The European Commission’s proposal COM(2026)616, published on 17 July 2026, introduces one of the most significant revisions to the EU Emissions Trading System (EU ETS) for aviation in recent years. The proposed changes would expand the system’s geographical scope, incorporate business jets, strengthen incentives for sustainable aviation fuels (SAF), introduce support for hydrogen and electric aviation, address non-CO₂ climate impacts, and establish a partial integration mechanism with CORSIA.

Expanding EU ETS Coverage Beyond Europe

One of the most impactful elements of the proposal is the expansion of the EU ETS geographical scope. Under the current framework, the system primarily covers intra-EEA flights, together with routes involving Switzerland and the United Kingdom.

Starting in 2029, the Commission proposes extending EU ETS coverage to flights departing from the EEA and travelling to destinations located within 5,000 kilometres of Frankfurt. This could bring routes to destinations such as Istanbul, Dubai, Abu Dhabi, Riyadh, Casablanca, Marrakech, Tunis, Algiers and Cairo into the scope of the EU ETS. Long-haul destinations such as New York, Toronto, São Paulo, Tokyo, Singapore or Beijing would remain outside this expanded coverage.

As a result, the EU ETS would cover a substantially larger share of the actual emissions generated by European aircraft operators. Approximately additional 19M tCO2 would be covered by extra-EEA within the proposed ratio, adding to the 64M tCO2 total reported emissions in the sector under the reduced scope.

Business Aviation Explicitly Included

The proposal introduces specific definitions for business flights and business aircraft, formally recognizing corporate aviation within the EU ETS regulatory framework.

While further implementing acts are expected to clarify which aircraft and operations will qualify as business aviation, operators in this segment should already begin assessing the potential implications for their Monitoring, Reporting and Verification (MRV) obligations and carbon compliance strategies.

SAF Support Extended Until 2040

The Commission is proposing a major extension of the SAF Allowances mechanism.

Under the current rules, a reserve of up to 20 million allowances is available to incentivize the uptake of sustainable aviation fuels until 2030. The new proposal would extend this support until 2040 through an additional reserve of up to 110 million SAF Allowances.

The proposal would also broaden eligibility, allowing allowances to be claimed for all flights departing from airports located within the EEA, considerably expanding the number of operators and routes that could benefit from the scheme.

In addition, airlines with fuel supply contracts of at least three years may be able to obtain advance SAF allowance reservations for up to five years, subject to an overall cap of 10 million allowances. Additional support is proposed when eligible feedstocks originate within the EEA.

Although the proposal extends the SAF Allowances programme until 2040, it also rebalances the level of support across fuel types. Biofuels (HEFA) would see their EU ETS support reduced from 50% to 30%, with eligibility ending in 2029. By contrast, renewable hydrogen and RFNBOs would retain stronger support levels at 60%, highlighting the EU’s increasing focus on next-generation aviation fuels and alternative propulsion pathways.

 

Moving Towards Technology Neutrality

Another strategic development is the transition from a SAF-focused framework towards a more technology-neutral approach.

The proposal explicitly includes renewable electricity, renewable hydrogen and renewable fuels of non-biological origin (RFNBOs) among the technology’s eligible for support under the EU ETS. This would enable airport electrification projects, electric aircraft initiatives and hydrogen aviation developments to access support mechanisms comparable to those currently available for sustainable aviation fuels.

Addressing Non-CO₂ Climate Effects

For the first time, the proposal introduces economic incentives targeting non-CO₂ climate impacts, particularly contrail formation. A reserve of up to 3 million allowances would be made available until 2033. Airlines could receive additional allowances by implementing contrail prediction models and reporting non-CO₂ effects using real operational and trajectory data.

Potentially eligible measures include cruise altitude optimization, advanced meteorological route planning, dynamic flight routing, contrail prediction and avoidance tools.

This signals a broader evolution of aviation climate policy beyond carbon dioxide emissions alone.

Partial Integration with CORSIA

The proposal also introduces a mechanism designed to avoid double carbon pricing on certain international routes.

Under the proposed framework, airlines could reduce their EU ETS surrender obligations by taking into account their CORSIA offsetting requirements and the relative value of eligible CORSIA credits compared with EU Allowances (EUAs). The objective is to create greater coherence between the two systems while supporting international climate action through a more integrated approach to carbon compliance.

Currently, 75% of states with airports included in the expansion ratio, would be under a double mechanism, as included under both mechanisms, CORSIA and EU-ETS.

Key Takeaways for Airlines

If adopted, COM(2026)616 will significantly reshape the aviation carbon compliance landscape. Airlines should begin evaluating the potential impact on their operations, fuel procurement strategies and carbon management programmes.

Key implications include:

• Expanded EU ETS coverage across a wider range of international routes.

• Increased regulatory visibility and obligations for business jet operators.

• A substantial increase in SAF-related support through 2040.

• New incentives for electricity, hydrogen and RFNBO technologies.

• Financial incentives linked to the reduction of non-CO₂ climate impacts.

• Greater interaction between EU ETS and CORSIA compliance requirements.

For airlines, early assessment and strategic preparation will be critical as the legislative process advances and implementation details become clearer. From EU ETS and UK ETS compliance to SAF support mechanisms, CORSIA obligations and emerging non-CO₂ requirements, airlines will need to make increasingly strategic decisions. Global Factor combines carbon market expertise, trading capabilities and aviation-focused advisory services to help operators navigate this transition efficiently, reduce compliance costs and stay ahead of regulatory developments.

Join our next webinar on September 7th to explore the proposal in greater detail. The session will cover the expansion of the EU ETS scope and carbon market updates, providing attendees with practical guidance on how to prepare for the evolving carbon market and regulatory landscape.