  and  cost  parameters,  are 
the 
taken  from 
documentation.  

literature  and  referenced 

in 

1.1.2.6  Forestry and land-use: GLOBIOM-G4M  

The  Global  Biosphere  Management  Model  (GLOBIOM)  is  a  global  recursive  dynamic 
partial equilibrium model integrating the agricultural, bioenergy and forestry sectors with 

158 Source: http://gains.iiasa.ac.at/models/  
159 Source: http://www.iiasa.ac.at/   

121 

 
 
                                                 
the  aim  to  provide  policy  analysis  on  global  issues  concerning  land  use  competition 
between the major land-based production sectors. Agricultural and forestry production as 
well  as  bioenergy  production  are  modelled  in  a  detailed  way  accounting  for  about  20 
globally  most  important  crops,  a  range  of  livestock  production  activities,  forestry 
commodities as well as different energy transformation pathways. 

GLOBIOM covers 50 world regions / countries, including the EU27 Member States.  

Model  uses  include  the  projection  of  emissions  from  land  use,  land  use  change  and 
forestry  (LULUCF)  for  EU  Reference  scenario  and  policy  scenarios.  For  the  forestry 
sector,  emissions  and  removals  are  projected  by  the  Global  Forestry  Model  (G4M),  a 
geographically  explicit  agent-based  model  that  assesses  afforestation,  deforestation  and 
forest  management  decisions.  GLOBIOM-G4M  is  also  used  in  the  LULUCF  impact 
assessment  to  assess  the  options  (afforestation,  deforestation,  forest  management,  and 
cropland and grassland management) and costs of enhancing the LULUCF sink for each 
Member State. 

The  GLOBIOM-G4M  has  been  developed  and  is  maintained  by  the  International 
Institute of Applied Systems Analysis160. 

Sources for data inputs 

The  main  market  data  sources  for  GLOBIOM-EU  are  EUROSTAT  and  FAOSTAT, 
which provide data at the national level and which are spatially allocated using data from 
the SPAM model161. Crop management systems are parameterised based on simulations 
from  the  biophysical  process-based  crop  model  EPIC.  The  livestock  production  system 
parameterization  relies  on  the  dataset  by  Herrero  et  al162.  Further  datasets  are 
incorporated, coming from the scientific literature and other research projects. 

GLOBIOM is calibrated to FAOSTAT data for the year 2000 (average 1998 - 2002) and 
runs recursively dynamic in 10-year time-steps. In the context of this exercise, baseline 
trends of agricultural  commodities are aligned with FAOSTAT data  for  2010/2020  and 
broadly  with  AGLINK-COSIMO  trends  for  main  agricultural  commodities  in  the  EU 
until 2030. 

The  main  data  sources  for  G4M  are  CORINE,  Forest  Europe  (MCPFE,  2015)163, 
countries’  submissions  to  UNFCCC  and  KP,  FAO  Forest  Resource  Assessments,  and 

160 Source : http://www.iiasa.ac.at/   
161 See You, L., Wood, S. (2006). An Entropy Approach to Spatial Disaggregation of Agricultural 
Production, Agricultural Systems 90, 329–47 and http://mapspam.info/ . 
162 Herrero, M., Havlík, P., et al. (2013). Biomass Use, Production, Feed Efficiencies, and Greenhouse Gas 
Emissions from Global Livestock Systems, Proceedings of the National Academy of Sciences 110, 20888–
93. 
163 MCPFE (2015). Forest Europe, 2015: State of Europe's Forests 2015. Madrid, Ministerial Conference 
on the Protection of Forests in Europe: 314. 

122 

 
 
                                                 
national  forest  inventory  reports.  Afforestation  and  deforestation  trends  in  G4M  are 
calibrated to historical data for the period 2000-2013. 

1.1.2.7  Agriculture: CAPRI  

CAPRI is  a global  multi-country agricultural  sector model, supporting decision making 
related to the Common Agricultural Policy and environmental policy and therefore with 
far greater detail for Europe than for other world regions. It is maintained and developed 
in a network of public and private agencies including the European Commission (JRC), 
Universities (Bonn University, Swedish University of Agricultural Sciences, Universidad 
Politécnica  de  Madrid),  research  agencies  (Thünen  Institute),  and  private  agencies 
(EuroCARE), in charge for use in this modelling cluster). The model takes inputs from 
GEM-E3,  PRIMES  and  PRIMES  Biomass  model,  provides  outputs  to  GAINS,  and 
exchanges  information  with  GLOBIOM  on  livestock,  crops,  and  forestry  as  well  as 
LULUCF effects. 

The  CAPRI  model  provides  the  agricultural  outlook  for  the  Reference  Scenario,  in 
particular  on  livestock  and  fertilisers  use,  further  it  provides  the  impacts  on  the 
agricultural  sector  from  changed  biofuel  demand.  It  takes  into  account  recent  data  and 
builds on the 2020 EU Agricultural Outlook164.  Depending on the need it may also be 
used to run climate mitigation scenarios, diet shift scenarios or CAP scenarios.  

Cross checks are undertaken ex-ante and ex-post to ensure consistency with GLOBIOM 
on overlapping variables, in particular for the crop sector.  

Sources for data inputs 

The  main  data  source  for  CAPRI  is  EUROSTAT.  This  concerns  data  on  production, 
market balances, land use, animal herds, prices, and sectoral income. EUROSTAT data 
are  complemented  with  sources  for  specific  topics  (like  CAP  payments  or  biofuel 
production).  For  Western  Balkan  regions  a  database  matching  with  the  EUROSTAT 
inputs for CAPRI has been compiled based on national data. For non-European regions 
the  key  data  source  is  FAOSTAT,  which  also  serves  as  a  fall  back  option  in  case  of 
missing EUROSTAT data. The database compilation is a modelling exercise on its own 
because  usually  several  sources  are  available  for  the  same  or  related  items  and  their 
reconciliation  involves  the  optimisation  to  reproduce  the  hard  data  as  good  as  possible 
while maintaining all technical constraints like adding up conditions. 

In the context of this exercise, the CAPRI model uses historical data series at least up to 
2017, and the first simulation years (2010 and 2015) are calibrated on historical data. 

164 EU Agricultural Outlook for markets, income and environment 2020-2030,  
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/agricultural-outlook-
2020-report_en.pdf  

123 

 
 
                                                 
1.1.3  Assumptions on technology, economics and energy prices 

to  reflect 

the  fundamental  socio-economic, 

technological  and  policy 
In  order 
developments,  the  Commission  prepares  periodically  an  EU  Reference  Scenario  on 
energy, transport and GHG emissions. The scenarios assessment used for the “Fit for 55” 
policy package builds on the latest “EU Reference Scenario 2020” (REF2020)165. 

The main assumptions related to economic development, international energy prices and 
technologies are described below. 

1.1.3.1  Economic assumptions 

The  modelling  work  is  based  on  socio-economic  assumptions  describing  the  expected 
evolution  of  the  European  society.  Long-term  projections  on  population  dynamics  and 
economic  activity  form  part  of  the  input  to  the  energy  model  and  are  used  to  estimate 
final energy demand.  

Population  projections  from  Eurostat166  are  used  to  estimate  the  evolution  of  the 
European  population,  which  is  expected  to  change  little  in  total  number  in  the  coming 
decades.  The  GDP  growth  projections  are  from  the  Ageing  Report  2021167  by  the 
Directorate  General  for  Economic  and  Financial  Affairs,  which  are  based  on  the  same 
population growth assumptions. 

Table 1. Projected population and GDP growth per MS 

Population  

GDP growth  

2020  2025  2030  2020-‘25  2026-‘30 

EU27 

447.7  449.3  449.1  0.9% 

1.1% 

Austria 

8.90 

9.03 

9.15 

0.9% 

1.2% 

Belgium 

11.51  11.66  11.76  0.8% 

0.8% 

Bulgaria 

6.95 

6.69 

6.45 

0.7% 

1.3% 

Croatia 

4.06 

3.94 

3.83 

0.2% 

0.6% 

Cyprus 

0.89 

0.93 

0.96 

0.7% 

1.7% 

165 See related publication. 
166 EUROPOP2019 population projections 
https://ec.europa.eu/eurostat/web/population-demography-migration-projections/population-projections-
data  
167 The 2021 Ageing Report : Underlying assumptions and projection methodologies 
https://ec.europa.eu/info/publications/2021-ageing-report-underlying-assumptions-and-projection-
methodologies_en  

124 

 
 
 
  
                                                 
Czechia 

10.69  10.79  10.76  1.6% 

2.0% 

Denmark 

5.81 

5.88 

5.96 

2.0% 

1.7% 

Estonia 

1.33 

1.32 

1.31 

2.2% 

2.6% 

Finland 

5.53 

5.54 

5.52 

0.6% 

1.2% 

France 

67.20  68.04  68.75  0.7% 

1.0% 

Germany 

83.14  83.48  83.45  0.8% 

0.7% 

Greece 

10.70  10.51  10.30  0.7% 

0.6% 

Hungary 

9.77 

9.70 

9.62 

1.8% 

2.6% 

Ireland 

4.97 

5.27 

5.50 

2.0% 

1.7% 

Italy 

60.29  60.09  59.94  0.3% 

0.3% 

Latvia 

1.91 

1.82 

1.71 

1.4% 

1.9% 

Lithuania 

2.79 

2.71 

2.58 

1.7% 

1.5% 

Luxembourg  0.63 

0.66 

0.69 

1.7% 

2.0% 

Malta 

0.51 

0.56 

0.59 

2.7% 

4.1% 

Netherlands  17.40  17.75  17.97  0.7% 

0.7% 

Poland 

37.94  37.57  37.02  2.1% 

2.4% 

Portugal 

10.29  10.22  10.09  0.8% 

0.8% 

Romania 

19.28  18.51  17.81  2.7% 

3.0% 

Slovakia 

5.46 

5.47 

5.44 

1.1% 

1.7% 

Slovenia 

2.10 

2.11 

2.11 

2.1% 

2.4% 

Spain 

47.32  48.31  48.75  0.9% 

1.6% 

Sweden 

10.32  10.75  11.10  1.4% 

2.2% 

Beyond  the  update  of  the  population  and  growth  assumptions,  an  update  of  the 
projections on the sectoral composition of GDP was also carried out using the GEM-E3 
computable general equilibrium model. These projections take into account the potential 
medium- to long-term impacts of the COVID-19 crisis on the structure of the economy, 

125 

 
 
 
even  though  there  are  inherent  uncertainties  related  to  its  eventual  impacts.  Overall, 
conservative  assumptions  were  made  regarding  the  medium-term  impacts  of  the 
pandemic on the re-localisation of global value chains, teleworking and teleconferencing 
and global tourism. 

1.1.3.2  International energy prices assumptions 

Alongside  socio-economic  projections,  EU  energy  modelling  requires  projections  of 
international  fuel  prices.  The  2020  values  are  estimated  from  information  available  by 
mid-2020. The projections of the POLES-JRC model – elaborated by the Joint Research 
Centre and derived from the Global Energy and Climate Outlook (GECO168) – are used 
to obtain long-term estimates of the international fuel prices.  

The  COVID  crisis  has  had  a  major  impact  on  international  fuel  prices169.  The  lost 
demand cause an oversupply leading to decreasing prices. The effect on prices compared 
to pre-COVID estimates is expected to be still felt up to 2030. Actual development will 
depend on the recovery of global oil demand as well as supply side policies170. 

Table  3  shows  the  international  fuel  prices  assumptions  of  the  REF2020  and  of  the 
different  scenarios  and  variants  used  in  the  “Fit  for  55”  policy  package  impact 
assessments.  

Table 2: International fuel prices assumptions  

in $'15 per boe 

2000 

‘05 

‘10 

‘15 

‘20 

‘25 

‘30 

‘35 

‘40 

‘45 

‘50 

Oil 

38.4 

65.4 

86.7 

52.3  39.8  59.9  80.1  90.4  97.4  105.6  117.9 

Gas (NCV) 

26.5 

35.8 

45.8 

43.7  20.1  30.5  40.9  44.9  52.6  57.0 

57.8 

Coal 

11.2 

16.9 

23.2 

13.1  9.5 

13.6  17.6  19.1  20.3  21.3 

22.3 

in €'15 per boe 

2000  2005 

‘10 

‘15 

‘20 

‘25 

‘30 

‘35 

‘40 

‘45 

‘50 

Oil 

34.6 

58.9 

78.2 

47.2  35.8  54.0  72.2  81.5  87.8  95.2 

106.3 

Gas (NCV) 

23.4 

31.7 

40.6 

38.7  17.8  27.0  36.2  39.7  46.6  50.5 

51.2 

Coal 

9.9 

15.0 

20.6 

11.6  8.4 

12.0  15.6  16.9  18.0  18.9 

19.7 

Source: Derived from JRC, POLES-JRC model, Global Energy and Climate Outlook (GECO) 

168 https://ec.europa.eu/jrc/en/geco  
169 IEA, Global Energy Review 2020, June 2020 
170 IEA, Oil Market Report, June 2020 and US EIA, July 2020. 

126 

 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
1.1.3.3  Technology assumptions 

Modelling  scenarios  on  the  evolution  of  the  energy  system  is  highly  dependent  on  the 
assumptions  on  the  development  of  technologies  -  both  in  terms  of  performance  and 
costs. For the purpose of the impact assessments related to the “Climate Target Plan” and 
the  “Fit  for  55”  policy  package,  these  assumptions  have  been  updated  based  on  a 
rigorous  literature  review  carried  out  by  external  consultants  in  collaboration  with  the 
JRC171.  

Continuing  the  approach  adopted  in  the  long-term  strategy  in  2018,  the  Commission 
consulted  on  the  technology  assumption  with  stakeholders  in  2019.  In  particular,  the 
technology database of the main model suite (PRIMES, PRIMES-TREMOVE, GAINS, 
GLOBIOM, and CAPRI) benefited from a dedicated consultation workshop held on 11th 
November 2019. EU Member States representatives also had the opportunity to comment 
on  the  costs  elements  during  a  workshop  held  on  25th  November  2019.  The  updated 
technology assumptions are published together with the EU Reference Scenario 2020. 

1.1.4  The existing 2030 framework: the EU Reference Scenario 2020  

1.1.4.1  The EU Reference Scenario 2020 as the common baseline  

The  EU  Reference  Scenario  2020  (REF2020)  provides  projections  for  energy  demand 
and supply, as well as greenhouse gas emissions in all sectors of the European economy 
under  the  current  EU  and  national  policy  framework.  It  embeds  in  particular  the  EU 
legislation in place to reach the 2030 climate target of at least 40% compared to 1990, as 
well  as  national  contributions  to  reaching  the  EU  2030  energy  targets  on  Energy 
efficiency  and  Renewables  under  the  Governance  of  the  Energy  Union.  It  thus  gives  a 
detailed picture of where the EU economy and energy system in particular would stand in 
terms of GHG emission if the policy framework were not updated to enable reaching the 
revised  2030  climate  target  to  at  least  -55%  compared  to  1990  proposed  under  the 
Climate Target Plan172. 

The Reference Scenario serves as the common baseline shared by all the initiatives of the 
“Fit for 55” policy package to assess options in their impact assessments: 

-  updating the Effort Sharing Regulation, 
-  updating the Emission Trading System, 
- 
- 
- 

revision of the Renewables Energy Directive, 
revision of the Energy Efficiency Directive, 
revision  of  the  Regulation  setting  CO2  emission  performance  standards  for  cars 
and light commercial vehicles, 

171 JRC118275 
172 COM/2020/562 final 

127 

 
 
                                                 
- 

review of the LULUCF EU rules. 

1.1.4.2  Difference with the CTP “BSL” scenario 

The  REF2020  embeds  some  differences  compared  to  the  baseline  used  for  the  CTP 
impact assessment. While the technology assumptions (consulted in a workshop held on 
11th  November  2019)  were  not  changed,  the  time  between  CTP  publication  and  the 
publication  of  the  “Fit  for  55”  package  allowed  updating  some  other  important 
assumptions:    

  GDP  projections,  population  projections  and  fossil  fuel  prices  were  updated,  in 
particular  to  take  into  account  the  impact  of  the  COVID  crisis  through  an 
alignment  with  the  2021  Ageing  Report173  and  an  update  of  international  fossil 
fuel prices notably on the short run.  

  While the CTP baseline aimed at reaching the current EU 2030 energy targets (on 
energy  efficiency  and  renewable  energy),  the  Reference  Scenario  2020,  used  as 
the baseline for the “Fit for 55” package, further improved the representation of 
the National Energy Climate Plans (NECP). In particular it aims at reaching the 
national  contributions  to  the  EU  energy  targets,  and  not  at  respecting  these  EU 
targets themselves.  

1.1.4.3  Reference scenario process 

The  REF2020  scenario  has  been  prepared  by  the  European  Commission  services  and 
consultants  from  E3Modelling,  IIASA  and  EuroCare,  in  coordination  with  Member 
States experts through the Reference Scenario Experts Group.  

It benefitted from a stakeholders consultation (on technologies) and is aligned with other 
outlooks  from  Commission  services,  notably  DG  ECFIN’s  Ageing  Report  2021  (see 
section  0),  as  well  as,  to  the  extent  possible,  the  2020  edition  of  the  EU  Agricultural 
Outlook 2020-2030 published by DG AGRI in December 2020174.  

1.1.4.4  Policies in the Reference scenario  

The  REF2020  also  takes  into  account  the  still-unfolding  effects  of  the  COVID-19 
pandemic,  to  the  extent  possible  at  the  time  of  the  analysis.  According  to  the  GDP 
assumptions  of  the  Ageing  Report  2021,  the  pandemic  is  followed  by  an  economic 
recovery  resulting  in  moderately  lower  economic  output  in  2030  than  pre-COVID 
estimates.  

173 The 2021 Ageing Report : Underlying assumptions and projection methodologies 
https://ec.europa.eu/info/publications/2021-ageing-report-underlying-assumptions-and-projection-
methodologies_en 
174 https://ec.europa.eu/info/news/eu-agricultural-outlook-2020-30-agri-food-sector-shown-resilience-still-
covid-19-recovery-have-long-term-impacts-2020-dec-16_en  

128 

 
 
                                                 
The  scenario  is  based  on  existing  policies  adopted  at  national  and  EU  level  at  the 
beginning  of  2020.  In  particular,  at  EU  level,  the  REF2020  takes  into  account  the 
legislation adopted in the Clean Energy for All  European Package175. At national level, 
the scenario takes into account the policies and specific targets, in particular in relation 
with renewable energy and energy efficiency, described in the final National Energy and 
Climate  Plans  (NECPs)  submitted  by  Member  States  at  the  end  of  2019/beginning  of 
2020. 

The  REF2020  models  the  policies  already  adopted,  but  not  the  target  of  net-zero 
emissions  by  2050.  As  a  result,  there  are  no  additional  policies  introduced  driving 
decarbonisation  after  2030.  However,  climate  and  energy  policies  are  not  rolled  back 
after  2030  and  several  of  the  measures  in  place  today  continue  to  deliver  emissions 
reduction  in  the  long  term.  This  is  the  case,  for  example,  for  products  standards  and 
building codes and the ETS Directive (progressive reduction of ETS allowances is set to 
continue after 2030). 

Details  on  policies  and  measures  represented  in  the  REF2020  can  be  found  in  the 
dedicated “EU Reference Scenario 2020” publication. 

1.1.4.5  Reference Scenario 2020 key outputs 

For 2030, the REF2020  scenario mirrors the main targets  and projections submitted by 
Member  States  in  their  final  NECPs.  In  particular,  aggregated  at  the  EU  level,  the 
REF2020  projects  a  33.2%  share  of  renewable  energy  in  Gross  Final  Energy 
Consumption.  Final  energy  consumption  is  823  Mtoe,  which  is  29.6%  below  the  2007 
PRIMES Baseline.  

In the REF2020, GHG emissions from the EU in 2030 (including all domestic emissions 
& intra EU aviation and maritime) are 43.8% below the 1990 level. A carbon price of 30 
EUR/tCO2eq.  in  2030  drives  emissions  reduction  in  the  ETS  sector.  Table  4  shows  a 
summary  of  the  projections  for  2030.  A  detailed  description  of  the  REF2020  can  be 
found in a separate report published by the Commission176. 

Table 3: REF2020 summary energy and climate indicators. 

 EU 2030 

GHG  reductions  (incl.  Domestic  emissions  &  intra  EU  aviation  and  maritime)  vs 
1990 

RES share 

PEC energy savings 

175 COM(2016) 860 final. 
176 Link to reference. 

129 

REF2020 

-43.8% 

33.2% 

-32.7% 

 
 
                                                 
FEC energy savings 

Environmental impacts 

GHG emissions reduction in current ETS sectors vs 2005 

GHG emissions reduction in current non-ETS sectors vs 2005 

Energy system impacts 

GIC (Mtoe) 

 - Solid fossil fuels  

 - Oil  

 - Natural gas  

 - Nuclear  

 - Renewables 

Final Energy Demand (Mtoe) 

RES share in heating & cooling 

RES share in electricity 

RES share in transport 

Economic and social impacts 

-29.6% 

-48.2% 

-30.7% 

1224.2 

9.3% 

31.9% 

22% 

11% 

25.8% 

822.6 

32.8% 

58.5% 

21.2% 

System costs (excl. auction payment) (average 2021-30) as % of GDP 

10.9% 

Investment  expenditures  (incl.  transport)  average  annual  (2021-30)  vs  (2011-20) 
(bn€) 

285 

EU ETS carbon price (€/ton, 2030) 

30 

Energy- expenditures (excl. transport) of households as % of total consumption 

7.0% 

Source: PRIMES model 

The system costs (excluding ETS carbon-related payments) reaches close to 11% of the 
EU’s GDP on average over 2021-2030. This cost177 is calculated ex-post with a private 

177 Energy system costs for the entire energy system include capital costs (for energy installations such as 
power plants and energy infrastructure, energy using equipment, appliances and energy related costs of 
transport), energy purchase costs (fuels + electricity + steam) and direct efficiency investment costs, the 
latter being also expenditures of capital nature. For transport, only the additional capital costs for energy 
purposes (additional capital costs for improving energy efficiency or for using alternative fuels, including 
alternative fuels infrastructure) are covered, but not other costs including the significant transport related 
infrastructure costs e.g. related to railways and roads. Direct efficiency investment costs include additional 
costs for house insulation, double/triple glazing, control systems, energy management and for efficiency 

130 

 
 
 
  
 
 
                                                 
 
sector perspective applying a flat 10% discount rate178 over the simulation period up to 
2050 to compute investment-related annualized expenditures. 

By 2050, final energy consumption is projected at around 790 Mtoe and approximately 
74%  of  the  European  electricity  is  generated  by  renewable  energy  sources.  GHG 
emissions in the EU are projected to be about 60% lower than in 1990: the REF2020 thus 
falls short of the European goal of climate neutrality by 2050. 

