The EU ETS review must turn aviation ambition into deployment 

One of the major climate and competitiveness debates of the year is the reform of the EU’s carbon pricing instrument, the Emissions Trading System (ETS). In aviation, much of the discussion has centred on a single question: should international flights be brought into the system. That debate matters, but it risks overshadowing another fundamental issue: Can the EU actually deliver the aviation decarbonisation it has already legislated? 

The EU’s 2023 adoption of ReFuelEU Aviation regulation established some of the world’s most ambitious binding targets for low-carbon aviation fuels, creating a clear demand signal.  

Three years on, the fuels the mandate assumes, the clean electricity needed to produce them, and the investment conditions to make the fuel projects bankable are not materialising at the pace required. 

The EU ETS will not solve these challenges on its own, but it remains one of the fundamental policy levers capable of boosting the business case for investments in low-carbon aviation fuels.  

Why today’s sustainable aviation fuels are not enough 

Most of the SAF that is being used in Europe is biofuelproduced from waste oils and fats. While these fuels are essential for reducing emissions in the near term, they face inherent limits.  

The supply of truly climate beneficial biofuel feedstocks is finite and competition for them is growing across aviation, shipping and road transport. The feedstocks that exist are heavily reliant on imports —according to the European Union Aviation Safety Agency (EASA), around 69% of feedstocks used for EU SAF production are imported — raising questions about long-term supply security and scalability. 

Clean Air Task Force’s modelling indicates that biofuels are unlikely to cover more than 46% of aviation’s energy demand by 2050, even under scenarios that aggressively prioritise biofuels for the aviation sector. Beyond that point, other types of energy carriers will be needed to cut aircraft emissions to levels that are consistent with aviation’s decarbonisation goals. Synthetic aviation fuels are therefore not a supplementary option but a central component of Europe’s long-term aviation decarbonisation strategy.

Meeting the EU’s long-term aviation climate goals could require around 25.4 Mt of synthetic fuel produced with 18 Mt of low-carbon hydrogen as a feedstock in 2050 — a volume of hydrogen comparable to the EU’s entire current industrial demand. Achieving that scale of production will require a significant expansion of low-carbon hydrogen, clean electricity, and fuel-production infrastructure. 

Yet despite increasingly ambitious mandates, the projects needed to deliver that future are not moving forward. As of mid-2026, no large-scale e-SAF project in the EU has reached a final investment decision. Given the long lead times required to develop these projects, delays today will shape fuel availability well into the 2030s. 

What the EU ETS review can do 

The EU ETS works by placing a declining cap on emissions and requiring operators to hold allowances for every tonne they release. In aviation that translates into a stronger business case for low-carbon fuels. But the carbon price alone cannot bridge the cost gap. At around €640 per tonne for conventional jet fuel against roughly €1,925 per tonne for aviation biofuels and as much as €7,520 per tonne for synthetic fuel (EASA, 2025), the differential remains too large for the carbon price signal of around 80€ per tonne to close unaided. Direct price support is still essential. 

The EU’s existing tool for this is the SAF allowance mechanism within the EU ETS. Airlines that use SAF can receive allowances to bridge the cost gap. Through 2030, they can offset up to 95% of the price gap for synthetic fuels and 70% for advanced biofuels. But the mechanism expires in 2030, just as aviation should begin to rely increasingly on synthetic fuels. Extending the mechanism beyond 2030 is crucial to provide the long-term investment certainty needed to convert policy ambition into fuel production. 

The EU ETS review should also address how ETS revenues generated from aviation are used. Today, there is no requirement for Member States to reinvest those revenues back into the sector’s transition. A defined share should be directed toward aviation decarbonisation measures, including SAF and e-SAF projects and infrastructure, as well as efforts to address aviation’s non-CO₂ impacts.  

This is not a request for special treatment. Aviation faces a narrower set of decarbonisation options than most sectors covered by the EU ETS, and the options that exist – mainly low carbon fuels- remain scarce and expensive. Revenues generated by the sector should help accelerate the transition pathways available to it.

Yet, none of these measures will work in isolation. The EU ETS must be accompanied by broader efforts to expand clean electricity supply needed to scale low-carbon hydrogen production, improve transparency in SAF markets and implement complementary mechanisms such as the proposed two-sided auction model. Together, these measures can help translate Europe’s fuel mandates into actual fuel production. 

Looking ahead: the role of removals  

Finally, the EU ETS review opens an important conversation on the role of permanent, high-quality carbon removals in aviation’s long-term decarbonisation portfolio. Any integration of removals into the EU ETS should be subject to robust safeguards on permanence, quality, and verification. 

Aviation will require a portfolio of decarbonisation solutions, and the relative contribution of each will shift as technologies mature, clean electricity becomes more widely available, and costs evolve. As that picture develops, policymakers should retain the flexibility to recognise permanent removals alongside fuel-based pathways, provided the framework is designed carefully enough that removals complement, rather than undermine the development and deployment of cleaner aviation fuels.  

The success of the EU’s aviation decarbonisation policy will ultimately be measured not by the ambition of its targets, but by whether it creates the conditions and right sequencing to achieve them. 

ReFuelEU Aviation has already created the demand signal. The challenge now is building the supply, infrastructure and investment framework needed to match it. The EU ETS review is a key opportunity to strengthen the business case for investments in aviation decarbonisation.