Focusing  on  the  energy  system,  REF2020  shows  that  in  2030  fuel  mix  would  still  be 
dominated by fossil fuels. While the renewables grow and fossil fuels decline by 2050, 
the substitution is not sufficient for carbon neutrality. It also has to be noted that there is 
no deployment of e-fuels that are crucial for achievement of carbon neutrality as analysed 
in the Long Term Strategy179 and in the CTP. 

Figure 3: Fuel mix evolution of the Reference Scenario 2020 

Source: Eurostat, PRIMES model 

enhancing changes in production processes not accounted for under energy capital and fuel/electricity 
purchase costs. Energy system costs are calculated ex-post after the model is solved. 
178 See the EU Reference Scenario 2020 publication for a further discussion on the roles and levels of 
discount rates in the modelling, which also represent risk and opportunity costs associated with 
investments. 
179 COM(2018) 773 

131 

02004006008001000120014001600180020002005201020152020202520302035204020452050MtoeOther renewables***Bioenergy**SolarWindNuclearNatural gasOilCoal* 
 
 
 
                                                                                                                                                 
Figure 4: Share of energy carriers in final energy consumption in the Reference Scenario 2020  

Note: * includes peat and oil shale; ** includes manufactured gases, *** includes waste  
Source: Eurostat, PRIMES model 

Coal use in power generation decrease by 62% by 2030 and almost completely disappear 
by 2050. Also demand for oil sees a significant decrease of 54% over the entire period – 
the most important in absolute terms. Electricity generation grows by 24% by 2050.  

Figure 5: Final energy demand by sector in the Reference Scenario 2020 

Source: Eurostat, PRIMES model 

Despite  continued  economic  growth,  final  energy  demand  decreases  by  18%  between 
2015 and 2050 (already by 2030 it decreases by more than 8%). 

1.1.5  Scenarios for the “Fit for 55” policy analysis 

1.1.5.1  From the Climate Target Plan scenarios to “Fit for 55” core scenarios 

In the Climate Target Plan (CTP) impact assessment, the increase of efforts needed for 
the  GHG  55%  target  was  illustrated  by  policy  scenarios  (developed  with  the  same 

132 

0100200300400500600700800900100020002005201020152020202520302035204020452050MtoeElectricityOther RESBioenergy***Heat distributedHydrogenNatural gas**OilCoal*0100200300400500600700800900100020002005201020152020202520302035204020452050MtoeTransportResidentialServices &agriIndustry 
 
 
 
modelling  suite  as  the  scenarios  done  for  the  “Fit  for  55”  package)  showing  increased 
ambition  (or  stringency)  of  climate,  energy  and  transport  policies  and,  consequently, 
leading to a significant investment challenge. 

The  first  key  lesson  from  the  CTP  exercise  was  that  while  the  tools  are  numerous  and 
have  a  number  of  interactions  (or  even  sometimes  trade-offs)  a  complete  toolbox  of 
climate, energy and transport policies is needed for the increased climate target as all 
sectors would need to contribute effectively towards the GHG 55% target.  

The  second  key  lesson  was  that  even  though  policy  tools  chosen  in  the  CTP  scenarios 
were different - illustrating in particular the fundamental interplay between the strength 
of the carbon pricing and intensity of regulatory measures  - the results achieved were 
convergent. All CTP policy scenarios that achieved a 55% GHG target180 showed very 
similar  levels  of  ambition  for  energy  efficiency,  renewables  (overall  and  on  sectoral 
level) and GHG reductions across the sectors indicating also the cost-effective pathways.  

The third lesson was that carbon pricing working hand in hand with regulatory measures 
helps avoid “extreme” scenarios of either: 

  a  very  high  carbon  price  (in  absence  of  regulatory  measures)  that  will  translate 

into increased energy prices for all consumers,  

  very ambitious policies that might be difficult to be implemented (e.g. very high 
energy  savings  or  renewables  obligations)  because  they  would  be  costly  for 
economic operators or represent very significant investment challenge. 

The Figure 6 below illustrates the interactions between different policy tools relevant to 
reach the EU’s climate objectives. 

180 A 50% GHG target was also analysed 

133 

 
 
                                                 
Figure 6: Interactions between different policy tools  

With  the  55%  GHG  target  confirmed  by  EU  leaders  in  the  December  2020  EUCO 
Conclusions181  and  the  2021  Commission  Work  Programme182  (CWP  2021)  that  puts 
forward the complete toolbox to achieve the increased climate target (so-called “Fit for 
55” proposals), the fundamental set-up of the CTP analysis was confirmed. This set-up is 
still  about  the  interplay  between  carbon  pricing  and  regulatory  measures  as  illustrated 
above, and the extension of the ETS is the central policy question.  

As  described  above,  the  policy  scenarios  of  the  CTP  assessment  are  cost-effective 
pathways that capture all policies needed to achieve the increased climate target of 55% 
GHG  reductions.  This  fundamental  design  remains  robust  and  the  CTP  scenarios  were 
thus used as the basis to define the “Fit for 55” policy scenarios.  

In  the  context  of  the  agreed  increased  climate  target  of  a  net  reduction  of  55%  GHG 
compared to 1990, the 50% GHG scenario (CTP MIX-50) explored in the CTP has been 
discarded since no longer relevant. The contribution of extra EU aviation and maritime 
emissions in  the CTP  ALLBNK scenario  was  assessed in  the respective  sector specific 
impact  assessments  and  was  not  retained  as  a  core  scenario.  This  leaves  the  following 
CTP scenarios in need of further revisions and updates in the context of preparing input 
in a coherent manner for the set of IAs supporting the “Fit for 55” package, ensuring the 
achievement  of  the  overall  net  55%  GHG  reduction  ambition  with  similar  levels  of 
renewable energy and energy efficiency deployment as in CTP:  

181 https://www.consilium.europa.eu/media/47328/1011-12-20-euco-conclusions-fr.pdf  
182 COM(2020) 690 final 

134 

 
 
 
                                                 
  CTP  REG  (relying  only  on  intensification  of  energy  and  transport  policies  in 

absence of carbon pricing beyond the current ETS sectors);  

  CTP  MIX  (relying  on  both  carbon  price  signal  extension  to  road  transport  and 

buildings and intensification of energy and transport policies);  

  CTP CPRICE (relying chiefly on carbon price signal extension, and more limited 

additional sectoral policies). 

1.1.5.2  Scenarios for the “Fit for 55”package 

Based on the Climate Target  Plan analysis, some  updates  were needed  though for the 
purpose of the “Fit for 55” assessment, in terms of: 

  Baseline: 

o 

o 

to  reflect  the  most  recent  statistical  data  available,  notably  in  terms  of 
COVID impacts,  
to  capture  the  objectives  and  policies  put  forward  by  Member  States  in 
the NECPs, which were not all available at the time of the CTP analysis, 

The  baseline  used  in  the  Fit  for  55  package  is  thus  the  “Reference  Scenario  2020”,  as 
described in section 2.1.4.  

  Scenario design in order to align better with policy options as put forward in the 

CWP 2021 and respective Inception Impact Assessments183. 

As  a  consequence,  the  three  following  core  policy  scenarios  were  defined  to  serve  as 
common policy package analysis across the various initiatives of the “Fit for 55” policy 
assessments: 

  REG: an update of the CTP REG case (relying only on very strong intensification 
of energy and transport policies in absence of carbon pricing beyond the current 
ETS sectors). 

  MIX:  reflecting  an  update  of  the  CTP  MIX  case  (relying  on  both  carbon  price 
signal  extension  to  road  transport  and  buildings  and  strong  intensification  of 
energy  and  transport  policies).  With  its  uniform  carbon  price  (as  of  2025),  it 
reflects  either  an  extended  and  fully  integrated  EU  ETS  or  an  existing  EU  ETS 
and new ETS established for road transport and buildings with emission caps set 
in line with cost-effective contributions of the respective sectors. 

183 Importantly, all “Fit for 55” core scenarios reflect the Commission Work Programme (CWP) 2021 in terms of 
elements foreseen. This is why assumptions are made about legislative proposals to be made  later on - by Quarter 4 
2021. On the energy side, the subsequent proposals are: the revision of the EPBD, the proposal for Decarbonised Gas 
Markets and the proposal for reducing methane emissions in the energy sector. For transport they refer to the revision 
of the TEN-T Regulation and the revision of the ITS Directive. In addition, other policies that are planned for 2022 are 
also represented in a stylised way in these scenarios, similar to the CTP scenarios. In this way, core scenarios represent 
all key policies needed to deliver the increased climate target. 

135 

 
 
                                                 
  MIX-CP:  representing  a  more  carbon  price  driven  policy  mix,  combining  thus 
the general philosophy of the CTP CPRICE scenario with  key drivers of the MIX 
scenario albeit at a lower intensity. It illustrates a revision of the EED and RED 
but limited to a lower intensification of current policies in addition to the carbon 
price signal applied to new sectors.  
Unlike MIX, this scenario allows to separate carbon price signals of “current” and 
“new” ETS. The relative split of ambition in GHG reductions between “current” 
ETS  and  “new  ETS”  remains,  however,  close  in  MIX-CP  to  the  MIX  scenario 
leading to differentiated carbon prices between “current” ETS and “new” ETS184.   

These  three  “Fit  for  55”  core  policy  scenarios  have  been  produced  starting  from  the 
Reference  Scenario  2020  and  thus  use  the  same  updated  assumptions  on  post-COVID 
economics and international fuel prices. 

Table 5 provides an overview of the policy assumptions retained in the three core policy 
scenarios. It refers in particular to different scopes of emissions trading system (“ETS”):  

- 

- 

- 

“current+”:  refers  to  the  current  ETS  extended  to  cover  also  national  and 
international intra-EU maritime emissions185: this scope applies to all scenarios, 
“new”:  refers  to  the  new  ETS  for  buildings  and  road  transport  emissions:  this 
scope applies in MIX and MIX-CP up to 2030, 
“large”:  refers  to  the  use  of  emissions  trading  systems  covering  the  “current” 
scope  ETS,  intra-EU  maritime,  buildings  and  road  transport  (equivalent  to 
“current+” + “new”): this scope applies in MIX and MIX-CP after 2030. 

The scenarios included focus on emissions within the EU, including intra-EU navigation 
and intra-EU aviation emissions. The inclusion or not of extra-EU navigation and extra-
EU maritime emissions is assessed in the relevant sector specific Impact Assessments. 

184 This is a feature not implemented in the CTP CPRICE scenario. 
185 For modelling purposes “national maritime” is considered as equal to “domestic navigation”, i.e. also 
including inland navigation. 

136 

 
 
                                                 
Table 4: Scenario assumptions description (scenarios produced with the PRIMES-GAINS-GLOBIOM modelling suite)  

Scenario 

REG 

Brief 
description: 
ETS 

Extension of “current” ETS to 
also cover intra-EU maritime 
navigation186  
Strengthening of “current+” 
ETS in line with -55% 
ambition 

MIX 
By 2030: 2 ETS systems: 

MIX-CP 

- 
- 

one “current+” ETS (current extended to intra-EU maritime) 
one “new” ETS applied to buildings and road transport 

After 2030: both systems are integrated into one “large” ETS 

Relevant up to 2030: the 2 ETSs are 
designed so that they have the same 
carbon price, in line with -55% 
ambition 

Relevant up to 2030: “current+” ETS 
reduces emissions comparably to MIX 

Lower regulatory intervention resulting in 
higher carbon price than in MIX, notably in 
the “new” ETS 

Lower intensity increase of EE and RES 
policies versus Reference.  
Transport policies as in MIX (except 
related to CO2 standards) 

Brief 
description: 
sectoral policies 

High intensity increase of EE, 
RES, transport policies versus 
Reference 

Medium intensity increase of EE, 
RES and transport policies versus 
Reference 

Target scope 

EU27 

Aviation 

Maritime 

Intra-EU aviation included, extra-EU excluded 

Intra-EU maritime included, extra-EU excluded 

186 “Intra-EU navigation” in this table includes both international intra-EU and national maritime. Due to modelling limitations, energy consumption by “national maritime” is assumed 
to be the same as “domestic navigation”, although the latter also includes inland navigation.  

137 

 
 
 
                                                 
MIX 

REG 

MIX-CP 

Around 55% reductions 

Scenario 
navigation 
Achieved GHG reduction of the target scope 
Including 
LULUCF 
Excluding 
LULUCF 
Assumed Policies 
Carbon pricing (stylised, for small industry, international aviation and maritime navigation may represent also other instruments than 
EU ETS such as taxation or CORSIA for aviation) 
Stationary ETS  Yes 
Aviation-Intra 
EU ETS 

Around 53% reductions 

Yes 

Aviation - Extra 
EU ETS 

Maritime-Intra 
EU ETS 

Yes: mixture 50/50 carbon pricing (reflecting inclusion in the “current+” / “large” ETS, or taxation, or CORSIA) 
and carbon value (reflecting operational and technical measures); total equal to the carbon price of the “current+” 
(up to 2030) / “large” ETS  

Yes, carbon pricing equal to the price of the “current+” (up to 2030) / “large” EU ETS 

Maritime-Extra 
EU ETS 

As in MIX (but applied to the 
“current+” ETS) 

Up to 2030: no carbon pricing. 
After 2030: 50% of extra-EU MRV187 sees the “large” ETS price, while the 
remaining 50% sees a carbon value equal to the “large” ETS carbon price. 

Buildings and 
road transport 
ETS 
CO2 standards 
for LDVs and 

No 

Yes (in the “new” ETS up to 2030, and in the “large” ETS after 2030) 

CO2 standards for LDVs and HDVs + Charging and refuelling infrastructure development (review of the Directive 
on alternative fuels infrastructure and TEN-T Regulation & funding), including strengthened role of buildings 

187 50% of all incoming and all outgoing extra-EU voyages 

138 

 
 
                                                 
Scenario 
HDVs 
EE policies 
overall ambition 

EE policies in 
buildings 

EE policies in 
transport 
RES policies 
overall ambition 

RES policies in 
buildings + 
industry 

RES policies in 
transport and 
policies 
impacting 
transport fuels  

Taxation 
policies 

REG 
High ambition increase 

MIX 
Medium ambition increase 

MIX-CP 
Lower ambition increase 

High ambition increase 

Medium ambition increase 

Lower ambition increase 

High intensity increase (more 
than doubling of renovation 
rates assumed) 

Medium intensity increase (at least 
doubling of renovation rates 
assumed) 

Lower intensity increase, no assumptions 
on renovation rates increases 

High ambition increase 

Medium intensity increase 

As in MIX 

High ambition increase 

Medium intensity increase 

Lower ambition increase except for 
transport (see below)  

Incentives for uptake of RES in 
heating and cooling 

 Incentives for uptake of RES in 
heating and cooling 

No increase of intensity of policy 
(compared to Reference) 

Increase of intensity of policies to decarbonise the fuel mix (reflecting ReFuelEU aviation and FuelEU maritime 
initiatives). 
Origin of electricity for “e-fuels” under the aviation and shipping mandates:  
up to 2035 (inclusive) “e-fuels” (e-liquids, e-gas, hydrogen) are produced from renewable electricity, applying 
additionality principle. 
from 2040 onwards “e-fuels” are produced from “low carbon” electricity (i.e. nuclear and renewable origin). No 
application of additionality principle. 
CO2 from biogenic sources or air capture. 

Central option on energy content taxation of the ETD revision 

139 

 
 
Scenario 
Additional non-
CO2 policies 
(represented by 
a carbon value) 

REG 

MIX 

MIX-CP 

Medium ambition increase  

140 

 
 
1.1.5.3  Quantitative elements and key modelling drivers 

Policies and measures are captured in the modelling analysis in different manners. Some 
are explicitely represented such as for instance improved product energy performance 
standards, fuel mandates or carbon pricing in an emission trading system. Others are 
represented by modelling drivers (“shadow values”) used to achieve policy objectives. 

The overall need for investment in new or retrofitted equipment depends on expected 
future demand and expected scrapping of installed equipment. The economic modelling 
of the competition among available investment options is based on: 

- 

the investment cost, to which a “private” discount rate is applied to represent risk 
adverseness of the economic agents in the various sectors188, 
fuel prices (including their carbon price component),  

- 
-  maintenance  costs  as  well  as  performance  of  installations  over  the  potential 

- 

lifetime of the installation,  
the  relevant  shadow  values  representing  energy  efficiency  or  renewable  energy 
policies.  

In particular, carbon pricing instruments impact economic decisions related to operation 
of existing equipment and to investment, in the different sectors where they apply. Table 
6 shows the evolution of the ETS prices by 2030 in the Reference and core scenarios. 

Table 5: ETS prices by 2030 in the difference scenarios (€2015/tCO2) 

Scenarios 

REF2020 

REG 

MIX 

MIX-CP 

Carbon price “current” ETS sectors 

Carbon price “new” ETS sectors 

2025 

2030 

2025 

2030 

27 

31 

35 

35 

30 

42 

48 

52 

0 

0 

35 

53 

0 

0 

48 

80 

The investment decisions are also taken considering foresight of the future development 
of fuel prices, including future carbon values189 post 2030. Investment decisions take into 
account expectations about climate and energy policy developments, and this carbon 
value achieves in 2050 levels between €360/tCO2 (in REG, where energy policy drivers 
play comparatively a larger role) and €430/tCO2 (MIX-CP)190.  

188 For more information on the roles and levels of discount rates applied per sector, see the EU Reference 
Scenario 2020 publication. 
189 Post 2030, carbon values should not be seen as a projected carbon price in emissions trading, but as a 
shadow value representing a range of policies  to achieve climate neutrality that are as yet to be defined.  
190 The foresight and the discounting both influence the investment decisions. While in the modelling the 
discounting is actually applied to the investment to compute annualised fixed costs for the investment 

141 

 
 
 
                                                 
 
In complement to carbon pricing drivers, the modelling uses “shadow values” as drivers 
to reach energy policy objectives of policies and measures that represent yet to be 
defined policies in the respective fields: the so-called “energy efficiency value” and 
“renewable energy value”, which impact investment decision-making in the model. 
These values are thus introduced to achieve a certain ambition on energy efficiency, for 
instance related to national energy efficiency targets and renewable energy targets in the 
NECPs as represented in the Reference Scenario 2020, or increased renovation rates in 
buildings and increased sector specific renewable energy ambition related to heating and 
cooling in the policy scenarios. 

Table 7 shows average 2025-2035 values for the different scenarios. The values in 
REF2020 reflect the existing policy framework, to meet notably the national energy 
targets (both energy efficiency and renewable energy) as per the NECPs. They are 
typically higher in policy scenarios that are based on regulatory approaches than in 
scenarios that are more based on carbon pricing. The “energy efficiency value” and 
“renewable energy value” also interact with each other through incentivising investment 
in options which are both reducing energy demand and increasing the contribution of 
renewables, like heat pumps. This is for instance the case in the REG scenario, where the 
comparatively higher “energy efficiency value” complements the “renewable energy 
value” in contributing to the renewable energy performance of the scenario, notably 
through the highest heat pump penetration of all scenarios. 

Table 6: Energy efficiency value and renewable energy value (averaged 2025-2035) 

Scenarios 

REF2020 

REG 

MIX 

MIX-CP 

Average renewables 
shadow value 

Average energy efficiency 
shadow value 

(€'15/ MWh) 

(€'15/ toe) 

62 

121 

61 

26 

330 

1449 

1052 

350 

Specific measures for the transport system 

Policies that aim at improving the efficiency of the transport system (corresponding to 
row “EE in Transport” in the Table 5), and thus reduce energy consumption and CO2 
emissions, are phased-in in scenarios that are differentiated in terms of level of ambition 
(low, medium, high ambition increase). All scenarios assume an intensification of such 
policies relative to the baseline. Among these policies, the CO2 emission standards for 
vehicles are of particular importance. The existing standards191, applicable from 2025 and 

decision, its effect can be illustrated if applied to the future prices instead: for example, the average 
discounted carbon price in 2030 for the period 2030-2050 for renovation of houses and for heating 
equipment, applying a 12% discount rate, is €65 in the MIX scenario and €81 in the MIX CP scenario. 
191 The existing legislation sets for newly registered passengers cars, an EU fleet-wide average emission 
target of 95 gCO2/km from 2021, phased in from 2020. For newly registered vans, the EU fleet-wide 

142 

 
 
 
                                                                                                                                                 
 
from 2030, set binding targets for automotive manufacturers to reduce emissions and thus 
fuel consumption and are included in the Reference Scenario. 

Medium ambition increase 

In this case, the following policy measures are considered that drive improvements in 
transport system efficiency and support a shift towards more sustainable transport modes, 
and lead to energy savings and emissions reductions: 

-  Initiatives  to  increase  and  better  manage  the  capacity  of  railways,  inland  waterways 
and short sea shipping, supported by the TEN-T infrastructure and CEF funding;  

-  Gradual internalisation of external costs (“smart” pricing); 
-  Incentives to improve the performance of air navigation service providers in terms of 

efficiency and to improve the utilisation of air traffic management capacity; 

-  Incentives to improve the functioning of the transport system: support to multimodal 
mobility  and  intermodal  freight  transport  by  rail,  inland  waterways  and  short  sea 
shipping; 

-  Deployment  of  the  necessary  infrastructure,  smart  traffic  management  systems, 

transport digitalisation and fostering connected and automated mobility; 

-  Further  actions  on  clean  airports  and  ports  to  drive  reductions  in  energy  use  and 

emissions; 

-  Measures to reduce emissions and air pollution in urban areas; 
-  Pricing measures such as in relation to energy taxation and infrastructure charging; 
-  Revision of roadworthiness checks; 
-  Other measures incentivising behavioural change; 
-  Medium intensification of the CO2 emission standards for cars, vans, trucks and buses 
(as  of  2030),  supported  by  large  scale  roll-out  of  recharging  and  refuelling 
infrastructure. This corresponds to a reduction in 2030 compared to the 2021 target of 
around 50% for cars and around 40% for vans. 

Low ambition increase 

In this case, the same policy measures as in the Medium ambition increase are included. 
However, limited increase in ambition for CO2 emission standards for vehicles 
(passenger cars, vans, trucks and buses) as of 2030 is assumed, supported by the roll-out 
of recharging and refuelling infrastructure. This corresponds to a reduction in 2030 
compared to the 2021 target of around 40% for cars and around 35% for vans. 

High ambition increase 

average emission target is 147 gCO2 /km from 2020 onward. Stricter EU fleet-wide CO2 emission targets, 
start to apply from 2025 and from 2030. In particular emissions will have to reduce by 15% from 2025 for 
both cars and vans, and by 37.5% and 31% for cars and vans respectively from 2030, as compared to 2021. 
From 2025 on, also trucks manufacturers will have to meet CO2 emission targets. In particular, the EU 
fleet-wide average CO2 emissions of newly registered trucks will have to reduce by 15% by 2025 and 30% 
by 2030, compared to the average emissions in the reference period (1 July 2019–30 June 2020). For cars, 
vans and trucks, specific incentive systems are also set to incentivise the uptake of zero and low-emission 
vehicles. 

143 

 
                                                                                                                                                 
Beyond measures foreseen in the medium ambition increase case, the high ambition 
increase case includes: 

-  Further  measures  related  to  intelligent  transport  systems,  digitalisation,  connectivity 

and automation of transport - supported by the TEN-T infrastructure; 
-  Additional measures to improve the efficiency of road freight transport; 
-  Incentives for low and zero emissions vehicles in vehicle taxation; 
-  Increasing  the  accepted  load/length  for  road  in  case of zero-emission High Capacity 

Vehicles; 

-  Additional measures in urban areas to address climate change and air pollution; 
-  Higher intensification of the CO2 emission standards for cars, vans, trucks and buses 
(as of 2030) as compared to the medium ambition increase case, leading to lower CO2 
emissions and fuel consumption and further incentivising the deployment of zero- and 
low-emission  vehicles,  supported  by  the  large  scale  roll-out  of  recharging  and 
refuelling  infrastructure.  This  corresponds  to  a  reduction  in  2030  compared  to  the 
2021 target of around 60% for cars and around 50% for vans. 

Drivers of reduction in non-CO2 GHG emissions 

Non-CO2 GHG emission reductions are driven by both the changes taking place in the 
energy system due to the energy and carbon pricing instruments, and further by the 
application of a carbon value that triggers further cost efficient mitigation potential 
(based on the GAINS modelling tool) in specific sectors such as waste, agriculture or 
industry. 

Table 7: Carbon value applied to non-CO2 emissions in the GAINS model (€2015/tCO2) 

Scenarios 

Non-CO2 carbon values 

2025 

2030 

REF2020 

REG 

MIX 

MIX-CP 

0 

4 

4 

5 

0 

4 

4 

10 

144 

 
 
 
 
 
1.1.5.4  Key results and comparison with Climate Target Plan scenarios  

Table 8: Key results of the “Fit for 55” core scenarios analysis for the EU 

2030 unless otherwise stated 

REF 

REG 

MIX  MIX-CP 

Key results 

GHG emissions* reductions (incl. 
intra EU aviation and maritime, 
incl. LULUCF) 
GHG emissions* reductions (incl. 
intra EU aviation and maritime, 
excl. LULUCF)  
Overall RES share 

RES-E share 

RES-H&C share 

RES-T share 

PEC energy savings  

FEC energy savings 

CO2 emissions reductions (intra-EU 
scope, excl. LULUCF), of which 
Supply side (incl. power 
generation, energy branch, 
refineries and district heating) 
Power generation 

Residential 

Services 

Agriculture (energy) 
Transport (incl. domestic and intra 
EU aviation and navigation) 
Non-CO2 GHG emissions reductions 
(excl. LULUCF) 
Reduced air pollution vs. REF 
Reduced health damages and air 
pollution control cost vs. REF - Low 
estimate 
Reduced health damages and air 
pollution control cost vs. REF - High 
estimate 

% reduction from 1990 

45% 

55% 

55% 

55% 

% reduction from 1990 

43.4% 

53.0% 

52.9% 

52.9% 

% 

% 

% 

% 
% reduction from 2007 
Baseline 
% reduction from 2007 
Baseline 

Environmental impacts 

33% 

59% 

33% 

21% 

33% 

40% 

65% 

41% 

29% 

39% 

38% 

65% 

38% 

28% 

39% 

38% 

65% 

36% 

27% 

38% 

30% 

37% 

36% 

35% 

(% change from 2015) 

-30% 

-43% 

-42% 

-42% 

(% change from 2015) 

-49% 

-62% 

-63% 

-64% 

(% change from 2015) 

(% change from 2015) 

(% change from 2015) 

(% change from 2015) 

-51% 

-10% 

-32% 

-36% 

-23% 

-64% 

-23% 

-56% 

-53% 

-36% 

-65% 

-23% 

-54% 

-52% 

-36% 

-67% 

-23% 

-50% 

-48% 

-35% 

(% change from 2015) 

-17% 

-22% 

-21% 

-21% 

(% change from 2015) 

-22% 

-32% 

-32% 

-33% 

(% change) 

(€ billion/year) 

(€ billion/year) 

Energy system impacts 

-10% 

24.8 

42.7 

Industry (incl. process emissions) 

(% change from 2015) 

Primary Energy Intensity 

toe/M€'13 

83  

75  

76  

76  

Gross Available Energy (GAE) 

Mtoe 

1,289  

1,194  

1,198  

1,205  

 - Solids share 

 - Oil share 

 - Natural gas share 

 - Nuclear share 

 - Renewables share 

 - Bioenergy share 

 - Other Renewables share 

% 

% 

% 

% 

% 

% 

% 

9% 

34% 

21% 

10% 

26% 

13% 

13% 

6% 

33% 

20% 

11% 

31% 

13% 

18% 

5% 

33% 

20% 

11% 

30% 

12% 

18% 

5% 

33% 

21% 

11% 

30% 

12% 

18% 

Gross Electricity Generation 

TWh 

2,996  

3,152  

3,154  

3,151  

145 

 
  
  
  
  
  
  
  
  
  
  
- Gas share 

- Nuclear share 

- Renewables share 

% 

% 

% 

14% 

17% 

59% 

12% 

16% 

65% 

13% 

16% 

65% 

14% 

16% 

65% 

Economic impacts 

Investment expenditures (excl. 
transport) (2021-30) 
Investment expenditures (excl. 
transport) (2021-30) 

bn €'15/year 

297 

417 

402 

379 

% GDP 

2.1% 

3.0% 

2.9% 

2.7% 

Additional investments to REF 

bn €'15/year 

120 

105 

83 

Investment expenditures (incl. 
transport) (2030-51) 
Investment expenditures (incl. 
transport) (2030-51) 

bn €'15/year 

944 

1068 

1051 

1028 

% GDP 

6.8% 

7.7% 

7.6% 

7.4% 

Additional investments to REF 

bn €'15/year 

Additional investments to 2011-20 
Energy system costs excl. carbon 
pricing and disutility (2021-30) 
Energy system costs excl. carbon 
pricing and disutility (2021-30) 
Energy system costs incl. carbon 
pricing and disutility (2021-30) 
Energy system costs incl. carbon 
pricing and disutility (2021-30) 
ETS price in current sectors (and 
maritime) 
ETS price in new sectors (buildings 
and road transport) 
Average Price of Electricity 

bn €'15/year 

bn €'15/year 

124 

408 

107 

392 

84 

368 

285 

1518 

1555 

1550 

1541 

% GDP 

10.9% 

11.2%  11.15% 

11.1% 

bn €'15/year 

1535 

1598 

1630 

1647 

% GDP 

€/tCO2 

€/tCO2 

€/MWh 

11.0% 

11.5% 

11.7% 

11.8% 

30 

0 

42 

0 

48 

48 

52 

80 

158 

156 

156 

157 

% 

54% 

52% 

bn €'15 

Import dependency  
Fossil fuels imports bill savings 
compared to REF (2021-30) 
Energy-related expenditures in 
buildings  (excl. disutility) 
Energy-related expenditures in 
transport (excl. disutility) 
Note: *All scenarios achieve 55% net reductions in 2030 compared to 1990 for domestic EU emissions, 
assuming net LULUCF contributions of 255 Mt CO2-eq. in 1990 and 225 Mt CO2-eq. in 2030 and including 
national, intra-EU maritime and intra-EU aviation emissions

% of private 
consumption 
% of private 
consumption  

18.1% 

18.5% 

18.1% 

18.3% 

7.5% 

6.9% 

7.5% 

7.4% 

53% 

53% 

136 

115 

99 

192

.  

Table 9: Comparison with the CTP analysis 

Results for 2030 

Source: PRIMES model, GAINS model 

CTP 55% GHG reductions 
scenarios range 

“Fit for 55” core scenarios 
range 

(REG, MIX, CPRICE, 
ALLBNK) 

(REG, MIX, MIX-CP) 

192 Emissions estimates for 1990 are based on EU UNFCCC inventory data 2020, converted to IPCC AR5 
Global Warming Potentials for notably methane and nitrous oxide. However, international intra-EU 
aviation and international intra-EU navigation are not separated in the UNFCCC data from the overall 
international bunker fuels emissions. Therefore, 1990 estimates for the intra-EU emissions of these sectors 
are based on (a combination of) data analysis for PRIMES modelling and 2018-2019 MRV data for the 
maritime sector. 

146 

 
  
  
  
                                                 
Overall net GHG reduction (w.r.t. 1990)* 

55% 

38-40% 

64-67% 

39-42% 

22-26% 

36-37% 

39-41% 

67-73% 

Overall RES share 

RES-E 

RES-H&C  

RES-T 

FEC EE 

PEC EE 

CO2 reduction on the supply side (w.r.t. 
2015) 

CO2 reduction in residential sector (w.r.t. 
2015) 

CO2 reduction in services sector (w.r.t. 
2015) 

55% 

38-40% 

65% 

36-41% 

27-29% 

35-37% 

38-39% 

62-64% 

61-65% 

50-56% 

54-61% 

48-53% 

CO2 reduction in industry (w.r.t. 2015) 

21-25% 

CO2 reduction in intra-EU transport (w.r.t. 
2015) 

16-18% 

CO2 reduction in road transport (w.r.t. 2015) 

19-21% 

Non-CO2 GHG reductions (w.r.t. 2015, excl. 
LULUCF) 

31-35% 

23% 

21-22% 

24-26% 

32-33% 

Investments magnitude, excluding transport 
(in bn€/per year) 

Energy system costs (excl. auction payments 
and disutility) as share of GDP (%, 2021-
2030) 

401-438 bn/year 

379-417 bn/per year 

10.9-11.1% 

11.1-11.2% 

Note: *All scenarios achieve 55% net reductions in 2030 compared to 1990 for domestic EU emissions, 
assuming net LULUCF contributions of 255 Mt CO2-eq. in 1990 and 225 Mt CO2-eq. in 2030 and including 
national, intra-EU maritime and intra-EU aviation emissions60 (except the CTP ALLBNK that achieves 55% 
net reductions including also emissions from extra-EU maritime and aviation).  

Source: PRIMES model, GAINS model 

147 

 
 
 
 
1.1.6  Results per Member State 

This document is completed by detailed modelling results at EU and MS level for the 
different core policy scenarios: 

-  Energy, transport and overall GHG (PRIMES model)  
-  Details on non-CO2 GHG emissions (GAINS model) 
-  LULUCF emissions (GLOBIOM model) 
-  Air pollution (GAINS model) 

2.  SPECIFIC ANALYTICAL ELEMENTS FOR THIS IMPACT ASSESSMENT 

The quantitative analysis of the options for this Impact Assessment is based on modelling 
of the aviation sector using the Aviation Integrated Model (AIM) global aviation systems 
model  and  of  the  wider  economy  using  the  E3ME  global  macro-economic  model,  for 
impacts up to 2035. Here we present the results for 2030. The full results are presented in 
the study commissioned by the Commission193.  

Description of the Aviation Integrated Model (AIM) 

The  Aviation  Integrated  Model  (AIM)  is  a  global  aviation  systems  model,  which 
simulates interactions between passengers, airlines, airports and other system actors into 
the future, with the goal of providing insight into how policy levers and other projected 
system changes will affect aviation’s externalities and economic impacts.  

The  model  was  originally  developed  in  2006-2009  with  UK  research  council  funding 
(e.g.  Reynolds  et  al.,  2007;  Dray  et  al.  2014)194,  and  was  updated  as  part  of  the 
ACCLAIM  project  (2015-2018)  between  University  College  London,  Imperial  College 
and Southampton University (e.g. Dray et al., 2019)195, with additional input from MIT 
regarding electric aircraft (e.g. Schäfer et al., 2018)196.  

AIM uses a modular, integrated approach to simulate the global aviation system and its 
response  to  policy.  The  basic  model  structure  is  shown  in  Figure  A4.1  below.  AIM 
consists of seven interconnected modules.  

193 ICF Consulting et al. (2020), Assessment of ICAO's global market-based measure (CORSIA) pursuant 
to Article 28b and for studying cost pass-through pursuant to Article 3d of the EU ETS Directive (hereafter 
“ICF Study”). 
194 Reynolds, T., Barrett, S., Dray, L., Evans, A., Köhler, M., Vera-Morales, M., Schäfer, A., Wadud, Z., 
Britter, R., Hallam, H., Hunsley, R., 2007. Modelling Environmental and Economic Impacts of Aviation: 
Introducing the Aviation Integrated Modelling Tool. In: Proceedings of the 7th AIAA Aviation 
Technology, Integration and Operations Conference, Belfast, 18–20 September 2007, AIAA-2007-7751; 
Dray, L., Evans, A., Reynolds, T., Schäfer, A., Vera-Morales, M. and Bosbach, W., 2014. Airline fleet 
replacement funded by a carbon tax: an integrated assessment. Transport Policy, 34, 75-84. 
195 Dray L., Krammer P., Doyme K., Wang B., Al Zayat K, O’Sullivan A., Schäfer A., 2019. “AIM2015: 
Validation and initial results from an open-source aviation systems model”, Transport Policy, 79, 93-102. 
196 Schäfer A., Barrett, S., Doyme, K., Dray, L., Gnadt, A., Self, R., O’Sullivan, A., Synodinos, A., & 
Torija, A., 2018. Technological, economic and environmental prospects of all-electric aircraft. Nature 
Energy, 4, 160-166. 

148 

 
 
 
                                                 
Figure A4.1 AIM model structure 

The Demand and Fare Module projects true origin-ultimate destination demand between 
a  set  of  cities  representing  approximately  95%  of  global  scheduled  RPK197,  using  a 
gravity-type  model  based  on  origin  and  destination  population  and  income,  average 
journey generalized cost, and other factors, as detailed in Dray et al. (2014). Within each 
city-city  passenger  flow,  airport  choice  and  routing  choice  (including  hub  airport  for 
multi-segment journeys) are handled using a multinomial logit model. Itinerary choice is 
modelled  as  a  function  of  journey  time,  cost,  number  flight  segments,  available  flight 
frequency  and  characteristics  of  the  origin  and  destination  airports.  This  model  is 
described further in Dray & Doyme (2019)198.  

Fares  per  individual  itinerary  are  simulated  using  a  fare  model  (Wang  et  al.,  2017)199 
based  on  airline  costs  by  type  per  segment,  demand,  route-level  competition,  low-cost 

197 Note that non-scheduled flights and freight are also modelled for this report. Because less information is 
available on routing for these flights, they are dealt with using a segment-based scaling approach.  
198 Dray, L. and Doyme, K., 2019. “Carbon Leakage in Aviation Policy”, Climate Policy, 19 (10), 1284-
1296. 
199 Wang, B., O’Sullivan, A., Dray, L., Al Zayat, K. and Schäfer, A., 2017. Modelling the Pass-Through of 
Airline Operating Costs on Average Fares in the Global Aviation Market. 21st ATRS conference, Antwerp, 
5-8 July 2017. 

149 

 
 
 
 
                                                 
carrier  presence  and  other  factors.  These  models  are  estimated  primarily  on  detailed 
disaggregate global passenger routing and fare data from Sabre (2017)200. 

The Airline  and Airport  Activity Module,  given  segment-level  demand, assesses which 
aircraft will be used to fly these routes and at what frequency, using a multinomial logit 
model estimated from historical scheduling data (Sabre, 2017) and dividing the fleet into 
nine size categories.  Given these aircraft movements  per airport, a queuing model  then 
estimates  what  the  resulting  airport-level  delays  would  be  (Evans,  2008)201.  Given  the 
lack  of  long-term  airport  capacity  forecasts,  in  most  cases  this  delay  model  is  used  to 
estimate  the  amount  of  (city-level)  capacity  that  would  be  required  to  keep  delays  at 
current levels.  

The  aircraft  movement  module  assesses  the  corresponding  airborne  routes  and  the 
consequent  location  of  emissions.  In  particular,  routing  inefficiencies  which  increase 
ground track distance flown beyond great circle distance, and fuel use above optimal for 
the given flight distance, are modelled using distance-based regional inefficiency factors 
based on an analysis of radar track data, as discussed in Reynolds (2008)202.  

Given  typical  aircraft  utilization,  the  aircraft  technology  and  cost  module  assesses  the 
size, composition, age and technology use of the aircraft fleet, and the resulting costs for 
airlines  and  emissions  implications.  First,  aircraft  movements  by  size  class  including 
routing  inefficiency  from  the  Aircraft  Movement  Module  are  input  to  a  performance 
model  (estimated  from  outputs  of  the  PIANO-X203  model  with  reference  aircraft  types 
and missions for CO2 and NOx, the FOX methodology (Stettler et al. 2013)204 for PM2.5, 
and Wood et al. (2008)205 for NO2). Second, the costs of operating this fleet for the given 
schedule  are  estimated  based  on  historical  cost  data  by  category  and  aircraft  type  (Al 
Zayat  et  al,  2017206). Third, emissions and costs are adjusted to  account  for the current 
age distribution  and technology utilization of the fleet,  including typical  retirement and 
freighter  conversion  behavior  (e.g.  Dray,  2013)207.  Finally,  any  shortfall  in  aircraft 
required to  perform  the given schedule is  assumed made up by new purchases, and the 
uptake  of  technology  and  emissions  mitigation  measures  by  both  new  aircraft  and 

200 Sabre, 2017. Market Intelligence passenger demand, routing and aircraft schedule databases. 
https://www.sabreairlinesolutions.com   
201 Evans, A., 2008. “Rapid Modelling of Airport Delay”. 12th Air Transport Research Society (ATRS) 
World Conference, Athens, Greece, July 6-10. 
202 Reynolds, T. G., 2009. Development of flight inefficiency metrics for environmental performance 
assessment of ATM. 8th USA/Europe Air Traffic Management Research and Development Seminar, Napa, 
CA, June 29 - July 2. 
203 Lissys, 2017. The PIANO X Aircraft Performance Model. www.piano.aero  
204 Stettler, M. E. J., Boies, A. M., Petzold, A. and Barrett, S. R. H., 2013. Global civil aviation black 
carbon emissions. Environmental Science and Technology, 47, 10397-10404. 
205 Wood, E.C., Herndon, S. C., Timko, M. T., Yelvington, P. E. and Miake-Lye, R.C., 2008. Speciation 
and chemical evolution of nitrogen oxides in aircraft exhaust near airports. Environmental Science and 
Technology, 2008, 42(6), 1884-1891. 
206 Al Zayat, K., Dray, L., Schäfer A., 2017. A Comparative Analysis of Operating Cost between Future 
Jet-Engine Aircraft and Battery Electric Aircraft. 21st ATRS Conference, Antwerp, 5-8 July 2017. 
207 Dray, L., 2013. An analysis of the impact of aircraft lifecycles on aviation emissions mitigation policies. 
Journal of Air Transport Management, 28, 62-69. 

150 

 
                                                 
existing  ones  is  assessed  on  a  net  present  value  basis,  as  described  in  Dray  et  al. 
(2018)208, and the impact of this on costs and emissions is assessed.  

These  four  modules  are  run  iteratively  until  a  stable  solution  is  reached.  The  output  is 
then used in  the impacts modules, shown on the right  of Figure 71. The global climate 
module is a rapid, reduced-form climate model which calculates the CO2 emissions. The 
air  quality  and  noise  module  are  similarly  rapid,  reduced-form  models  which  provide 
metrics  by  airport  for  the  noise  and  local/regional  air  quality  impacts  of  the  projected 
aviation  system.  In  the  case  of  air  quality,  dispersion  modelling  for  primary  pollutants 
uses a version of the RDC code (e.g. Yim et al., 2015)209. The type of noise modelling 
carried out depends on whether data on standard flight routes per airport is available, but 
for  all  airports  noise  modelling  based  on  total  noise  energy  is  carried  out  (Torija  et  al. 
2016,  2017)210.  The  regional  economics  module  looks  in  more  detail  at  the  economic 
impacts, including benefits such as increased employment as well as costing of noise and 
air quality impacts. 

Description of the E3ME model 

Overview 

E3ME is a computer-based model of the world’s economic and energy systems and the 
environment.  It was originally developed through the European Commission’s research 
framework  programmes  and  is  now  widely  used  in  Europe  and  beyond  for  policy 
assessment,  for  forecasting  and  for  research  purposes.  The  global  version  of  E3ME 
provides: 

1.  better geographical coverage 

2.  better  feedbacks  between  individual  European  countries  and  other  world 

economies 

3.  better treatment of international trade with bilateral trade between regions 

4.  new technology diffusion sub-modules 

This  model  description  provides  a  short  summary  of  the  E3ME  model.  For  further 
details, please read the full model manual available online from www.e3me.com. 

208 Dray, L., Schäfer, A. & Al Zayat, K., 2018. The global potential for CO2 emissions reduction from jet 
engine passenger aircraft. Transportation research Record, 2672(23), 40-51. 
209 Yim, S. H. L., Lee, G. L., Lee, I. H., Allroggen, F., Ashok, A., Caiazzo, F., Eastham, S. D., Malina, R. 
and Barrett, S. R. H., 2015. Global, regional and local health impacts of civil aviation emissions. 
Environmental Research Letters,  10(3), 034001. 
210 Torija, A. J., Self, R. H. and Flindell, I. H., 2016. On the CO2 and noise emissions forecast in future 
aviation scenarios in the UK. Proceedings of inter.noise 2016, Hamburg; Torija, A. J. , Self, R. H. and 
Flindell, I. H., 2016. Evolution of noise metrics in future aviation scenarios in the UK. 23rd International 
Congress on Sound and Vibration, Athens, 10-14 July 2016; Torija, A.J., Self, R. H. and Flindell, I. H., 
2017. A model for the rapid assessment of the impact of aviation noise near airports. Journal of the 
Acoustical Society of America 141(2), 981-995. 

151 

 
                                                 
Applications of E3ME 

Scenario-based analysis 

Although  E3ME  can  be  used  for  forecasting,  the  model  is  more  commonly  used  for 
evaluating the impacts of an input shock through a scenario-based analysis.  The shock 
may be either a change in policy, a change in economic assumptions or another change to 
a  model  variable.    The  analysis  can  be  either  forward  looking  (ex-ante)  or  evaluating 
previous  developments  in  an  ex-post  manner.  Scenarios  may  be  used  either  to  assess 
policy, or to assess sensitivities to key inputs (e.g. international energy prices). 

For  ex-ante  analysis  a  baseline  forecast  up  to  2050  is  required;  E3ME  is  usually 
calibrated to match a set of projections that are published by the European Commission 
and  the  International  Energy  Agency  but  alternative  projections  may  be  used.  The 
scenarios represent alternative versions of the future based on a different set of inputs. By 
comparing the outcomes to the baseline (usually in percentage terms), the effects of the 
change in inputs can be determined. 

Price or tax scenarios 

Model-based  scenario  analyses  often  focus  on  changes  in  price  because  this  is  easy  to 
quantify and represent in the model structure.  Examples include: 

•  changes  in  tax  rates  including  direct,  indirect,  border,  energy  and  environment 

taxes 

•  changes in international energy prices 

Regulatory impacts 

All of the price changes above can be represented in E3ME’s framework reasonably 
well, given the level of disaggregation available. However, it is also possible to assess the 
effects of regulation, albeit with an assumption about effectiveness and cost. For 
example, an increase in vehicle fuel-efficiency standards could be assessed in the model 
with an assumption about how efficient vehicles become, and the cost of these measures.  
This would be entered into the model as a higher price for cars and a reduction in fuel 
consumption (all other things being equal).  E3ME could then be used to determine: 

• 
• 
• 

secondary effects, for example on fuel suppliers 
rebound effects211 
overall macroeconomic impacts 

Comparison with CGE models and econometric specification 

E3ME  is  often  compared  to  Computable  General  Equilibrium  (CGE)  models.  In  many 
ways the modelling approaches are similar; they are used to answer similar questions and 
use similar inputs and outputs. However, underlying this there are important theoretical 
differences between the modelling approaches. 

211 In the example, the higher fuel efficiency effectively reduces the cost of motoring.  In the long-run this 
is likely to lead to an increase in demand, meaning some of the initial savings are lost.  Barker et al (2009) 
demonstrate that this can be as high as 50% of the original reduction. 

152 

 
 
                                                 
In  a  typical  CGE  framework,  optimal  behaviour  is  assumed,  output  is  determined  by 
supply-side constraints and prices adjust fully so that all the available capacity is used. In 
E3ME  the  determination  of  output  comes  from  a  post-Keynesian  framework  and  it  is 
possible to have spare capacity. The model is more demand-driven and it is not assumed 
that prices always adjust to market clearing levels.  

The  differences  have  important  practical  implications,  as  they  mean  that  in  E3ME 
regulation and other policy may lead to increases in output if they are able to draw upon 
spare economic capacity. This is described in more detail in the model manual. 

The  econometric  specification  of  E3ME  gives  the  model  a  strong  empirical  grounding.  
E3ME  uses  a  system  of  error  correction,  allowing  short-term  dynamic  (or  transition) 
outcomes,  moving  towards  a  long-term  trend.    The  dynamic  specification  is  important 
when  considering  short  and  medium-term  analysis  (e.g.  up  to  2020)  and  rebound 
effects212, which are included as standard in the model’s results. 

Limitations of the approach 

As with all modelling approaches, E3ME is a simplification of reality and is based on a 
series  of  assumptions.  Compared  to  other  macroeconomic  modelling  approaches,  the 
assumptions  are  relatively  non-restrictive  as  most  relationships  are  determined  by  the 
historical data in the model database. This does, however, present its own limitations, for 
which the model user must be aware: 

The quality of the data used in the modelling is very important. Substantial resources are 
put  into  maintaining  the  E3ME  database  and  filling  out  gaps  in  the  data.  However, 
particularly in developing countries, there is some uncertainty in results due to the data 
used. 

Econometric approaches are also sometimes criticised for using the past to explain future 
trends. In cases where there is large-scale policy change, the ‘Lucas Critique’ that 
suggests behaviour might change is also applicable. There is no solution to this argument 
using any modelling approach (as no one can predict the future) but we must always be 
aware of the uncertainty in the model results. 

E3ME basic structure and data 

The structure of E3ME is based on the system of national accounts, with further linkages 
to  energy  demand  and  environmental  emissions.  The  labour  market  is  also  covered  in 
detail, including both voluntary and involuntary unemployment. In total there are 33 sets 
of  econometrically  estimated  equations,  also  including  the  components  of  GDP 
(consumption,  investment,  international  trade),  prices,  energy  demand  and  materials 
demand. Each equation set is disaggregated by country and by sector. 

212 Where an initial increase in efficiency reduces demand, but this is negated in the long run as greater 
efficiency lowers the relative cost and increases consumption.  See Barker et al (2009). 

153 

 
                                                 
E3ME’s historical database covers the period 1970-2014 and the model projects forward 
annually  to  2050.  The  main  data  sources  for  European  countries  are  Eurostat  and  the 
IEA, supplemented by the OECD’s STAN database and other sources where appropriate.  
For  regions  outside  Europe,  additional  sources  for  data  include  the  UN,  OECD,  World 
Bank, IMF, ILO and national statistics. Gaps in the data are estimated using customised 
software algorithms. 

The main dimensions of the model 

The main dimensions of E3ME are: 

• 

• 

• 
• 
• 

61 countries – all major world economies, the EU28 and candidate countries 
plus other countries’ economies grouped 
44 or 70 (Europe) industry sectors, based on standard international 
classifications 
28 or 43 (Europe) categories of household expenditure 
22 different users of 12 different fuel types 
14 types of air-borne emission (where data are available) including the 6 
HG’s monitored under the Kyoto Protocol 

Standard outputs from the model 

As a general model of the economy, based on the full structure of the national accounts, 
E3ME is capable of producing a broad range of economic indicators. In addition there is 
range of energy and environment indicators. The following list provides a summary of 
the most common model outputs: 

• 

• 
• 
• 
• 
• 
• 
• 
• 

GDP and the aggregate components of GDP (household expenditure, 
investment, government expenditure and international trade) 
sectoral output and GVA, prices, trade and competitiveness effects 
international trade by sector, origin and destination 
consumer prices and expenditures 
sectoral employment, unemployment, sectoral wage rates and labour supply 
energy demand, by sector and by fuel, energy prices 
CO2 emissions by sector and by fuel 
other air-borne emissions 
material demands 

This  list  is  by  no  means  exhaustive  and  the  delivered  outputs  often  depend  on  the 
requirements of the specific application. In addition to the sectoral dimension mentioned 
in the list, all indicators are produced at the national and regional level and annually over 
the period up to 2050. 

E3ME as an E3 model 

The E3 interactions 

Each  data  set  has  been  constructed  by  statistical  offices  to  conform  with  accounting 
conventions.  Exogenous  factors  coming  from  outside  the  modelling  framework  are 

154 

 
shown on the outside edge of the chart as inputs into each component.  For each region’s 
economy  the  exogenous  factors  are  economic  policies  (including  tax  rates,  growth  in 
government expenditures, interest rates and exchange rates).  For the energy system, the 
outside  factors  are  the  world  oil  prices  and  energy  policy  (including  regulation  of  the 
energy industries).  For the environment component, exogenous factors include policies 
such  as  reduction  in  SO2  emissions  by  means  of  end-of-pipe  filters  from  large 
combustion  plants.  The  linkages  between  the  components  of  the  model  are  shown 
explicitly by the arrows that indicate which values are transmitted between components. 

The economy module provides measures of economic activity and general price levels to 
the  energy  module;  the  energy  module  provides  measures  of  emissions  of  the  main  air 
pollutants  to  the  environment  module,  which  in  turn  can  give  measures  of  damage  to 
health  and  buildings.    The  energy  module  provides  detailed  price  levels  for  energy 
carriers distinguished in the economy module and the overall price of energy as well as 
energy use in the economy. 

Treatment of international trade 

An important part of the modelling concerns international trade. E3ME solves for 
detailed bilateral trade between regions (similar to a two-tier Armington model). Trade is 
modelled in three stages: 

5.  econometric estimation of regions’ sectoral import demand  
6.  econometric estimation of regions’ bilateral imports from each partner 
7.  forming exports from other regions’ import demands 

Trade volumes are determined by a combination of economic activity indicators, relative 
prices and technology. 

The labour market 

Treatment  of  the  labour  market  is  an  area  that  distinguishes  E3ME  from  other 
macroeconomic  models.  E3ME  includes  econometric  equation  sets  for  employment, 
average  working  hours,  wage  rates  and  participation  rates.  The  first  three  of  these  are 
disaggregated by economic sector while participation  rates are disaggregated by gender 
and five-year age band. 

The  labour  force  is  determined  by  multiplying  labour  market  participation  rates  by 
population. Unemployment (including both voluntary and involuntary unemployment) is 
determined  by  taking  the  difference  between  the  labour  force  and  employment.  This  is 
typically a key variable of interest for policy makers. 

The role of technology 

Technological  progress  plays  an  important  role  in  the  E3ME  model,  affecting  all  three 
E’s:  economy,  energy  and  environment.    The  model’s  endogenous  technical  progress 
indicators  (TPIs),  a  function  of  R&D  and  gross  investment,  appear  in  nine  of  E3ME’s 
econometric equation sets including trade, the labour market and prices. Investment and 
R&D  in  new  technologies  also  appears  in  the  E3ME’s  energy  and  material  demand 

155 

 
equations to capture energy/resource savings technologies as well as pollution abatement 
equipment. In addition, E3ME also captures low carbon technologies in the power sector 
through the FTT power sector model.213 

Model Inputs and Assumptions 

The inputs to the modelling were derived from the (Draft) PRIMES Reference Scenario, 
as  used  for  other  Impact  Assessments  following  the  Climate  Target  Plan.    New  model 
runs were undertaken in December 2020 and January 2021 using revised input from the 
PRIMES Reference Scenario, reflecting the impacts of the COVID-19 pandemic. 

Aviation modelling was carried out both for a set of ‘most likely’ trajectories in uncertain 
input scenario variables (oil price, carbon price, demand growth, CORSIA participation 
and  changes  in  technology)  and  across  a  grid  of  variant  scenarios  for  these  input 
variables. Outputs are then reported for nominal scenario conditions (i.e., using the ‘most 
likely’  trajectories  for  all  uncertain  scenario  variables;  the  E3ME  modelling  is  also 
carried out on this basis) along with a given range in each output metric across all other 
combinations of uncertain scenario variables. 

The variables, and scenarios or trajectories modelled for these variables, are:  

  The main options (C0WIDE, C1BASE, C2CONLY, C3CLEAN, C4MIX) 
  Demand  growth  (at  nominal  values  for  other  variables):  high,  central  and  low 
growth  via  different  scenarios  for  demand  drivers  (e.g.  GDP/capita,  population) 
and development of elasticities. 

  Oil price: high, central low oil price trajectories 
  Carbon price: separate higher and lower price trajectories for EU ETS allowance 

price and CORSIA-eligible offsets.  

  Technology:  optimistic,  central  and  pessimistic 

lenses  for 

timeline  and 

effectiveness of within-sector emissions mitigation measures. 

  CORSIA Participation: Low, Initial Assumed and High. 

The ICF report provides a detailed description of these. Some key elements are described 
below. 

The  following  oil  price  assumptions  are  used,  as  provided  by  the  Commission  to  the 
modelers. 

Oil  prices  during  the  pandemic  recovery  period  are  lower  in  all  cases  than  projected 
ahead  of  the  crisis,  and  for  the  nominal  scenario  they  remain  lower  than  previously 
projected throughout the entire modelled period to 2035.   

213 See Mercure (2012). 

156 

 
  
 
                                                 
Table A4.1: Assumptions about oil price used for the high, nominal, and low scenarios 
with  COVID-19  adjustment.  Values  in  the  previous  impact  assessment  are  shown  in 
brackets (where different). 

Scenario 

Oil price, year 2015 US dollars 

COVID-19-adjusted 
High 

COVID-19-adjusted 
Nominal 

2015 

2020 

2025 

2030 

2035 

52 

40 (67) 

96 

108 

124 

52 

40 (58) 

60 (73) 

80 (87) 

90 (94) 

COVID-19-adjusted Low  

52 

40 (58) 

60 (61) 

59 

57 

The  following  carbon  price  assumptions  were  used  for  EU  allowances  and  CORSIA 
eligible offsets (adjusted for the impacts of COVID-19). 

Table A4.2: Carbon price assumptions by scenario and allowance type, corrected for the 
impacts of COVID-19.  

Scenario 

(EU  ETS)  Base 

EUA 
COVID-19  (nominal) 

(EU  ETS) 
EUA 
COVID-19  (high) 

IIb 

CORSIA Sc1 (nominal) 

CORSIA Sc2 (high) 

2015 

7.8 

7.8 

0.20 

0.20 

Carbon price €/tCO2, year 2020 euros 

2020 

26.5 

26.5 

1.02 

1.02 

2025 

27.5 

47.8 

1.02 

5.09 

2030 

32 

84.5 

1.02 

13.2 

157 

 
 
 
 
 
Technology Assumptions 

In AIM, technology developments are modelled by specifying values for the individual 
characteristics of candidate technologies per aircraft size class, for nine size classes from 
Small Regional Jets to Very Large Aircraft. The resulting change in fuel use per RPK or 
RTK is then an output of the model. The characteristics of future technologies (e.g. new 
aircraft  models,  retrofits,  operational  measures  or  alternative  fuels)  can  be  highly 
uncertain. In many cases, estimates of the benefits of technologies depend on engineering 
breakthroughs that have still to be made. Therefore, the technology adoption model uses 
a lens approach to assess the impact of uncertainty in technology parameters (e.g. Allaire 
et al. 2014)214. A lens is a set of input parameters which reflect a particular scenario for 
future  technology.  For  example,  the  ‘pessimistic’  technology  lens  used  in  this  study 
describes  a  future  in  which  it  is  particularly  hard  to  reduce  aviation  emissions  through 
technology;  this  assumes  the  reduction  in  fuel  use  from  new  technologies  is  at  the  low 
end of available estimates, costs are at the high end of available estimates, and the date 
from which the technology is available is at the late end of available estimates. For this 
impact  assessments,  three  lenses  have  been  defined  using  technology  parameters, 
including  changes  in  aircraft  operating  costs  by  cost  type  and  changes  in  fuel  burn,  as 
derived from Schäfer et al. (2016)215 and Dray et al. (2018).  As well as the pessimistic 
lens discussed above, we use a central lens which assumes all technology parameters are 
at  central/’most  likely’  values  from  available  estimates,  and  an  ‘optimistic’  scenario  in 
which  reductions  in  fuel  use  from  new  technologies  are  at  the  high  end  of  available 
estimates,  costs  are  at  the  low  end  of  available  estimates,  and  the  date  from  which  the 
technology is available is at the early end of available estimates.  In all cases we assume 
consistency with ICAO’s CO2 standard. 

Within AIM, measures are adopted based on their cost-effectiveness, using a Net Present 
Value (NPV) model as described in Dray et al. (2018). This means that high fuel and/or 
carbon  prices  can  affect  which  technologies,  retrofits  and  operational  strategies  are 
adopted. Because airlines typically use individual aircraft on multiple routes across their 
networks, technology uptake is assessed at a regional level (e.g. Europe, North America) 
based on average route-level costs within each region. 

The results also depend on a number of other input assumptions, for the scale of supply 
of cellulosic biomass-derived drop-in aviation fuel.  

As  the  analysis  for  this  impact  assessment  looks  to  2030  and  2035,  not  2050, 
assumptions are fairly conservative216 

Projections of how much biofuel might be in use in aviation up to 2050 vary widely and 
are dependent on the costs and supply of biomass assumed, as well as the characteristics 

214 Allaire D, Noel G, Willcox K and Cointin R. Uncertainty quantification of an Aviation Environmental 
Toolsuite. Reliability Engineering and System Safety, 2014; 126:14-24. 
215 Schäfer, A., Evans, A. D., Reynolds, T. and Dray, L. M. Costs of Mitigating CO2 Emissions from 
Passenger Aircraft. Nature Climate Change, Vol. 6, 2016, pp. 412-417. 
216 ICF report p181-183. 

158 

 
                                                 
of  and  demand  from  other  sectors  and  policies.  Most  recent  multi-sectoral  analyses 
project relatively low aviation biomass use to 2035.  

Electrofuels  (or  power-to-liquid  fuels)  also  have  potential  to  contribute  to  climate 
neutrality.  However,  given  the  current  costs  at  3-6  times  that  of  untaxed  kerosene  and 
uncertainties about uptake, electrofuels are not included in the modelling for this impact 
assessment.  

No additional policy support for aviation biofuel beyond ETS or CORSIA carbon pricing 
and biofuel exemptions are assumed. Operators are assumed to use biofuels only if they 
can reduce total operating costs by doing so. 

159 

 
 
Annex 5: COVID-19 impacts on growth of greenhouse gas 
emissions in the aviation sector 

In November 2020, Eurocontrol published its forecast for the recovery of the European 
aviation  sector  for  the  years  2020-2024217  that  was  updated  in  May  2021218.  This 
describes the severe impact of the COVID-19 pandemic on the air traffic. According to 
the forecast, even in the most optimistic scenario, the 2019 emission levels would not be 
reached before 2024, and the worst-case scenario shows a recovery by 2029. 

217 https://www.eurocontrol.int/publication/eurocontrol-five-year-forecast-2020-2024  
218 https://www.eurocontrol.int/press-release/new-eurocontrol-four-year-forecast-finds-air-traffic-not-
expected-reach-2019-levels  

160 

 
 
 
 
 
 
                                                 
Annex 6: 2019 ICAO Resolution on CORSIA 

Resolution A40-19: Consolidated statement of continuing ICAO policies and 
practices related to environmental protection - Carbon Offsetting and Reduction 
Scheme for International Aviation (CORSIA)  

Whereas  Assembly  Resolution  A38-18  decided  to  develop  a  global  market-based 
measure (GMBM) scheme for international aviation, for decision by the 39th Session of 
the Assembly;  

Recalling that Assembly Resolution  A38-18 requested the Council,  with  the support of 
Member States, to identify the major issues and problems, including for Member States, 
and make a recommendation on a GMBM scheme that appropriately addresses them and 
key  design  elements,  including  a  means  to  take  into  account  special  circumstances  and 
respective capabilities, and the mechanisms for the implementation of the scheme from 
2020  as  part  of  a  basket  of  measures  which  also  include  technologies,  operational 
improvements and sustainable aviation fuels to achieve ICAO’s global aspirational goals;  

Whereas  Assembly  Resolution  A39-3  decided  to  implement  a  GMBM  scheme  in  the 
form  of  the  Carbon  Offsetting  and  Reduction  Scheme  for  International  Aviation 
(CORSIA)  as  part  of  a  basket  of  measures  which  also  include  aircraft  technologies, 
operational  improvements  and  sustainable  aviation  fuels  to  achieve  ICAO’s  global 
aspirational goals;  

Recognizing that ICAO is the appropriate forum to address emissions from international 
aviation,  and  the  significant  amount  of  work  undertaken  by  the  Council,  its  Advisory 
Group  on  CORSIA  (AGC),  its  Technical  Advisory  Body  (TAB)  and  its  Committee  on 
Aviation Environmental Protection (CAEP) to support the implementation of CORSIA;   

Welcoming  the  adoption  of  the  first  edition  of  Annex  16  –  Environmental  Protection, 
Volume  IV  –  CORSIA,  the  provisions  of  which  include  Monitoring,  Reporting  and 
Verification (MRV) procedures for CORSIA;  

Also  welcoming  the publication of the first  edition  of Environmental Technical  Manual 
(ETM,  Doc  9501),  Volume  IV  –  Procedures  for  demonstrating  compliance  with  the 
CORSIA;  

Welcoming  the  progress  made  for  the  development  of  ICAO  CORSIA  Implementation 
Elements,  which  are reflected in 14  ICAO documents directly  referenced in  Annex 16, 
Volume IV, containing materials that are approved by the Council, and are essential for 
the implementation of CORSIA;  

161 

 
 
  
Also  welcoming  the  establishment  by  the  Council  of  the  Technical  Advisory  Body 
(TAB),  with  the  mandate  to  make  recommendations  to  the  Council  on  the  CORSIA 
eligible emissions units;  

Recognizing the importance of a coordinated approach for capacity building activities by 
ICAO  and  its  Member  States,  in  cooperation  with  the  aviation  industry,  to  support  the 
implementation  of  CORSIA,  in  particular  through  the  ICAO  Assistance,  Capacity-
building  and  Training  for  CORSIA  (ACTCORSIA)  programme  that  includes  the 
organization  of  seminars,  development  of  outreach  materials,  and  establishment  of 
CORSIA partnerships among States;  

Welcoming the increasing number of announcements by Member States of their intention 
to voluntarily participate in CORSIA in the pilot phase from 2021;  

Recognizing that strong capacity-building activities can facilitate the decision of Member 
States to voluntarily participate in CORSIA;   

Noting  the  support  of  the  aviation  industry  for  CORSIA  as  a  single  global  carbon 
offsetting  scheme,  as  opposed  to  a  patchwork  of  State  and  regional  MBMs,  as  a  cost 
effective  measure  to  complement  a  broader  package  of  measures  including  technology, 
operations and infrastructure measures;   

Recognizing  that  MBMs  should  not  be  duplicative  and  international  aviation  CO2 
emissions should be accounted for only once;   

Emphasizing  that  the  decision  by  the  39th  Session  of  the  Assembly  to  implement  the 
CORSIA  reflects  the  strong  support  of  Member  States  for  a  global  solution  for  the 
international aviation industry, as opposed to a possible patchwork of State and regional 
MBMs;   

Reaffirming the concern with the use of international civil aviation as a potential source 
for the mobilization of revenue for climate finance to the other sectors, and that MBMs 
should  ensure  the  fair  treatment  of  the  international  aviation  sector  in  relation  to  other 
sectors;   

Recalling  the  United  Nations  Framework  Convention  on  Climate  Change  (UNFCCC) 
and the Paris Agreement and acknowledging its principle of common but differentiated 
responsibilities and respective capabilities, in light of different national circumstances;   

Also acknowledging the principles of non-discrimination and equal and fair opportunities 
to develop international aviation set forth in the Chicago Convention;   

Recognizing that the work related to CORSIA and its implementation will contribute to 
the achievement of the goals set out in the Paris Agreement adopted under the UNFCCC;   

Whereas  the  UNFCCC  and  the  Paris  Agreement  provide  for  mechanisms,  such  as  the 
Clean  Development  Mechanism  (CDM)  and  a  new  market  mechanism  under  the  Paris 

162 

 
 
Agreement,  to  contribute  to  the  mitigation  of  GHG  emissions  to  support  sustainable 
development, which benefit developing States in particular;   

Welcoming  the  cooperation  between  the  UNFCCC  and  ICAO  on  the  development  of 
CDM methodologies for aviation;  

Recognizing that this Resolution does not set a precedent for or prejudge the outcome of 
negotiations under the UNFCCC, the Paris Agreement, or other international agreements, 
nor represent the position of the Parties to the UNFCCC, the Paris Agreement, or  other 
international agreements;   

The Assembly:  

1.  Resolves  that  this  Resolution,  together  with  Resolution  A40-17:  Consolidated 
statement of continuing ICAO policies and practices related to environmental protection - 
General  provisions,  noise  and  local  air  quality  and  Resolution  A40-18:  Consolidated 
statement of continuing ICAO policies and practices related to environmental protection 
–  Climate  change,  supersede  Resolutions  A39-1,  A39-2  and  A39-3  and  constitute  the 
to 
consolidated  statement  of  continuing  ICAO  policies  and  practices  related 
environmental protection;  

2.  Acknowledges  the  progress  achieved  on  all  elements  of  the  basket  of  measures 
available  to  address  CO2  emissions  from  international  aviation,  including  aircraft 
technologies,  operational  improvements,  sustainable  aviation  fuels  and  CORSIA,  and 
affirms the preference for the use of aircraft technologies, operational improvements and 
sustainable  aviation  fuels  that  provide  the  environmental  benefits  within  the  aviation 
sector;    

3. Also acknowledges that, despite this progress, the environmental benefits from aircraft 
technologies,  operational  improvements  and  sustainable  aviation  fuels  may  not  deliver 
sufficient CO2 emissions reductions to address the growth of international air traffic, in 
time  to  achieve  the  global  aspirational  goal  of  keeping  the  global  net  CO2  emissions 
from international aviation from 2020 at the same level;   

4.  Emphasizes  the  role  of  CORSIA  to  complement  a  broader  package  of  measures  to 
achieve the global aspirational goal, without imposing inappropriate economic burden on 
international aviation;   

5. Recalls its decision at the 39th Session to implement a GMBM scheme in the form of 
the  Carbon  Offsetting  and  Reduction  Scheme  for  International  Aviation  (CORSIA)  to 
address any annual increase in total CO2 emissions from international civil aviation (i.e. 
civil  aviation  flights  that depart in  one country  and arrive in  a different  country)  above 
the 2020 levels, taking into account special circumstances and respective capabilities;   

6.  Requests  the  Council  to  continue  to  ensure  all  efforts  to  make  further  progress  on 
aircraft  technologies,  operational  improvements  and  sustainable  aviation  fuels  be  taken 
by  Member  States  and  reflected  in  their  action  plans  to  address  CO2  emissions  from 

163 

 
 
international aviation, and to monitor and report the progress on implementation of action 
plans, and that a methodology should be developed to ensure that an aeroplane operator’s 
offsetting requirements under the scheme in a given year can be reduced through the use 
of  CORSIA  eligible  fuels  (i.e.,  CORSIA  sustainable  aviation  fuels  and  CORSIA  lower 
carbon aviation fuels), so that all elements of the basket of measures are reflected;   

7. Request the Council to continuously monitor the implementation of all elements of the 
basket  of  measures,  and  consider  the  necessary  policies  and  actions  to  ensure  that 
progress  is  achieved  in  all  of  the  elements  in  a  balanced  way  with  an  increasing 
percentage of emissions reductions accruing from non-MBM measures over time;  

8. Acknowledges special circumstances and respective capabilities of States, in particular 
developing States, in terms of vulnerability to the impacts of climate change, economic 
development  levels,  and  contributions  to  international  aviation  emissions,  among  other 
things, while minimizing market distortion;   

9. Recalls its decision at the 39th Session on the use of a phased implementation for the 
CORSIA to accommodate the special circumstances and respective capabilities of States, 
in particular developing States, while minimizing market distortion, as follows:   

a)  Pilot  phase  applies  from  2021  through  2023  to  States  that  have  volunteered  to 
participate  in  the  scheme.  States  participating  in  this  phase  may  determine  the  basis  of 
their aeroplane operator’s offsetting requirements from paragraph 11 e) i) below;  

b) First phase applies from 2024 through 2026 to States that voluntarily participate in the 
pilot phase, as well as any other States that volunteer to participate in this phase, with the 
calculation of offsetting requirements in paragraph 11 a) below;   

c) All States are strongly encouraged to voluntarily participate in the pilot phase and the 
first phase, noting that developed States, which have already volunteered, are taking the 
lead, and that several other States have also volunteered;  

d)  The  Secretariat  will  make  public  on  the  ICAO  website  updated  information  on  the 
States that volunteered to participate in the pilot phase and first phase;   

e)  Second  phase  applies  from  2027  through  2035  to  all  States  that  have  an  individual 
share of international aviation activities in RTKs in year 2018 above 0.5 per cent of total 
RTKs  or  whose  cumulative  share  in  the  list  of  States  from  the  highest  to  the  lowest 
amount of RTKs reaches  90 per cent  of total  RTKs, except  Least  Developed Countries 
(LDCs),  Small  Island  Developing  States  (SIDS)  and  Landlocked  Developing  Countries 
(LLDCs) unless they volunteer to participate in this phase;   

f)  States  that  are  exempted  or  have  not  yet  participated  are  strongly  encouraged  to 
voluntarily participate in the scheme as early  as possible, in particular those States that 
are  members  of  a  regional  economic  integration  organization.  States  who  decide  to 
voluntarily participate in the scheme, or decide to discontinue the voluntary participation 

164 

 
 
from the scheme, may only do so from 1 January in any given year and they shall notify 
ICAO of their decision by no later than 30 June of the preceding year;  

g)  Starting  in  2022,  the  Council  will  conduct  a  review  of  the  implementation  of  the 
CORSIA every three years, including its impact on the growth of international aviation, 
which serves as an important basis for the Council to consider whether it is necessary to 
make  adjustments  to  the  next  phase  or  compliance  cycle  and,  as  appropriate,  to 
recommend such adjustments to the Assembly for its decision;   

10. Recalls its decision at the 39th Session that the CORSIA shall apply to all aeroplane 
operators on the same routes between States with a view to minimizing market distortion, 
as follows:   

a) all international flights on the routes between States, both of which are included in the 
CORSIA  by  paragraph  9  above,  are  covered  by  the  offsetting  requirements  of  the 
CORSIA;  

b) all international flights on the routes between a State that is included in the CORSIA 
and another State that is not included in the CORSIA by paragraph 9 above are exempted 
from  the  offsetting  requirements  of  the  CORSIA,  while  retaining  simplified  reporting 
requirements; and  

c) all international flights on the routes between States, both of which are not included in 
the CORSIA by paragraph 9 above, are exempted from the offsetting requirements of the 
CORSIA, while retaining simplified reporting requirements;  

11. Recalls its decision at the 39th Session that the amount of CO2 emissions required to 
be offset by an aeroplane operator in a given year from 2021 is calculated every year as 
follows:   

a) an aeroplane operator’s offset requirement = [ % Sectoral × (an aeroplane  operator’s 
emissions covered by CORSIA in a given year × the sector’s growth factor in the given 
year)] + [ %  Individual  × (an  aeroplane operator’s emissions covered by  CORSIA in  a 
given year × that aeroplane operator’s growth factor in the given year);  

b) where the sector’s growth factor = (total emissions covered by CORSIA in the given 
year  –  average  of  total  emissions  covered  by  CORSIA  between  2019  and  2020)  /  total 
emissions covered by CORSIA in the given year;  

c)  where  the  aeroplane  operator’s  growth  factor  =  (the  aeroplane  operator’s  emissions 
covered by CORSIA in  the given  year  – average of the  aeroplane operator’s emissions 
covered  by  CORSIA  between  2019  and  2020  )  /  the  aeroplane  operator’s  emissions 
covered by CORSIA in the given year;  

d) where the % Sectoral = (100% – % Individual) and;  

e) where the % Sectoral and % Individual will be applied as follows:  

165 

 
 
i)  from  2021  through  2023,  100%  sectoral  and  0%  individual,  though  each 
participating State may choose during this pilot phase whether to apply this to:  

a) an aeroplane operator’s emissions covered by CORSIA in a given year, 
as stated above, or  

b) an aeroplane operator’s emissions covered by CORSIA in 2020;  

ii) from 2024 through 2026, 100 % sectoral and 0% individual;  

iii) from 2027 through 2029, 100 % sectoral and 0% individual;  

iv)  from  2030  through  2032,  at  least  20%  individual,  with  the  Council 
recommending to the Assembly in 2028 whether and to what extent to adjust the 
individual percentage;  

v)  from  2033  through  2035,  at  least  70%  individual,  with  the  Council 
recommending to the Assembly in 2028 whether and to what extent to adjust the 
individual percentage;  

f) the aeroplane operator’s emissions and the total emissions covered by CORSIA in the 
given year do not include emissions exempted from the scheme in that year;  

g) the scope of emissions in paragraphs 11 b) and 11 c) above will be recalculated at the 
start of each year to take into account routes to and from all States that will be added due 
to their voluntary participation or the start of a new phase or compliance cycle;  

12.  Recalls  its  decision  at  the  39th  Session  that  a  new  entrant219  is  exempted  from  the 
application of the CORSIA for three years or until the year in which its annual emissions 
exceed  0.1  per  cent  of  total  emissions  in  2020,  whichever  occurs  earlier.  From  the 
subsequent year, the new entrant is included in the scheme and treated in the same way as 
the other aeroplane operators;   

13.  Recalls  its  decision  at  the  39th  Session  that,  notwithstanding  with  the  provisions 
above, the CORSIA does not apply to low levels of international aviation activity with a 
view  to  avoiding  administrative  burden:  aeroplane  operators  emitting  less  than  10,000 
metric tonnes of CO2 emissions from international aviation per year; aeroplane with less 
than  5,700  kg  of  Maximum  Take  Off  Mass  (MTOM);  or  humanitarian,  medical  and 
firefighting operations;   

14. Recalls its decision at the 39th Session that the emissions that are not covered by the 
scheme,  as  the  results  of  phased  implementation  and  exemptions,  are  not  assigned  as 
offsetting requirements of any aeroplane operators included in the scheme;   

219 A new entrant is defined as any aeroplane operator that commences an aviation activity falling within the scope of 
Annex 16, Volume IV on or after its entry into force and whose activity is not in whole or in part a continuation of an 
aviation activity previously performed by another aeroplane operator. 

166 

 
 
                                                 
15. Recalls its decision at the 39th Session on a three year compliance cycle, starting with 
the  first  cycle  from  2021  to  2023,  for  aeroplane  operators  to  reconcile  their  offsetting 
requirements  under  the  scheme,  while  they  report  the  required  data  to  the  authority 
designated by the aeroplane operator’s State of registry every year;   

16. Recalls its decision at the 39th Session on the need to provide for safeguards in the 
CORSIA to  ensure the sustainable development  of the international  aviation  sector and 
against  inappropriate  economic  burden  on  international  aviation,  and  requests  the 
Council  to  decide  the  basis  and  criteria  for  triggering  such  action  and  identify  possible 
means to address these issues;   

17.  Recalls  its  decision  at  the  39th  Session  that  a  periodic  review  of  the  CORSIA  is 
undertaken by the Council, with the technical contribution of CAEP, for consideration by 
the Assembly, every three years from 2022 for the purpose referred to in paragraph 9 g) 
above  and  to  contribute  to  the  sustainable  development  of  the  international  aviation 
sector and the effectiveness of the scheme. This will involve, inter alia:  

a)  assessment  of:  progress  towards  achieving  the  ICAO’s  global  aspirational  goal;  the 
scheme’s market and cost impact on States and aeroplane operators and on international 
aviation; and the functioning of the scheme’s design elements;  

b)  consideration  of  the  scheme’s  improvements  that  would  support  the  purpose  of  the 
Paris Agreement, in particular its long-term temperature goals; and update the scheme’s 
design elements to improve implementation, increase effectiveness, and minimize market 
distortion, taking into account the consequential impact of changing the scheme’s design 
elements, e.g., to MRV requirements; and  

c) a special review by the end of 2032 on termination of the scheme, its extension or any 
other  improvements  of  the  scheme  beyond  2035,  including  consideration  of  the 
contribution  made  by  aircraft  technologies,  operational  improvements  and  sustainable 
aviation fuels towards achieving the ICAO’s environmental objectives;   

18.  Determines  that  the  CORSIA  is  the  only  global  market-based  measure  applying  to 
CO2  emissions  from  international  aviation  so  as  to  avoid  a  possible  patchwork  of 
duplicative  State  or  regional  MBMs,  thus  ensuring  that  international  aviation  CO2 
emissions should be accounted for only once;   

19. Requests the following actions be taken for implementation of the CORSIA:  

a) the Council, with the technical contribution of CAEP, to update the Annex 16, Volume 
IV and Environmental Technical Manual, Volume IV, as appropriate;  

b)  the  Council,  with  the  technical  contribution  of  CAEP,  to  continue  to  develop  and 
update  the  ICAO  CORSIA  documents  referenced  in  Annex  16,  Volume  IV  related  to: 
ICAO CORSIA CO2 Estimation and Reporting Tool; CORSIA eligible fuels; CORSIA 
emissions units criteria (EUC); and CORSIA Central Registry, as appropriate;  

167 

 
 
c) the Council to develop and update the ICAO CORSIA document referenced in Annex 
16,  Volume  IV  related  to  the  eligible  emissions  units  for  use  by  the  CORSIA, 
considering the recommendations of the TAB;  

d ) the Council to establish, by early 2020, and maintain the CORSIA Central Registry 
under the auspices of ICAO to enable the reporting of relevant information from Member 
States to ICAO;   

e) the Council to continue to oversee the implementation of the CORSIA, with support 
provided by the AGC and CAEP, as appropriate; and  

f)  Member  States  to  take  the  necessary  action  to  ensure  that  national  policies  and 
regulatory  frameworks  are  established  for  the  compliance  and  enforcement  of  the 
CORSIA, in accordance with the timeline set forth by Annex 16, Volume IV;  

20.    Recalls  its  decision  at  the  39th  Session  that  emissions  units  generated  from 
mechanisms established under the UNFCCC and the Paris Agreement are eligible for use 
in  CORSIA,  provided  that  they  align  with  decisions  by  the  Council,  with  the  technical 
contribution of TAB and CAEP, including on avoiding double counting and on eligible 
vintage and timeframe;  

21.  Decides  that  ICAO  and  Member  States  take  all  necessary  actions  in  providing  the 
capacity  building  and  assistance  and  building  partnerships  for  implementation  of  the 
CORSIA, in accordance with the timeline set forth in Annex 16, Volume IV, including 
through  the  ICAO  Assistance,  Capacity-building  and  Training  for  CORSIA  (ACT-
CORSIA)  programme  that  includes  the  organization  of  seminars,  development  of 
outreach  materials,  and  establishment  of  CORSIA  partnerships  among  States,  while 
emphasizing the importance of a coordinated approach under the umbrella of ICAO for 
undertaking capacity building and assistance activities;  

22. Recalls its decision at the 39th Session that the CORSIA will use emissions units that 
meet the Emissions Unit Criteria (EUC) in paragraph 19 above;   

23.  Requests  the  Council  to  promote  the  use  of  emissions  units  generated  that  benefit 
developing  States,  and  encourages  States  to  develop  domestic  aviation-related  projects; 
and  

the  Council 

24.  Requests 
to  explore  further  development  of  aviation-related 
methodologies  for  use  in  offsetting  programmes,  including  mechanisms  or  other 
programmes  under  the  UNFCCC,  and  encourages  States  to  use  such  methodologies  in 
taking actions to reduce aviation CO2 emissions, which could further enable the use of 
credits generated from the implementation of such programmes by the CORSIA, without 
double-counting of emissions reduction. 

168 

 
 
 
 
Annex 7: Developments following the 2016 ICAO Assembly 

At  the  39th  ICAO  Assembly  agreed  to  implement  a  GMBM  scheme  in  the  form  of  the 
Carbon  Offsetting  and  Reduction  Scheme  for  International  Aviation  (CORSIA)  to 
address any annual increase in total CO2 emissions from international civil aviation (i.e. 
civil  aviation  flights  that depart in  one country  and arrive in  a different  country)  above 
the 2020 levels.  

On 27 June 2018, at the 10th meeting of its 214th session, the ICAO Council adopted the 
First Edition of Volume IV of Annex 16 to the Convention: the International Standards 
and  Recommended  Practices  on  Environmental  Protection  –  Carbon  Offsetting  and 
Reduction Scheme for International Aviation (CORSIA). 

On 20 July 2018 the ICAO sent out State Letter AN 1/17.14 – 18/78 (‘the State Letter’), 
requesting the contracting States to, first, notify any disapproval of any part of CORSIA 
before  22  October  2018  and,  second,  notify  any  differences  between  their  national 
practices and CORSIA and the expected date for compliance before 1 December 2018. 

In this context, the EU Member States notified differences220 to the ICAO, pointing at the 
generic differences between the EU ETS and CORSIA, and aimed at preserving both the 
EU policy space as well as the EU level of climate ambition. 

After  a  state  letter  consultation  process,  at  its  216th  session  in  March  2019,  the  ICAO 
council  adopted  the  CORSIA  Emission  Unit  Eligibility  Criteria221.  It  also  set  up  the 
Technical  Advisory  Body  (TAB)  tasked  to  assess  offsetting  programmes  against  the 
Emission  Unit  Eligibility  Criteria  in  order  to  develop  recommendations  on  CORSIA 
eligible emissions Units for the ICAO Council.  

At its 217th  Session in  June 2019, the  ICAO Council, approved the  first  edition  of the 
ICAO  document  “CORSIA  Sustainability  Criteria  for  CORSIA  Eligible  Fuels”, 
containing the sustainability criteria applicable during the pilot phase of CORSIA (2021 
to 2023)222. After an ICAO Council request, the Committee on Aviation Environmental 
Protection  (CAEP)  worked  on  additional  and  strengthened  sustainability  criteria 
applicable from the start of CORSIA’s first phase on 1 January 2024. The ICAO Council, 
at  its  219th  Session  in  March  2020,  agreed  to  bring  the  amendments  recommended  by 
CAEP  to  the  ICAO  document  “CORSIA  Sustainability  Criteria  for  CORSIA  Eligible 
Fuels”,  for  consultation  with  Member  States  through  a  State  Letter.  The  result  of  the 

220 Council Decision (EU) 2018/2027.  
221 https://www.icao.int/environmental-protection/CORSIA/Documents/ICAO_Document_09.pdf  
222 https://www.icao.int/environmental-protection/CORSIA/Documents/ICAO%20document%2005%20-
%20Sustainability%20Criteria.pdf  

169 

 
 
 
                                                 
consultation  have  been  deferred  to  the  next  ICAO  Council  Session  in  February-March 
2021.  

the  compatibility  of  CORSIA  with 

In  September  2019,  the  40th  ICAO  Assembly  took  place  in  Montreal  in  September  / 
October  2019.  Following  reservations  against  the  global  market  measures,  a  group  of 
countries  among  which  China,  the  Russian  Federation  and  India,  took  positions  which 
contested 
the  Common  but  Differentiated 
Responsibilities  principle,  considered  the  scheme  unfairly  hinders  the  growth  of  the 
aviation  sector  in  developing  states  and  places  an  undue  burden  on  them  compared  to 
states  with  developed  aviation.  The  resolution  proposed  to  the  ICAO  Council  to  the 
Assembly was subject to a vote in the ICAO Assembly, which confirmed the majority of 
states backing CORSIA. Resolution A40-19 Consolidated statement of continuing ICAO 
policies  and  practices  related  to  environmental  protection  -  Carbon  Offsetting  and 
Reduction  Scheme  for  International  Aviation  (CORSIA)  was  adopted  with  92  votes  in 
favour and 25 votes against (the Resolution text is provided in the Annex 6 to the Impact 
Assessment). 

This resolution contains a few modifications compared to the resolution A39-3, including 
the  statement  that  CORSIA  is  “the  only  global  market-based  measure  to  address 
emissions  from  international  aviation”.  Finland  on  behalf  of  the  EU  clarified  its 
interpretation  of  this  new  insertion:    “Fully  in  line  with  our  positions  taken  at  the  last 
Assembly  and  in  our  interventions  in  ICAO  Council  meetings,  Paragraph  18  of  Draft 
Resolution is to be read in light of the Chicago Convention as well as in line with certain 
Contracting Parties’ legal obligations to pursue efforts to limit the temperature increase 
in  line  with  the  Paris  Agreement  on  climate  change.  One  of  the  principles  of  the 
Convention is  that each  Contracting State may apply on a non-discriminatory basis its 
laws and regulations to all aircraft operating within its jurisdiction. This principle also 
applies to environmental measures such as the ones we have in the EU and its Member 
States”.  

At its 40th meeting, the Assembly as part of its resolution A40-18223, also requested “the 
Council to continue to explore the feasibility of a long-term global aspirational goal for 
international  aviation,  through  conducting  detailed  studies  assessing  the  attainability 
and impacts of any goals proposed, including the impact on growth as well as costs in all 
countries, especially developing countries, for the progress of the work to be presented to 
the 41st Session of the ICAO Assembly.” This work is currently ongoing. 

In  March  2020,  the  ICAO  Council  adopted  a  first  decision  on  CORSIA  Eligible 
Emissions  Units  based  on  TAB  recommendation.  Following  application  by  ten 
programmes  in  2019,  six  of  them  were  deemed  eligible  to  generate  CORSIA-eligible 
emissions units. The decision sets two important parameters: first units are eligible only 
for  the  2021  –  2023  compliance  cycle  (eligibility  timeframe)  and  second only  for  units 

223 Resolution A40-18: Consolidated statement of continuing ICAO policies and practices related to 
environmental protection - Climate change, https://www.icao.int/environmental-
protection/Documents/Assembly/Resolution_A40-18_Climate_Change.pdf  

170 

 
 
 
                                                 
issued  to  activities  that  started  their  first  crediting  period  from  1  January  2016;  and in 
respect  of  emissions  reductions  that  occurred  through  31  December  2020  (eligible  unit 
dates). This decision was followed by a second one, adopted in November 2020  on the 
basis  of  a  second  cycle  of  programmes  applications,  submitted  in  2020.  The  main 
parameters  of  the  decision  remained  unchanged;  one  new  programme  was  deemed 
eligible. In the end of 2020, following material changes to their rules and procedures by 
some  of  the  programmes  undertaken  in  the  year  2020,  one  additional  programme 
managed  to  satisfy  the  criteria.  It  was  recommended  eligible  by  the  TAB  for 
consideration at the 222nd ICAO Council session (February 2021), bringing to eight the 
eligible  programmes224,  again  with  the  eligibility  unit  dates  and  timeframe  described 
above.  Finally,  one  of  the  already  eligible  programmes,  succeeded  to  respond  to  the 
criteria  on  double  counting  for  post-2020  and  the  TAB  recommended  accordingly 
extended  eligibility  unit  date  for  this  programme  to  the  end  of  2023,  subsequently 
decided by the ICAO Council. A third cycle of applications begun in January 2021. 

Due to the COVID-19 crisis, at its 220th session in June 2020, the ICAO Council decided 
that  2019  emissions  shall  be  used  as  baseline  in  the  pilot  phase  instead  of  the  average 
between 2019 and 2020 emissions225. This will impact the following three features: the 
annual  Sector's  Growth  Factor  (SGF),  the  annual  offsetting  requirements  during 
CORSIA's pilot phase and the threshold for new entrants.   

By  30  June  2020,  States  had  to  notify  ICAO  of  their  voluntary  participation.  ICAO 
published  a  document  listing  the  88  States  that  will  participate  in  CORSIA  from  1 
January  2020226.  The  EU  Member  States  notified  their  voluntary  participation  as  of  1st 
January  2021  without  prejudice  to  the  differences  filed227  in  this  way  preserving  the 
European  Union  legal  framework,  including  the  legislator’s  latitude  to  decide  on  the 
future Union scheme. Notifications sent by States to ICAO have not been published.  

In  parallel,  after  the  official  launch228  of  the  CORSIA  Central  Registry  in  June  2020, 
ICAO is updating available information229.  

According  to  paragraph  17  of  Assembly  Resolution  A40-19,  the  ICAO  Council  will 
conduct a periodic review of the CORSIA every three years from 2022 onwards. During 
its  220th  session,  in  June  2020,  the  ICAO  Council  decided  to  initiate  the  process  to 
establish the first review cycle. The review parameters are detailed in paragraph 17 of the 
Assembly  Resolution.  This  review  will  also  examine  the  impact  of  COVID-19  on 
CORSIA on various issues, including the impact on the baseline beyond the pilot phase.  

224 https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-Emissions-Units.aspx 
225 https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-and-Covid-19.aspx  
226 https://www.icao.int/environmental-
protection/CORSIA/Documents/CORSIA_States_for_Chapter3_State_Pairs_Jul2020.pdf  
227 Council Decision (EU) 2020/954. 
228 https://www.icao.int/Newsroom/Pages/Continued-progress-toward-implementation-of-ICAOs-Carbon-
Offsetting-and-Reduction-Scheme-for-International-Aviation-.aspx  
229 https://www.icao.int/environmental-protection/CORSIA/Pages/CCR.aspx  

171 

 
 
                                                 
172 

 
 
 
 
 
 
Annex 8: Integration of Aviation in the EU's Emissions 
Trading System 

1. INITIAL FULL SCOPE INCLUSION  
In view of the 2004 ICAO Assembly's unanimous decision not to develop a GMBM but 
to favour inclusion of aviation into open regional systems, the Commission proposed in 
2006 to integrate aviation into the EU ETS covering emissions from flights to and from 
all  EU  Member  States.  Directive  2008/101/EC  amended  the  EU  ETS  Directive 
2003/87/EC and included aviation activities within the scope of the ETS:  

-  Total emissions are covered from intra-EEA flights and extra-EEA flights.  

- 

- 

 The  emission  cap  for  aviation  from  2013  onwards  has  been  set  at  95  %  of  the 
average  historic  aviation  emissions  (corresponding  to  the  period  from  2004  to 
2006).  

 Aircraft operators have been obliged to start emissions reporting in 2010 and full 
compliance – including surrendering of allowances – in 2012.  

The inclusion of aviation into the EU ETS was based on the 2006 Impact assessment230 
that covered in detail the environmental, economic, and social impacts. It was based on 
an  extensive  public  consultation.  It  concluded  that  the  broadest  possible  geographic 
scope of all departing and arriving flights would give the highest environmental benefits 
without  neither  significantly  affecting  the  demand  for  aviation  services  nor  the 
competitive position of individual airlines.  

2. INTERNATIONAL REACTIONS  
The inclusion of aviation into the EU ETS led to diplomatic objections from a number of 
countries including China,  India, and the US,  which opposed the EU ETS  alleging that 
the  EU  would  have  no  competence  to  oblige  their  operators  to  participate  in  the  EU 
ETS231. On 2 November 2011, the  ICAO Council endorsed a statement by 26 of its 36 
Member  States  repeating  parts  of  these  declarations232.  Moreover,  the  Air  Transport 
Association of America (ATA) and major US airlines challenged the legality of the EU 
ETS  before  the  European  Court  of  Justice  (ECJ),  which  confirmed  that  the  EU  was 
entitled to extend the EU ETS to the full distance of flights which depart or arrive at EU 
airports233. 

3. DECISION NO. 377/2013/EC  
Prior  to  the  2013  ICAO  Assembly,  the  2012  ICAO  Council  decided  to  set  up  a  High-
level Group on Climate Change (HGCC) that would develop guidance for a GMBM for 

230 SEC(2006) 1684.   
231 Joint Declaration signed on 30 September 2011 in New Delhi and Joint Declaration signed on 23 
February 2012 in Moscow on the inclusion of international civil aviation in the EU ETS.   
232 2012 ICAO Council Decision endorsing the Delhi Declaration, available at: 
http://ec.europa.eu/clima/policies/transport/aviation/docs/minutes_icao_en.pdf    
233 Case C-366/10.   

173 

 
 
 
  
 
 
 
                                                 
international  aviation  emissions  and  a  framework  for  national  and  regional  MBMs.  In 
recognition of this positive development, and in order to provide time for the 2013 ICAO 
Assembly  to  agree  on  a  GMBM,  the  EU  adopted  the  "stop-the-clock"  decision  to 
temporarily defer the  enforcement  of the EU ETS compliance obligations for  flights  to 
and  from  most  third  countries  for  2012  unless  airlines  chose  to  remain  with  full  scope 
(which a number of airlines chose to do, including airlines based outside the EEA), while 
maintaining  the  application  of  the  system  for  all  airlines  in  relation  to  intra-EEA 
flights234. 

4. THE 2013 ICAO ASSEMBLY  
The  EU's  "stop-the-clock"  decision  was  welcomed  by  many  countries.  The  temporarily 
reduced  scope  of  the  EU  ETS  for  aviation  was  instrumental  to  trigger  the  2013  ICAO 
Assembly to move forward on the development of a GMBM. The 2013 ICAO Assembly 
adopted a roadmap, which had been proposed by the EU, to develop a GMBM by 2016 
to be implemented from 2020235. 

5. REGULATION 421/2014  
To  take  account  of  the  outcome  of  the  2013  ICAO  Assembly,  Regulation  (EU)  No 
421/2014  was  adopted  by  the  European  Parliament  and  the  Council,  amending  the  EU 
ETS Directive 2003/87/EC. In order to sustain the momentum reached at the 2013 ICAO 
Assembly, the regulation introduced article 28a in the EU ETS Directive to temporarily 
derogate  the  application  of  the  EU  ETS  to  extra-EEA  flights,  as  well  as  to  intra-EEA 
flights  to  outermost  regions  between  1  January  2013  and  31  December  2016  period.  It 
also required the Commission to report on the outcome of the 2016 ICAO Assembly to 
the  European  Parliament  and  to  the  Council  and  consider  and,  if  appropriate,  include 
proposals in reaction to the ICAO developments on the appropriate scope for coverage of 
emissions from extra EEA-flights from 2017 onwards.  

6. THE 2016 ICAO ASSEMBLY 
After  several  years  of  intensive  negotiations  the  ICAO  Assembly  reached  for  the  first 
time  an  agreement  on  an  ICAO  Resolution  for  the  implementation  of  a  global  market 
based measure known as the Carbon Offsetting and Reduction Scheme for International 
Aviation  (CORSIA),  to  address  the  growth  in  international  aviation  emissions  globally 
from 2021 through an offsetting system aimed at stabilising them at 2020 levels. 

7. REGULATION 2392/2017 
Pending  the  development  of  the  rules  and  modalities  needed  for  the  implementation  of 
CORSIA,  the  EU  ETS  Directive  was  last  revised  in  2017  to  extend  the  current 
geographical  scope  derogation  until  the  end  of  2023.  This  was  intended  to  provide 
continued  momentum  to  the  international  process  in  the  light  of  the  commitment.  The 
2017 revision notably requests the Commission to address the specific issues identified in 
Articles  3d,  and  28b  of  the  EU  ETS  Directive  in  a  report.  According  to  the  revised 
Directive, the Commission  is  to  present  a report to  the European Parliament and to  the 
Council in which it shall assess CORSIA in relation to a set of features and consider (a) 
increasing  the  percentage  of  auctioning  from  the  current  levels  and  (b)  ways  to 

234 Decision No 377/2013/EU.   
235 2013 ICAO Assembly Resolution A38-18, available at: http://www.icao.int/environmental-
protection/Documents/A38-17_A38-18.pdf    

174 

 
 
 
 
 
 
                                                 
implement  CORSIA  in  Union  law  through  a  revision  of  the  EU  ETS  Directive  and, 
where  appropriate,  accompany  this  report  with  a  legislative  proposal  that  is  consistent 
with the Union economy-wide greenhouse gas emission reduction commitment for 2030 
with the aim of preserving the environmental integrity and effectiveness of Union climate 
action. This work will be considered in the context of the European Green Deal and the 
objective of enhanced climate ambition for 2030. 

The  EU  ETS  for  aviation  has  been  successfully  implemented.  Compliance  with  the 
system has  been very close to  100% in terms  of emissions. More than 100 commercial 
airlines based in third countries, including from those countries who initially opposed the 
full  scope  of  the  EU  ETS  in  the  past,  have  fulfilled  their  reporting  and  compliance 
obligations. Verified CO2 emissions from ETS aviation activities between EEA airports 
amounted to 68.14 million tonnes of CO2 in 2019.  

8. Adoption of CORSIA SARPs 

The  First  Edition  of  Annex  16  —  Environmental  Protection,  Volume  IV  —  Carbon 
Offsetting  and  Reduction  Scheme  for  International  Aviation  (CORSIA)236  was  adopted 
by  the  Council  of  ICAO  on  27  June  2018.  The  adopted  First  Edition  of  Annex  16, 
Volume IV was shared with Contracting States through State letter AN 1/17.14 – 18/78 
dated 20 July 2018, and made publicly available through the ICAO CORSIA website on 
the  same  date.  The  First  Edition  of  Annex  16,  Volume  IV  became  effective  on  22 
October 2018 and became applicable on 1 January 2019. 

9. Council Decision (EU) 2018/2027 - Filing of Differences  
In accordance with the Article 38 of the Chicago convention, when a Contracting State 
finds it impracticable to comply with a Standard, to bring its own regulations or practices 
into  full  accord  with  any  international  standard,  or  which  deems  it  necessary  to  adopt 
regulations or practices differing from the standard, it needs to file a difference to ICAO. 

In light of the fundamental differences in nature between the EU ETS and CORSIA, with 
CORSIA  relying  on  the  nationality  of  the  airline  and  the  EU  ETS  being  a  route-based 
system  with  equal  treatment  ensured  on  routes,  the  Council  adopted  Council  Decision 
(EU)  2018/2027.  It  laid  down  the  position  to  be  taken  on  behalf  of  the  Union  within 
ICAO in respect of the First Edition of the SARPs on CORSIA as regards differences to 
be  notified.  In  accordance  with  that  Decision,  Member  States  notified  differences  to 
ICAO, highlighting the differences between the EU ETS and CORSIA and that the EU 
implementation of CORSIA would take place as appropriate through  revision of the EU 
ETS. The objective was to preserve the legality of EU legislation and future policy space, 
as well as the EU level of climate ambition. 

10. MRV Package 

236 https://www.unitingaviation.com/publications/Annex-16-Vol-04/  

175 

 
 
 
 
 
 
 
                                                 
The  EU  has  put  in  place  a  legally  binding  MRV  framework  based  on  the  CORSIA 
SARPSs and the existing MRV framework under the EU ET. The 2019 MRV Package 
includes: 

  Directive  2003/87/EC  of  the  European  Parliament  and  of  the  Council  of  13 
October  2003  establishing  a  system  for  greenhouse  gas  emission  allowance 
trading within the Union and amending Council Directive 96/61/EC 

  Commission  Delegated  Regulation 

(EU)  2019/1603  of  18  July  2019 
supplementing  Directive  2003/87/EC  of  the  European  Parliament  and  of  the 
Council  as  regards  measures  adopted  by  the  International  Civil  Aviation 
Organisation for the monitoring, reporting and verification of aviation emissions 
for the purpose of implementing a global market-based measure,  

  Commission Implementing Regulation (EU) 2018/2066 of 19 December 2018 on 
the monitoring  and reporting of  greenhouse  gas  emissions pursuant  to  Directive 
2003/87/EC  of  the  European  Parliament  and  of  the  Council  and  amending 
Commission Regulation (EU) No 601/2012 

  Commission Implementing Regulation (EU) 2018/2067 of 19 December 2018 on 
the verification of data and on the accreditation of verifiers pursuant to Directive 
2003/87/EC of the European Parliament and of the Council 
Integrated  monitoring  plan  and  annual  emission  report  templates  (published  on 
DG CLIMA website) 

 

  CORSIA Reporting Tool by Eurocontrol 

11. Swiss linking 

In 2020, the linking agreement237 between the EU and Switzerland entered into force. In 
addition to the current scope, the EU ETS covers departing flights to Switzerland, while 
the  Swiss  ETS  covers  domestic  flights  and  flights  departing  to  the  EEA.  EU-regulated 
aircraft operators report CO2 emissions and surrender allowances for the flights between 
the EEA and Switzerland and for Swiss domestic flights, while Swiss-regulated operators 
report and surrender in respect of the same scope as the EU ETS, together with domestic 
and departing flights  from  Switzerland to  the EEA. Equal  scope is  ensured through the 
EU-Swiss Treaty that puts this arrangement into place. 

237 https://ec.europa.eu/clima/news/agreement-linking-emissions-trading-systems-eu-and-switzerland_en  

176 

 
 
 
 
 
 
 
 
 
 
                                                 
Annex 9: Features of the EU ETS 

The  EU  ETS  is  a  cap  and  trade  system  where  operators  from  different  sectors  (power 
generation,  industry,  aviation)  annually  report  their  GHG  emissions  and  surrender  a 
number of units (typically, EU allowances)  equivalent to  the amount of emissions they 
are responsible for. 

Under  the  EU  ETS,  aircraft  operators  are  responsible  for  the  emissions  generated  by 
aviation activities covered by the EU ETS Directive. Emissions from all flights departing 
from or arriving at aerodromes in the European Economic Area (EEA) are covered by the 
EU  ETS.  However,  between  2013  and  2016  the  scope  has  been  temporarily  limited  to 
flights  between  airports  located  in  the  EEA.  Pending  the  development  of  the  rules  and 
modalities  needed  for  the  implementation  of  CORSIA,  the  EU  ETS  Directive  was  last 
revised in 2017 to extend the current geographical scope derogation for emissions taking 
place  up  to  2023.  In  2020,  the  linking  agreement  between  the  EU  and  Switzerland 
entered into force. In addition to the current scope, the EU ETS covers departing flights 
to Switzerland, while the Swiss ETS covers domestic flights and flights departing to the 
EEA.  In  accordance  with  the  EU-UK  Trade  and  Cooperation  Agreement  reached  in 
December 2020, the EU ETS shall continue to apply to departing flights from the EEA to 
the UK, while a UK ETS will apply effective carbon pricing on flights departing from the 
UK to the EEA. 

Member  States’  competent  authorities  are  responsible  for  administering  aircraft 
operators.  Each  Member  State  administers  operators  to  which  they  have  issued  the 
corresponding  operating  licence  as  well  as  those  aircraft  operators  from  third  countries 
performing  aviation  activities  in  Europe  attributed  to  them  in  accordance  with  the 
Directive.  Competent  Authorities  approve  monitoring  plans  from  aircraft  operators, 
receive  their  verified  emissions  reports  and  track  compliance  with  their  surrendering 
obligations. 

Aircraft operators submit before 30 March their verified emissions reports corresponding 
to  the  previous  year.  Before  30  April  they  must  surrender  the  equivalent  amount  of 
allowances. Emissions are electronically inscribed in the Union Registry, through which 
allowances are also surrendered by the operators. 

Aircraft operators receive some allowances free of charge. Free allocation is distributed 
between  aircraft  operators  on  the  basis  of  an  efficiency  benchmark.  They  can  also 
purchase allowances from auctions. (See table below). Aircraft operators can use specific 
aviation  allowances  and  general  allowances  from  other  sectors.  Until  2020,  they  could 
also  use  an  amount  of  international  credits  (Certified  Emission  Reductions  from  the 
Kyoto Protocol´s Clean Development Mechanism) up to 1.5% of their emissions. 

177 

 
 
 
Allowances  can  be  traded.  An  aircraft  operator  can  purchase  allowances  from  other 
markets  players  and  can  sell  its  allowances  if  it  has  them  in  excess.  This  way,  the  EU 
ETS incentivises emission reductions: aircraft operators that are able to reduce emissions 
can  obtain  a  benefit  from  selling  their  allowances,  whilst  those  that  increase  their 
emissions will face higher compliance costs by having to purchase additional units. 

Aircraft operators not complying with its EU ETS obligations face enforcement measures 
taken  by  Member  States’  competent  authorities.  If  aircraft  operators  do  not  annually 
surrender  the  corresponding  allowances  they  can  be  sanctioned  with  fines  amounting 
€100 per tonne of CO2 they are responsible for. 

Key features of the EU ETS for aviation  

EU ETS features 
Geographical coverage 

Flights covered 

Surrendering requirements 
Open or closed system 

Aviation cap 

Allocation of allowances 

Description 
European Economic Area (EEA) which includes 
the 27 EU Member States, Iceland, Norway and 
Liechtenstein.  
The 13 territories that are part of the EU are 
included in the EU ETS for aviation: Guadeloupe, 
French Guiana, Martinique, Reunion, the Azores, 
Madeira, the Canary Islands, Aland Islands, 
Akrotiri, Dhekelia, Ceuta, Melilla and Gibraltar  
All other territories of Member States that are not 
part of the EU are outside of the scope of EU ETS 
for aviation (e.g. Greenland or Channel Islands) 
The linking agreement between the EU and 
Switzerland entered into force in 2020. In addition 
to the current scope, Aircraft operators now need to 
report CO2 emissions and to surrender allowances 
for the flights between the EEA and Switzerland 
and for Swiss domestic flights. 
In accordance with the EU-UK Trade and 
Cooperation Agreement, the EU ETS continues to 
apply to departing flights from the EEA to the UK.  
All flights landing at or departing from EEA 
airports. 
All CO2 emissions released during the whole flight. 
Aviation is regulated under the same rules as the 
general EU ETS i.e. as an open system, but 
allowances are specific to the aviation sector.  
95% of the average 2004-2006 aviation emissions 
From 1 January 2021 onwards, the number of 
allowances allocated to aircraft operators should be 
reduced annually in line with the linear reduction 
factor applicable to all other sectors in the EU ETS 
82% of allowances are allocated for free to 
operators based on a benchmark in line with their 
activity levels in 2010. 15% of allowances can be 
auctioned. A special reserve ensures access to the 

178 

 
 
International credits 

Exclusions 

MRV approach 

market for new aircraft operators and assists 
aircraft operators with a sharp increase in number 
of tonne-kilometres in the case of applications 
submitted before June 2015. 
Aircraft operators may use Certified Emission 
Reductions and Emission Reduction Units for up to 
1.5 % of the number of allowances they are 
required to use for compliance up to 2020. 
Commercial airlines that operate fewer than 243 
flights per period for three consecutive four-month 
periods or flights with total annual emissions lower 
than 10,000 tonnes per year. Activities performed 
by a non-commercial aircraft operator operating 
flights with total annual emissions lower than 1 
000 tonnes per year. Other types of special purpose 
aircrafts are also excluded. A full list is in Annex I 
to the ETS Directive. 
CO2 emissions are based on applying an agreed 
emission factor (tCO2/km) to fuel consumption 
measured by considering tank levels at specific 
points in time as well as fuel uplift at the airport. A 
simplified approach is available for small emitters 
with emissions considered as verified if the 
emissions were determined the small emitters tool 
approved under Regulation (EU) No 606/2010 and 
populated by Eurocontrol with data from its ETS 
support facility. 

179 

 
 
 
 
 
Annex 10: Assessment of CORSIA pursuant to Art. 28b of the 
ETS Directive 

Article 28b(2) of Directive 2003/87/EC  lists the elements  that the European Parliament 
and  Council  require  the  Commission  to  examine  when  assessing  the  Carbon  Offsetting 
and Reduction Scheme for International Aviation  (CORSIA): “the ambition and overall 
environmental  integrity  of  the  global  market-  based  measure,  including  its  general 
ambition in relation to targets under the Paris Agreement, the level of participation, its 
enforceability, transparency, the penalties for  non-compliance, the processes for  public 
input,  the  quality  of  offset  credits,  monitoring,  reporting  and  verification  of  emissions, 
registries,  accountability  as  well  as  rules  on  the  use  of  biofuels”.  These  elements  are 
further detailed below. This Annex reports on these elements, drawing principally on the 
more extensive study  “Assessment  of  ICAO’s  global  market-based measure (CORSIA) 
pursuant to Article 28b and for studying cost pass-through pursuant to Article 3d of the 
EU ETS Directive”. 

Ambition and accountability 

This refers to the ambition and overall environmental integrity of CORSIA including its 
accountability to the targets under the Paris Agreement. 

The  Parties  to  the  Paris  Agreement  signed  up  to  strengthen  the  global  response  to  the 
threat  of  climate  change    including  “by  holding  the  increase  in  the  global  average 
temperature to  well below 2°C above pre-industrial  levels  and pursuing efforts to limit 
the temperature increase to 1.5°C above pre-industrial levels”238. The Parties also agreed 
to  peak  global  emissions  as  soon  as  possible  to  “achieve  a  balance  between 
anthropogenic  emissions  by  sources  and  removals  by  sinks  of  greenhouse  gases  in  the 
second half of this century”. The Paris agreement also calls for economy-wide absolute 
emission  reduction  targets  by  developed  countries,  while  developing  countries  should 
move  to  economy-wide  targets  over  time.  Emissions  from  aviation  are  included  in  the 
EU’s Paris Commitment, and need to be addressed to meet these objectives.  

The IPCC Special Report on the impacts of global warming of 1.5 °C239 emphasises the 
reduction in climate-related risks for humans and the natural system if global warming is 
kept  to  1.5°C  rather  than  2°C.  It  also  shows  that  pathways  consistent  with  a  1.5°C 
scenario  can  bring  multiple  synergies  with  the  Sustainable  Development  Goals  (SDGs) 
and that these synergies can exceed the trade-offs.  

238 https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement  
239 https://www.ipcc.ch/sr15/  

180 

 
 
 
                                                 
CORSIA is designed as an “offsetting mechanism”, which allows the aviation sector to 
continue to  grow  emission after 2020 in  as  far  as  emissions above the baseline, for the 
routes  covered,  should  be  offset  through  carbon  credits  (CORSIA  Eligible  Emission 
Units)  until  2035.  Before  the  COVID-19  crisis,  ICAO  had  estimated  that  by  2040 
international  aviation  emissions  could  rise  by  up  to  150%  compared  to  2020240.  The 
baseline for CORSIA was meant to be the global net CO2 emissions from international 
aviation  in  2020  so  as  to  achieve  the  aspirational  target  of  offsetting  CO2  emissions 
above 2020 levels, although in order not to rely on data for only one year the average of 
2019-2020  emissions  is  used.  Emissions  under  the  baseline  are  left  unaddressed  by 
CORSIA, as well as domestic emissions, which represents 40% of passenger emissions 
from aviation. In June 2020, following the COVID-19 crisis, the ICAO Council decided 
to  use  2019  emissions  as  baseline  during  the  2021-2023  pilot  phase241,  less  stringent 
compared  to  the  average  2019-2020  emissions  baseline,  in  order  to  take  account  of 
impacts arising from the COVID-19 crisis. 

CORSIA  is  a  route-based  system.  Both  the  departing  states  and  arriving  states  need  to 
participate in CORSIA for those emissions to be taken into account in the calculation of 
the offsetting requirements.  This  means that ambition  is  also  directly influenced by the 
level  of  participation  and  continued  implementation.  Without  full  participation  and 
continued  implementation,  CORSIA  cannot  on  its  own  meet  the  carbon  neutral  growth 
goal set by ICAO.   

CORSIA is designed to run until 2035, starting with a pilot phase from 2021 to 2023. It 
foresees  a  revision  mechanism  every  three  years  starting  in  2022  that  involves  the 
“consideration of the scheme’s improvements that would support the purpose of the Paris 
Agreement,  in  particular  its  long-term  temperature  goals;  and  update  the  scheme’s 
design elements to improve implementation, increase effectiveness, and minimize market 
distortion, taking into account the consequential impact of changing the scheme’s design 
elements,  e.g.,  to  MRV  requirements;”242  Following  the  ICAO  Council  decision  on  the 
change  of  baseline  during  the  pilot  phase,  this  review  will  also  examine  the  impact  of 
COVID-19 on CORSIA on various issues, including the impact on the baseline beyond 
the pilot phase. The 2032 special review will consider the termination of the scheme, its 
extension or any other improvements of the scheme beyond the year 2035243. 

Latest modelling has shown that CORSIA could mitigate 0.4% of international aviation 
emissions in  2025 through offsetting  (and biofuels) under full participation scenario on 
eligible  routes,  4.6%  in  2030  and  9.7%  in  2035.  Looking  at  total  aviation  emissions 
(including domestic aviation), these shares would range between 0.3% in 2025 and 6.3% 
in 2035. These impacts  depend on the quality of the offset credits. These shares reflect 
the  emissions  that  would  actually  be  mitigated  by  CORSIA.  The  share  of  emissions 

240 ICAO, 2019. See https://www.icao.int/environmental-protection/Pages/ClimateChange_Trends.aspx     
241 https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-and-Covid-19.aspx  
242 A40-19, §17b. 
243 A40-19, §17c. 

181 

 
 
                                                 
covered  by  CORSIA  is  higher  but  a  large  share  of  the  covered  emissions  are  not 
addressed, because CORSIA only regulates the growth of emissions above the baseline 
on participating routes. 

Level of participation 

In  the  pilot  phase  (2021-2023)  and  first  phase  (2024-2026),  participation  of  states  in 
CORSIA is expressly voluntary, with the possibility to opt-in or out from the system. All 
countries  should  then  participate  in  the  second  phase  starting  in  2027,  except  least 
developed  countries,  land-locked  developing  countries,  small  island  developing  states, 
and  states  with  a  small  share  of  international  aviation  activity  in  2018  (namely  states 
whose individual share of international aviation activities in Revenue Tonne Kilometres 
(RTKs) was below 0.5 per cent of total RTKs; and states that were not part of the list of 
states  that  account  for  90  per  cent  of  total  RTKs  when  sorted  from  the  highest  to  the 
lowest amount of individual RTKs).   

ICAO has published a list of the 88 states that have notified that they will participate in 
CORSIA from 1 January 2021244, but it has not published any responses to the state letter 
on participation, which states were meant to reply to by 30 June 2020, and which would 
also show the terms of what they notified. The 88 states include all member states of the 
European Civil  Aviation Conference  (ECAC)245, which notified participation subject  to 
differences246,  as  well  as  US,  Canada  and  Japan  among  others.  Notifications  received 
from  the  states  volunteering  in  the  pilot  phase  have  not  been  published  by  the  ICAO 
Secretariat. 

Latest  analysis  shows  that  CORSIA’s  current  coverage  of  the  aviation  sector’s  global 
(domestic  and  international)  CO2  emissions  across  all  CORSIA  phases  would  be 
approximately 35 to 38 %247 reflecting the 88 states listed as volunteering. 

Currently,  there  are  five  states  that  have  not  notified  their  participation  from  1 January 
2021  and  that  are  not  exempt  from  the  second  phase  starting  in  2027.  These  states  are 
China,  Russia,  India,  Brazil,  Vietnam,  and  ICAO  has  no  legal  powers  to  force  them  to 
participate.  The first four of these states have made a number of reservations in recent 
years  against  CORSIA,  considering  the  global  aspirational  goal  of  “Carbon  Neutral 

244 https://www.icao.int/environmental-
protection/CORSIA/Documents/CORSIA_States_for_Chapter3_State_Pairs_Jul2020.pdf  
245 ECAC is composed of 44 member states, including all EU member states. A complete list of its 
members is available on: https://www.ecac-ceac.org/member-states     
246 In view of the 30 June 2020 deadline, the EU adopted a decision on the notification of voluntary 
participation stating that “This notification is without prejudice to differences, under Article 38 of the 
Chicago Convention, with the provisions of Annex 16, Volume IV to the Chicago Convention” (Council 
Decision 2020/954/UE). 
247 Under nominal demand growth assumptions CORSIA would cover approximately 361 MtCO2 of the 
total aviation sector emissions of 953 MtCO2 in 2025 (or 38%); 390MtCO2 of the total of 1,079 MtCO2 in 
2030 (or 36%) and 424 MtCO2 of the total of 1,201 MtCO2 in 2035 (or 35%). 

182 

 
 
 
                                                 
Growth” from 2020 as going against the growth of international aviation  in developing 
countries. 

Enforceability and penalties for non-compliance 

The  legal  instrument  chosen  by  ICAO  for  CORSIA  enforceability  is  a  mix  between 
“lower  binding  effect”,  or  the  so  called  “soft  law”  instruments,  such  as  Assembly 
Resolutions (providing high level mandates and orientations by the ICAO Assembly on 
triennial  basis),  Standard  and  Recommended  Practices  (SARPs)248  and  technical 
provisions (Implementation elements249), thus avoiding uncertain ratification processes of 
a treaty or of an amendment to the Chicago Convention.  

The  Assembly  Resolutions  are  not  legally  binding,  but  considered  as  “soft  law”.  Their 
degree of legal strength is examined in a number of studies, and found to be dependant 
on several factors including the vocabulary employed (e.g. using terms such as “decides” 
rather  than  “invites”).  For  instance,  in  Resolution  A39-3  adopted  at  the  39th  ICAO 
Assembly in 2016, deciding to implement CORSIA, the word "decides" is used 13 times, 
demonstrating the wish of ICAO to give strong political “quasi law” force to the text. 

As the SARPs are included in annexes to the Chicago Convention, they do not have the 
same  nature  or  binding  force  as  treaty  provisions.  They  receive  binding  force  through 
their  implementation  in  national  law.  The  stringency  with  which  they  are  implemented 
may  vary  from  one  state  to  another.  For  instance,  while  the  EU  used  a  delegated 
regulation  to  implement  the Monitoring, Reporting and Verification (MRV) provisions, 
ensuring CORSIA’s MRV is binding in its entirety and directly applicable to all Member 
States of the EEA, this is not necessarily the case elsewhere. 

While  Article  37  of  the  Chicago  Convention  stipulates  that  each  contracting  state 
undertake  to  collaborate  in  securing  the  highest  practicable  degree  of  uniformity  in 
regulations  and  standards  in  all  matters  in  which  such  uniformity  will  facilitate  and 
improve  air  navigation,  Article  38  enables  ICAO  member  states  not  to  observe  the 
SARPs  if  they  find  it  impracticable  to  comply  in  all  respects  with  any  international 
standard  or  procedure,  through  the  notification  of  differences.  Article  38  of  the 
Convention provides that each ICAO member state be required to notify any difference 
between  a  Standard  and  its  own  legislation.  Illustratively,  in  2018  EU  Member  States 

248 SARPs are the technical specifications adopted by the ICAO Council in accordance with Article 37 of 
the  Chicago Convention in order to achieve "the highest practicable degree of uniformity in regulations, 
standards, procedures and organization in relation to aircraft, personnel, airways and auxiliary services in 
all matters in which such uniformity will facilitate and improve air navigation". Annex 16 of the Chicago 
Convention  is  dealing  with  Environmental  Protection,  and  its  Volume  IV,  with  CORSIA.  Today,  ICAO 
manages not less than 12,000 SARPs across the 19 Annexes of the Chicago Convention. 
249 Approved by the ICAO Council, but neither in the Assembly Resolution or in the SARPs. CORSIA 
includes in total 14 different ICAO documents finalized, approved and available online : 
https://www.icao.int/environmental-protection/CORSIA/Pages/implementation-elements.aspx  

183 

 
 
 
                                                 
have notified ICAO that certain differences exist between the Directive 2003/87/EC and 
CORSIA250. Whilst the filing of differences can serve to highlight non-compliance with 
the CORSIA SARPs, ICAO has no instruments at its disposal to enforce compliance, and 
thus no penalties are envisaged by ICAO in case of non-compliance.  

The  enforceability  and  enforcement  of  use  of  Eligible  Emissions  Units  or  CORSIA 
Eligible Fuels (CEF) defined by ICAO is similarly difficult to sustain based on the nature 
of the above mentioned legal instruments, as noted in the Legal Study251. Reservations in 
this  regard  were  made  by  number  of  countries  (e.g.  emphasised  publicly  by  China252). 
The  European  Commission,  recalled  in  a  letter  addressed  on  1st  March  2019  to  the 
Secretary General of ICAO, that CORSIA will be effective only if the growth of aviation 
emissions  from  2020  is  effectively  compensated  by  projects  generating  credits  that 
represent  real,  additional,  permanent  and  verified  reductions  of  greenhouses  gases  that 
are  accounted  for  only  once  towards  any  climate  mitigation  obligation  or  voluntary 
action. This emphasizes the importance of the quality of the eligible units for achieving 
the CORSIA goals. 

There are additional challenges as the purchase, use and cancellation of offset credits is 
done  at  national  level  by  the  aeroplane  operators  themselves,  who  are  due  to  report  to 
their reporting state. This could imply potential disparities among ICAO member states. 
Those uncertainties are tackled better when it comes to the use of CORSIA Eligible Fuels 
(CEF), as the technical  conditions  to meet  to  constitute a CEF are directly provided by 
the  ICAO  and  remain  the  same  regardless  of  the  aeroplane  operator  or  the  country 
concerned. The same goes for the life cycle emissions value for the CEF (default value or 
determined following an established methodology), where verification is  undertaken by 
an independent verification body.   

Transparency and processes for public input  

ICAO does not have a freedom of information policy and has no global mechanism for 
public request of information. The lack of transparency in ICAO is due to some extent to 
the historic activities of the organization dealing with issues like safety and technology. 

The  ICAO  Assembly  Resolutions  are  made  available  to  the  public,  as  well  as  any 
reservations to those. At the same time, neither the public nor the press, and even ICAO 
member states  in  some cases, have access  to  more specific documents as  the aeroplane 
operators annual  use of alternative fuels  (for other operators than the ones of the given 
member state), cancelled offsets, CORSIA compliance obligation and compliance status. 
The ICAO Council meetings, deliberations and decisions are also not public.  

250 Council Decision (EU) 2018/2027. 
251 https://ec.europa.eu/clima/sites/clima/files/transport/aviation/docs/gmbm_legal_study_en.pdf  
252 https://www.icao.int/Meetings/a40/Documents/Resolutions/china_EN.pdf  

184 

 
 
 
                                                 
The  Council  decisions  represent  the  majority  of  rules  with  regard  to  CORSIA.  Once 
adopted, the SARPs, representing the majority of the relevant technical specifications for 
the functioning of the instrument, are accessible for online consultation (they cannot be 
printed  or  saved  for  offline  consultation)  but  can  be  purchased.  All  Implementation 
elements,  accompanying  the  SARPs,  are  available  for  download  on  the  CORSIA  web 
pages  of  ICAO253.  Before  adoption  by  the  ICAO  Council,  the  decisions  pertaining  to 
CORSIA are negotiated and prepared by the Committee on Aviation and Environmental 
Protection (CAEP) and its  working groups and task forces, as well as by the Technical 
Advisory  Body  (TAB),  when  it  comes  to  recommendations  on  Emissions  Units 
eligibility. CAEP working documents are not public, neither are the CAEP “directives”, 
adopted by the ICAO Council to guide CAEP work. Furthermore, while ICAO Council 
members  are  elected  in  a  transparent  manner  by  the  Assembly  every  three  years,  the 
selection process of the 23 ICAO members for the CAEP is done in secret, as it is for the 
19 members of the TAB. 

There  is  high  degree  of  transparency  when  it  comes  to  the  proceedings  of  the  TAB, 
established  in  March  2019  by  the  ICAO  Council.  The  Terms  of  Reference,  the  TAB 
procedures, the annual timeline for its work, the non-confidential sections of programme 
applications  (representing  most  of  the  applications  material),  the  public  inputs  to  those 
applications, as well as a redacted form of the TAB recommendations (excluding internal 
operational  arrangements  of  the  TAB),  are  made  available  to  the  public  on  the  ICAO 
website. The public comments period lasts for 30 days and it is so far the unique space to 
gather public input under CORSIA254. 

Quality of offset credits 

For  Eligible  Emissions  Units  to  effectively  offset  the  CO2  that  aircraft  release  into  the 
atmosphere,  it  is  critical  that  they  offer  a  solid  guarantee  that  they  represent  emission 
reductions  that  would  not  have  occurred  otherwise  (concept  of  additionality);  are 
accurately measured, reported, and verified (MRV); are permanent; ensure that they will 
not lead to any increase in emissions elsewhere (carbon leakage); and are only claimed 
once towards any climate target (avoidance of double counting/claiming). Consideration 
of the “quality” of carbon credits reflects the extent to which they are likely to fulfil this 
guarantee. 

253 https://www.icao.int/environmental-protection/CORSIA/Pages/default.aspx  
254 Illustratively, the documents made available pertaining to TAB for its 2020 cycle of work can be found 
under : https://www.icao.int/environmental-
protection/CORSIA/Documents/Forms/AllItems.aspx?RootFolder=%2Fenvironmental%2Dprotection%2F
CORSIA%2FDocuments%2FTAB%2FTAB%202020&FolderCTID=0x0120001E0668FDCEB3914CB43
AEE6773BAE9C0&View=%7B2F6075F3%2D7C75%2D4DEA%2D9C62%2D37A41C41848A%7D#Inp
lviewHash2f6075f3-7c75-4dea-9c62-
37a41c41848a=RootFolder%3D%252Fenvironmental%252Dprotection%252FCORSIA%252FDocuments
%252FTAB%252FTAB%25202020 

185 

 
 
 
                                                 
To  evaluate  the  eligibility  of  the  units,  the  TAB  was  established  as  an  expert  body 
reporting to the ICAO Council. It uses the Emission Unit Eligibility Criteria255, as well as 
the  Guidelines  for  Criteria  Interpretation256  developed  by  CAEP  in  recent  years  and 
approved for formal use in March 2019 by the ICAO Council.  In order to carry out the 
evaluation,  the  TAB,  which  has  limited  resources  (cf.  19  experts),  has  formed  five 
thematic sub-groups of experts to focus analytical work on clusters of eligibility criteria 
(governance,  additionality,  MRV,  permanence,  double  counting),  thus  ensuring  experts 
will not focus on only one or few programmes.   

From  April  2019  to  January  2020,  the  TAB  undertook  the  evaluation  of  the  first  (14) 
applicant  programmes.  At  its  meeting  in  October  2019  and  after  the  finalisation  of  the 
initial  analysis  by  experts,  TAB  engaged  in  live  discussions  (either  face-to-face  or 
remote)  with  programmes  to  clarify  the  outstanding  issues.  The  TAB  requested 
additional evidence and information from programmes. These efforts fed into the TAB’s 
technical  assessments  which  formed  the  basis  for  the  TAB  recommendations  on 
CORSIA eligible emission units, finalised at the TAB meeting in January 2020. In March 
2020, 
the 
recommendations made by the TAB.  

took  a  decision  on  eligible  units,  following 

ICAO  Council 

the 

The first TAB report issued in February 2020 contains two types of recommendations to 
the Council:  

(i)  specific 

recommendations  on 

the  eligibility 

(six  programmes  were 

recommended for immediate eligibility) 

(ii)  general recommendations applying to all programmes, such as the starting date 
of recognition of their units (eligibility unit date: issued to activities that started 
their first  crediting period from  1 January 2016257; and in  respect  of emissions 
reductions  that  occurred  up  until  31  December  2020)  and  the  duration  of  such 
recognition  (eligibility  timeframe  :  eligible  for  cancellation  for  use  toward 
CORSIA offsetting requirements in the 2021-2023 compliance- cycle).  

The second TAB report corresponding to the TAB’s second round of work (April 2020 
—  September  2020)  added  a  single  programme  to  the  above  list  of  six  programmes 
delivering  eligible  offsets,  while  keeping  the  same  general  eligibility  unit  date  and 
timeframe. 

In the end of 2020, following material changes to their rules and procedures by some of 
the  programmes  undertaken  in  the  year  2020,  one  additional  programme  managed  to 
satisfy  the  criteria.  It  was  recommended  eligible  by  the  TAB  for  consideration  at  the 

255 https://www.icao.int/environmental-protection/CORSIA/Documents/ICAO_Document_09.pdf  
256 https://www.icao.int/environmental-
protection/CORSIA/Documents/TAB/TAB%202021/Programme_Application_Form_Appendix_A_Supple
mentary_Information_2020.docx  
257 According to the crediting period start date specified at the time of registration. 

186 

 
 
 
                                                 
222nd ICAO Council session (February 2021), bringing to eight the eligible programmes, 
again with the eligibility unit dates and timeframe described above.  

Finally, one of the already eligible programmes, succeeded to respond to the criteria on 
double  counting  for  post-2020  and  the  TAB  recommended  accordingly  extended 
eligibility unit date for this programme to the end of 2023, subsequently decided by the 
ICAO Council.  

After  more  than  two  years  of  continuous  work  of  the  TAB,  certain  shortcomings  that 
could have undermined the quality of the units approved, are to be noted, amongst which 
the most prominent are: 

-  The  EUC  are  used  by  the  TAB  at programme  level,  rather  than  focusing  on 
individual  projects  (understandably  provided  the  limited  human  resources 
capacities of the TAB), making more use of the Programme Design Elements set 
of  the  EUC,  and  making  less  use  of  the  Carbon  Offset  Credit  Integrity 
Assessment Criteria part of the EUC. Furthermore, it appears that TAB assesses if 
a certain programme has an approach or rule to address an issue, but not so much 
if these approaches and rules are efficient in their intended purpose. For instance 
regarding safeguards, even the programmes that  were found to  fulfil the criteria 
are highly heterogeneous and offer a wide variety of safeguards and approaches 
to avoid and mitigate environmental and social risk. 

-  The  TAB  consideration  of  recommendation  to  only  allow  emissions  reduction 
units generated from activities until 31 December 2020 suggests that TAB made 
an interpretation  of the  drafted EUC that narrows the scope of the EUC to  only 
consider  NDCs  as  the  type  of  mitigation  obligation  for  which  emission  units 
should avoid double counting with states’ commitments (post-2020). However at 
least 36 non-Annex 1 countries pledged mitigation actions under the Copenhagen 
Accord258,  and  more  countries  communicated  pledges  in  Cancun  in  2010  for 
emission  reductions  in  the  period  to  2020.  Studies  estimate  that  77%  of  CDM 
credits generated between 2013 and 2020 came from countries with a target or a 
pledge made in Copenhagen or Cancun259.   

While one of the eligible programmes fulfils the post-2020 double counting EUC, Parties 
to the Paris Agreement have not concluded on accounting rules for the use of CORSIA 
offsets.  This  means  that  absence  of  UNFCCC  decision  on  robust  accounting  and 
adjustment may lead to emission reductions being used and counted twice, or more than 
twice,  leading  to  higher  than  perceived  global  greenhouse  gas  emissions,  despite  the 
existence  of  a  CORSIA  eligible  unit  criterion  against  double  counting.  Additionally, 

258 OECD 2010. http://www.oecd.org/environment/cc/45441364.pdf  
259 https://www.atmosfair.de/wp-content/uploads/sei-pr-2017-using-the-clean-development-mechanism.pdf   

187 

 
 
 
 
 
 
                                                 
liability under CORSIA, to the extent possible of its limited enforceability, lies with the 
programmes (and not with states). 

Environmental integrity under the Paris Agreement requires going beyond the traditional 
concept  of  additionality,  to  ensure  that  there  are  measures  in  place  to  avoid  double 
counting but also to ensure that the market-based mechanisms generating the credits are 
in line with host parties’ NDCs and long-term strategies. Use of offsets in a way that may 
undermine  the  host  country’s  NDC  or  path  to  climate  neutrality  will  make  it  more 
difficult for host countries to meet current and future more ambitious targets. 

MRV and registries 

Common rules regarding the monitoring, reporting and verification of emissions (MRV) 
under  CORSIA  are  crucial  to  ensure  accuracy  of  emission  reports  and  consistency.  
The  MRV  processes  and  standards  of  the  EU  ETS  and  CORSIA  are  similar,  because 
ICAO  took  account  of  the  EU’s  experience  in  this  area:  flight  by  flight  monitoring, 
annual  reporting  of  CO2  emissions  based  upon  a  state’s  approved  monitoring  plan, 
annual  third  party  verification,  similar  estimation  methods  and  approaches  for  closing 
data  gaps,  etc.  It  is  important  to  note,  however,  that  CORSIA  MRV  first  has  to  be 
transposed  into  national  legislation,  hence  leaving  room  for  potential  differences  in 
implementation between states (cf. section above on enforceability). 

In terms of outstanding MRV elements proper to CORSIA, the MRV has been applicable 
from 1 January 2019 onwards to all aeroplane operators producing annual CO2 emissions 
greater  than  10  000  tonnes  from  international  flights  conducted  by  aeroplanes  with  a 
maximum  certificated  take-off  mass  greater  than  5  700  kg.  Verified  data  started  to  be 
reported since May 2020. Under CORSIA, operators with  annual  CO2 emission of less 
than  500  000  tonnes  are  eligible  for  a  simplified  monitoring  in  the  baseline  period 
(through the CORSIA Estimation and Reporting Tool – CERT260). From 2021, operators 
with  annual  CO2  emissions  from  international  flights  subject  to  offsetting  requirements 
of  less  than  50  000  t  CO2,  are  eligible  for  simplified  monitoring.  Under  CORSIA,  the 
monitoring methods for the determination of the fuel consumption are subject to review 
and approval by the state. The SARPs allow jurisdictions to choose which methods the 
administered operators may use from the five methods included in the SARPs (including 
besides Method A and B used in the EU ETS, the monitoring methods Block-off/Block-
on, Fuel uplift and Fuel Allocation with block hour261). 

In  order  to  assist  states  in  building  their  national  capacities  to  implement  CORSIA, 
starting with the MRV, the ICAO Council encouraged the establishment of the CORSIA 

260 Further details on the CERT is to be found under : https://www.icao.int/environmental-
protection/CORSIA/Pages/CERT.aspx  
261 For further detail on these methods, refer to pages 24 to 29 of the following presentation : 
https://www.icao.int/Meetings/RS2018/Documents/2_1_CORSIA%20MRV%20System_Monitoring.pdf  

188 

 
 
 
                                                 
Buddy Partnerships among states as part of the ACT (Assistance, Capacity-building and 
Training)  initiative262.  Through  these  partnerships,  for  2020  (3rd  phase  of  the 
partnerships,  the  second  and  first  one  taking  place  in  2019  and  2018  respectively)  16 
donor  states  assisted  115  recipient  states  to  build  their  national  capacity  to  implement 
CORSIA MRV rules. 

Launched  in  mid-2020,  the  CORSIA  Central  Registry  (CCR)  is  one  of  the  key 
Implementation elements  underpinning the CORSIA system.  States  need to  transmit  an 
annual emission report to the CCR, containing details such as total annual CO2 emissions 
per  state  pair  aggregated  for  aeroplane  operators  and  per  each  operator  per  state, 
emissions unit cancellation, and CORSIA eligible fuels use. Here again the enforceability 
is key. A robust system will depend on the implementation of MRV rules across states to 
ensure correct reporting of emissions data. To prevent potential data gaps due to the lack 
of implementation of MRV rules, Article 2.5 of Annex 16, Volume IV provides a clear 
set  of  provisions  to  enable  ICAO  to  estimate  relevant  items  where  data  has  not  been 
reported. 

Rules on the use of biofuels 

ICAO  developed  a  comprehensive  framework  to  reduce  offsetting  requirements  under 
CORSIA  through  the  use  of  eligible  aviation  fuels  subject  to  compliance  with 
sustainability criteria. Based on the sustainability criteria, CORSIA Eligible Fuels (CEF) 
include  Sustainable  Aviation  Fuels  (SAF,  a  renewable  or  waste-derived  aviation  fuel) 
and in principle but not yet operational, Lower Carbon Aviation Fuels (LCAF, a fossil-
based  aviation  fuel).  As  for  now,  no  LCAF  and  only  SAFs  have  been  identified  as 
eligible fuels. 

CAEP  is  tasked  with  developing  strengthened  sustainability  criteria  specifically 
applicable  to  LCAF  to  apply  beyond  the  pilot  phase.  LCAF  are  not  operational  under 
CORSIA  until  a  sustainability  framework  and  an  accounting  methodology  have  been 
adopted for their use. From a technical standpoint, a small portion of GHG emission of 
fossil-based  aviation  fuels  is  attributed  to  the  fuel  production  stage  while  most  of  the 
GHG emissions come from burning the fuels. Thus, there is little room for improving the 
carbon intensity of fossil fuels. There are some technologies that allow the production of 
fossil fuels with a smaller carbon footprint, such as flaring, CCS and the use of renewable 
energy in oil refineries. As LCAF relates to reductions in emissions associated with the 
production  of  the  fuel,  there  is  an  important  risk  that  the  use  of  LCAF  leads  to  double 
counting as these reductions could be used under CORSIA and appear in the inventories 
reported to the UNFCCC. 

262 https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-Buddy-Partnerships.aspx  

189 

 
 
 
                                                 
ICAO  established  three  sustainability  criteria  (achieve  net  greenhouse  gas  emissions 
reductions  of  at  least  10%  compared  to  the  baseline263,  limitations  and  additional 
quantification requirements for feedstock grown on land converted after 1 January 2008) 
for  CEF  applicable  during  the  pilot  phase  of  CORSIA  (2021-2023).  Additional 
sustainability criteria stemming from 10 additional sustainability themes (e.g. water, soil, 
air,  conservation,  waste  and  chemicals,  human  and  labour  rights)  have  undergone  state 
consultation  and  have  been  formally  adopted  by  the  ICAO  Council  at  its  222nd  session 
for application from  1 January 2024 (a decision regarding Themes 3 to  7 will be made 
upon  approval  of  the  ICAO  Document  CORSIA  Sustainability  Criteria  for  CORSIA 
Eligible Fuels and the relevant guidance material).  

Under  CORSIA,  the  Sustainability  Certification  Schemes  (SCS)  are  organizations  that 
certify  economic  operators  according  to  the  sustainability  criteria  and  ensure  that 
economic operators calculate actual life cycle emissions values (if default values are not 
applied)  using  the  agreed  methodology  by  controlling  and  auditing  the  documents  and 
records  and  monitoring  their  operations.  CORSIA  has  a  thorough  description  of 
responsibilities  for  the  SCS  on  how  to  evaluate  the  economic  operators  against 
sustainability criteria and certify the fuels. 

263  The  GHG  emissions  reduction  requirements  defined  by  CORSIA  are  10%  meaning  that  the  GHG 
emissions  (life  cycle  basis)  of  eligible  fuels  should  be  ≤  90%  of  fossil  aviation  fuel.  While  the  10% 
sustainability threshold enables CORSIA to potentially include a wide variety of biofuels as eligible fuels 
(provided  that  they  meet  the  entire  set  of  sustainability  criteria),  it  could  be  seen  as  setting  a  low 
sustainability threshold. However, it should be  noted that the  CORSIA  mechanism  for CORSIA Eligible 
Fuels allows airlines to claim benefits (reduction of offsetting requirements) only in proportion to the GHG 
performance of the CORSIA Eligible Fuel used. This means that airlines are encouraged to use CORSIA 
Eligible  Fuels  which  achieve  major  GHG  emissions  reductions,  in  order  to  consequently  reduce  their 
offsetting requirements. In that sense, CORSIA ensures that actual emission reductions can be claimed in 
order to create incentives for the uptake of fuels with higher GHG savings. 

190 

 
 
 
 
                                                 
Annex 11: Study of cost pass-through pursuant to Art. 3d of 
the ETS Directive 

The EU ETS Directive Art. 3d(2) requires that the Commission shall undertake a study 
on the ability of the aviation sector to pass on costs resulting from CO2 emissions to its 
customers, in relation to the EU ETS and to the global market-based measure developed 
by  ICAO  (CORSIA).  The  study  is  included  in  European  Commission  publication 
“Assessment of ICAO’s global market-based measure (CORSIA) pursuant to Article 28b 
and for studying cost pass-through pursuant to Article 3d of the EU ETS Directive”.  

Cost pass through is typically described as the percentage of the input cost change that is 
passed  through  to  customers  –  so  for  example,  in  a  100%  cost  pass-through  scenario 
every  €1  increase  in  the  price  of  inputs  is  passed  through  as  a  €1  increase  in  the  price 
seen  by  the  customer.  In  the  air  transport  industry,  the  estimated  ability  of  airlines  to 
pass-through  cost  changes  varies  significantly.  Many  factors  impact  airlines’  pricing 
decisions, including: 

  Market  conditions  based  on  infrastructure  and  airline  network  constraints,  slot 

shortage and allocation 

  Variations  in  the  price  elasticity  of  demand,  which  can  be  segmented  along 
multiple dimensions, but often includes length of haul and/or leisure and business 
travellers 

  Level  of  competition,  determined  by  the  number  of  airlines  flying  on  a  specific 

route, frequency of flights 

  Product differentiation, including seat pitch, catering, loyalty scheme 
 
  Barriers to entry such as high capital costs, slot constraints making it challenging 

Imperfect information 

for young players in the industry. 

The  study  focuses  on  the  operating  costs  and  policy  options  related  to  EU-ETS  and 
CORSIA.  Cost  pass-through  is  defined  as  the  ability  to  pass  on  the  costs  of  required 
allowances to cover the carbon emissions or offsetting requirements. These costs include 
both  out-of-pocket  costs,  ie  costs  of  paying  for  the  emissions  deficit  by  acquiring  EU 
ETS allowances or CORSIA Eligible Emissions Units, and opportunity costs ie foregone 
earnings  that  could  have  been  made  had  the  airline  not  made  the  flight  and  sold  the 
allowances. 

The cost pass-through analysis was  conducted building on  literature findings as well as 
data and analysis specific to aviation carbon costs.  

Literature  analysis  indicates  that  the  following  factors  have  a  significant  impact  on 
carbon emissions cost pass-through: 

191 

 
 
 
  Market Conditions. The air transport industry is marked by an intense degree of 
competition among airlines in many markets and routes around the world. Albeit 
counter-intuitive, intense competition  is  a factor that may enhance the ability of 
airlines to pass-through an additional cost. 

  Market  infrastructure.  Market  infrastructure  can  be  defined  by  the  level  of 
airports  congestion  in  the  air  transport  industry.    For  uncongested  airports,  the 
allowance/credit price is passed through to passengers in the ticket price, resulting 
in a loss of profit margin and volume, whereas for congested airports the costs are 
not  passed  through  in  the  ticket  price,  avoiding  volume  loss,  but  resulting  in 
higher loss of profit margin. 

  Price elasticities. Price elasticity refers to the degree to which supply or demand 
of a product responds to a change in price. Both demand and supply of aviation 
services are price sensitive. 

  Exposure to international trade. The impact of international trade for EU airlines 
is limited as any EU or non-EU airline operating a given route will be subjected 
to  the  same  rules  (i.e.  EU  ETS  charges  incurred  on  intra-EEA  and  exempted 
extra-EEA  routes).  However,  at  a  network  level,  airlines  operating  intra-EEA 
routes  will  incur  higher  costs  compared  to  airlines  operating  extra-EEA  routes 
exclusively.  Airlines  operating  a  mixed  network  can  therefore  disadvantage  the 
overall company’s cost base and profitability. 

  Carbon costs distribution. Relative difference in carbon cost is likely to influence 
the cost-pass through. Unequal carbon costs for competing airlines on a route tend 
to lead to lower average pass-through for the most affected airlines and/or profit 
increases for the less-affected airlines. 

Among  the  five  factors  above,  three  main  factors  were  selected  for  the  quantitative 
assessment both for their relevance and data availability: 

  Airport congestion. Congested airports were defined as the top ten airports with the 
most  delayed  traffic.  Each  intra-EEA  route  was  defined  by  one  of  the  following 
options:  congested  airport  to  congested  airport  (C  &  C);  congested  airport  to 
uncongested airport (C & UC); and uncongested to uncongested airport (UC & UC). 
  Competition intensity. The number of airlines operating between two points was used 

as a proxy to determine the competitive intensity on each route. 

  Demand elasticity and substitution. Route distance was used as a proxy for demand 
elasticity  between  two  airports  on  each  route  to  analyse  how  it  affects  cost  pass-
through opportunities. 

These factors were used in an analysis of the percentage of fuel cost variations that were 
passed  through  to  passengers  in  the  form  of  ticket  prices.  All  flight  routes  within  the 
European  Economic  Area  were  categorised  into  27  route  categories.  The  results 
demonstrate  that  for  these  parameters  the  fuel  cost  pass-through  ranged  from  15%  on 
long range routes connecting two congested airports with low competition, to 100% on 
short haul routes connecting two uncongested airports with high competition.  

192 

 
 
Carbon  cost  is  likely  to  account  for  a  smaller  portion  of  cost  compared  to  fuel, 
representing  between  0.2%  and  1.3%  of  total  operating  costs.  The  study  demonstrates 
that the magnitude at the passenger level will be limited to an upper range of €2 on intra-
continental  routes.  These  two  results  illustrate  the  potential  for  airlines  to  pass-through 
additional regulatory costs emanating from their emissions.  

Out-of-pocket costs 

In aggregate, the pass-through estimations resulting from modelling are: 

1.  Initial average pass-through rates of around 74% for intra-EEA flights;  
2.  Initial  average  pass-through  rates  of  around  75-82%  for  extra-EEA  flights, 

depending on the type of carbon cost applied;  

3.  Initial average pass-through rates of around 77% for other routes; and 
4.  Initial average pass-through rates on routes to and from EU outermost regions of 

74-77%, depending on the type of carbon cost applied. 

The results of the study demonstrate that many airlines will pass on the majority of the 
additional  carbon  costs  to  passengers,  manifesting  as  higher  air  fares.  This  increase  is 
however  likely  to  be  small  compared  to  the  total  expenditure  of  a  holiday  or  business 
trip,  and  if  applied  on  an  industry  level  is  likely  to  have  a  low  impact  on  aggregate 
demand,  although  it  may  impact  the  market  share  of  the  airlines  depending  on  their 
comparative ability to accommodate such a cost increase. 

193 

  
 
 
 
From the airlines’ perspective, the costs represent a significant gross expenditure, even if 
the net expenditure may be lower due to the cost-pass through potential described in this 
analysis. 

On an aggregate basis, a cost pass-through range from 0% to 100% would affect airlines’ 
operating margin from -1pt to +1pt (i.e. a 7% total operating margin would decrease to 
6%  in  case  of  0%  cost  pass-through,  and  increase  to  8%  in  case  of  100%  cost  pass-
through). 

In  conclusion,  the  analysis  suggests  that  on  average  airlines  are  able  to  pass-through  a 
significant  percentage  of  industry-level  cost  increases  to  passengers.  However,  the 
dynamics  are  complicated,  and  the  capacity  of  airlines  to  pass  through  the  costs  will 
significantly  vary  between  routes,  with  up  to  a  100%  variation.  Individual  airlines  will 
consequently  be  affected  differently,  which  will  introduce  comparative  advantages  and 
disadvantages between market participants. 

194 

 
 
 
 
 
 
 
Annex 12: 2030 Climate Target Plan policy conclusions  

The Communication on stepping up Europe’s 2030 climate ambition - the Climate Target 
Plan  (CTP)264  and  its  underpinning  impact  assessment  are  the  starting  point  for  the 
initiatives under the Fit for 55 package.  

The plan concluded on the feasibility - from a technical, economic and societal point of 
view  -  of  increasing  the  EU  climate  target  to  55%  net  reductions  of  greenhouse  gases 
(GHG)  emissions by 2030 compared to  1990.  It also  concluded that all  sectors need  to 
contribute to this target.  

In particular, with energy supply and use responsible for 75% of emissions, the plan put 
forward  ambition  ranges  for  renewables  and  energy  efficiency,  which  correspond  in  a 
cost-efficient  manner  to  the  increased  climate  target.  The  climate  target  plan  also 
established that this increase in climate and energy ambition will require a full update of 
the current climate and energy policy framework, undertaken in a coherent manner.  

As  under  the  current  policy  framework,  the  optimal  policy  mix  should  combine,  at  the 
EU and national levels, strengthened economic incentives (carbon pricing) with updated 
regulatory  policies,  notably  in  the  field  of  renewables,  energy  efficiency  and  sectoral 
policies  such  as  CO2  standards  for  new  light  duty  vehicles.  It  should  also  include  the 
enabling  framework  (research  and  innovation  policies,  financial  support,  addressing 
social concerns).  

While  sometimes  working  in  the  same  sectors,  the  policy  tools  vary  in  the  way  they 
enable  the  achievement  of  the  increased  climate  target.  The  economic  incentives 
provided  by  strengthened  and  expanded  emissions  trading  will  contribute  to  the  cost-
effective  delivery  of  emissions  reductions.  The  regulatory  policies,  such  as  the 
Renewable  Energy  Directive  (RED),  the  Energy  Efficiency  Directive  (EED),  the 
Regulation  on CO2 standards for vehicles supported by the Directive on the alternative 
fuels  infrastructure,  and  the  Re(FuelEU)  aviation  and  maritime  initiatives,  aim  at 
addressing  market  failures  and  other  barriers  to  decarbonisation,  but  also  create  an 
enabling  framework  for  investment,  which  supports  cost-effective  achievement  of 
climate target by reducing perceived risks, increasing the efficient use of public funding 
and  helping  to  mobilise  and  leverage  private  capital.  The  regulatory  policies  also  pave 
the way for the future transition needed to achieve the EU target of the climate neutrality. 
Such a sequential  approach from the CTP  to  the Fit for 55 initiatives was necessary in 
order to ensure coherence among all initiatives and a collective delivery of the increased 
climate target.  

With the “MIX” scenario, the impact assessment included a policy scenario that largely 
reflects the political orientations of the plan. 

264 

COM (2020) 562 final. 

195 

 
 
 
                                                 
The  final  calibration  between  the  different  instruments  is  to  be  made  depending,  inter 
alia on the decision on the extension of emissions trading beyond the maritime sector and 
its terms. 

The Table 1 below shows the summary of the key CTP findings: 

Table 1: Key policy conclusions of the Climate Target Plan 

POLICY CONCLUSIONS IN THE CTP 

GHG  emissions 
reduction 

  At least 55% net reduction (w.r.t. 1990) 
  Agreed by the European Council in December 2020 
  Politically agreed by the European Council and the European Parliament in 

ETS 

ESR 

the Climate Law 

  Corresponding targets need to be set in the EU ETS and the Effort Sharing 
Regulation to ensure that in total, the economy wide 2030 greenhouse gas 
emissions reduction target of at least 55% will be met. 
Increased climate target requires strengthened cap of the existing EU ETS 
and revisiting the linear reduction factor.  

 

  Further expansion of scope is a possible policy option, which could include 
emissions  from  road  transport  and  buildings,  looking  into  covering  all 
emissions of fossil fuel combustion. 

  EU should continue to regulate at least intra-EU aviation emissions in the 
EU ETS and include at least intra-EU maritime transport in the EU ETS. 
  For aviation, the Commission will propose to reduce the free allocation of 
allowances,  increasing  the  effectiveness  of  the  carbon  price  signal  in  this 
sector, while taking into account other policy measures.  

  Corresponding targets need to be set in the Effort Sharing Regulation and 
under  the  EU  ETS,  to  ensure  that  in  total,  the  economy  wide  2030 
greenhouse gas emissions reduction target of  at least 55% will be met. 

LULUCF 

  Sink needs to be enhanced. 

  Agriculture  forestry  and  land  use  together  have  the  potential  to  become 
rapidly  climate-neutral  by  around  2035  and  subsequently  generate 
removals consistent with trajectory to become climate neutral by 2050. 

standards 
and 

cars 

CO2 
for 
vans 

  Transport  policies and standards will be revised and, where needed, new 

policies will be introduced.  

  The Commission will revisit and strengthen the CO2 standards for cars and 

Non-CO2  GHG 
emissions 

vans for 2030. 

  The  Commission  will  assess  what  would  be  required  in  practice  for  this 
sector  to  contribute  to  achieving  climate  neutrality  by  2050  and  at  what 
point in time internal combustion engines in cars should stop coming to the 
market. 

  The  energy  sector  has  reduction  potential  by  avoiding  fugitive  methane 
emissions.  The  waste  sector  is  expected  to  strongly  reduce  its  emissions 
already  under  existing  policies.  Turning  waste  into  a  resource  is  an 
essential  part  of  a  circular  economy.  Under  existing  technology  and 
management options, agriculture emissions cannot be eliminated fully but 
they  can  be  significantly  reduced  while  ensuring  food  security  is 
maintained in the EU. Policy initiatives have been included in the Methane 

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Strategy.  

Renewables 

  38-40% share needed to achieve increased climate target cost-effectively.  
  Renewable  energy  policies  and  standards  will  be  revised  and,  where 

needed, new policies will be introduced.  

  Relevant  legislation  will  be  reinforced  and  supported  by  the  forthcoming 
Commission  initiatives  on  a  Renovation  Wave,  an  Offshore  Energy 
strategy, alternative fuels for aviation and maritime as well as a Sustainable 
and Smart Mobility Strategy. 

  EU  action  to  focus  on  cost-effective  planning  and  development  of 
renewable energy technologies, eliminating market barriers and providing 
sufficient incentives for demand for renewable energy, particularly for end-
use  sectors  such  as  heating  and  cooling  or  transport  either  through 
electrification  or  via  the  use  of  renewable  and  low-carbon  fuels  such  as 
advanced biofuels or other sustainable alternative fuels. 

  The  Commission  to  assess  the  nature  and  the  level  of  the  existing, 
indicative  heating  and  cooling  target,  including  the  target  for  district 
heating  and  cooling,  as  well  as  the  necessary  measures  and  calculation 
framework  to  mainstream  further  renewable  and  low  carbon  based 
solutions, including electricity, in buildings and industry. 

  An updated methodology to promote, in accordance with their greenhouse 
gas  performance,    the  use  of  renewable  and  low-carbon  fuels  in  the 
transport sector set out in the Renewable Energy Directive. 

  A comprehensive terminology for all renewable and low-carbon fuels and a 
European  system  of  certification  of  such  fuels,  based  notably  on  full  life 
cycle  greenhouse  gas  emissions  savings  and  sustainability  criteria,  and 
existing provisions for instance in the Renewable Energy Directive. 
Increase the use of sustainably produced biomass and minimise the use of 
whole trees and food and feed-based crops to produce energy through inter 
alia  reviewing  and  revisiting,  as  appropriate,  the  biomass  sustainability 
criteria in the Renewable Energy Directive, 

 

  Energy  efficiency  policies  and  standards  will  be  revised  and,  where 

needed, new policies will be introduced.  

  Energy efficiency improvements will need to be significantly stepped up to 

around 36-37% in terms of final energy consumption265. 

  Achievement of a more ambitious energy efficiency target and closure of 
the collective ambition gap of the national energy efficiency contributions 
in the NECPs will require actions on a variety of fronts. 

  Renovation Wave will launch a set of actions to increase the depth and the 
rate  of  renovations  at  single  building  and  at  district  level,  switch  fuels 
towards  renewable  heating  solutions,  diffuse  the  most  efficient  products 
and  appliances,  uptake  smart  systems  and  building-related  infrastructure 
for charging e-vehicles, and improve the building envelope (insulation and 
windows). 

  Action will be taken not only to better enforce the Energy Performance of 

Energy 
Efficiency 

265 The Impact Assessment identifies a range of 35.5% - 36.7% depending on the overall design of policy 
measures underpinning the new 2030 target. This would correspond to a range of 39.2% - 40.6% in terms 
of primary energy consumption.  

197 

 
 
                                                 
Buildings Directive, but also to identify any need for targeted revisions. 
  Establishing  mandatory  requirements  for  the  worst  performing  buildings 
and  gradually  tightening  the  minimum  energy  performance  requirements 
will also considered. 

198