1. The state of the aviation industry
How much pollution is the aviation industry responsible for?
Aviation is one of the fastest-growing sources of greenhouse gas emissions globally. It accounts for around 2–2.5% of global CO₂ emissions, with its total climate impact estimated to be up to about twice as high when non-CO₂ effects, such as contrails and nitrogen oxides, are included.
In the EU, aviation accounts for roughly 3.8–4% of total emissions, and this share is expected to grow as emissions from other sectors decline more quickly.
How much is the aviation industry paying for its pollution?
Currently, very little. Aviation benefits from major tax exemptions, including no VAT or fuel taxes.
Under the current EU Emissions Trading System (ETS), airlines must pay for emissions from flights within Europe, but international flights are not priced.
How does aviation’s tax treatment compare to other sectors in the EU?
Aviation is by far the least taxed transport mode. Long-distance flights largely avoid paying for their climate impact. This creates an uneven system where aviation does not follow the polluter-pays principle, unlike other transport modes such as road transport.
|
Tax |
Aviation |
Trains |
Cars & trucks |
|
Fuel tax |
None |
Yes* |
High |
|
VAT on fuel |
None |
Yes |
Yes |
|
VAT on tickets |
None |
Low or none |
N/A |
|
Other taxes |
Limited |
Limited |
Multiple (e.g. road taxes, tolls) |
|
Carbon pricing (ETS) |
Partial (EU flights only) |
Partial (via electricity ETS) |
None |
Sources: European Commission – Taxation and Customs Union (Excise Duties on Energy); EU Parliament Indirect Taxation Fact Sheets; UK VAT Notice 744A on passenger transport.
* Around 80% of passenger trains run on electricity, which is generally subject to lower taxes; diesel trains, used on some routes, may face higher fuel taxation similar to road vehicles.
Note: While this table focuses on aviation, it’s worth noting that shipping faces similar tax gaps – read our Shipping page to learn more.
2. ETS basics
What is the EU Emissions Trading System (ETS)?
The EU ETS is a carbon pricing system that sets a cap on emissions from key sectors and allows companies to trade emission allowances. It’s the EU’s main tool for reducing greenhouse gas emissions.
How does the ETS work in practice?
The EU ETS is a “cap-and-trade” carbon market.
A limit (cap) is set on total emissions, and companies must monitor and report their emissions each year and surrender allowances to cover them. These allowances can be bought and sold.
The cap is reduced over time, which creates a carbon price. It generates revenue through auctions and encourages companies to cut emissions and invest in cleaner technologies.
Which sectors are currently covered by the ETS?
The ETS covers major sectors including:
- Power generation
- Heavy industry
- Maritime shipping (including international journeys)
- Aviation (but only for flights within Europe)
Has the ETS been effective so far?
Yes. Emissions from sectors covered by the ETS have fallen by around 50% since 2005.
How much revenue has ETS created and what is it used for?
The EU ETS has raised over 245bn to date across sectors, including around €39 billion in 2024 alone.
These revenues are used to fund:
- Renewable energy and energy efficiency
- Low-carbon innovation (via funds like the Innovation Fund)
- Climate action at national and EU level
3. Aviation and the ETS: what is the issue?
Which flights are covered by the ETS today?
The ETS currently covers flights that both depart from and arrive within the European Economic Area (EEA).
However, most international flights – including long-haul routes – are excluded, so the majority of aviation emissions are not priced.
Why are international flights currently excluded?
International flights were excluded in 2012 to support the development of a global aviation climate scheme through the International Civil Aviation Organization (ICAO).
This temporary exemption has been repeatedly extended, despite the global scheme (CORSIA) not delivering meaningful emissions reductions.
How much pollution has gone unpriced since 2012?
As a result of exempting international flights from the ETS, 1.1bn tonnes of CO₂ has been unregulated between 2012 and 2023.
What revenue has the EU missed out on due to this exemption?
By not pricing international aviation emissions, the EU has missed out on approximately €26bn in revenue that could have been used to fund climate action.
4. The opportunity ahead: CORSIA review and the EU proposal
What is CORSIA?
CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) is a global scheme developed by the International Civil Aviation Organization to address emissions from international flights.
Under CORSIA:
- Airlines monitor and report emissions from international flights.
- Only emissions above a very high baseline must be addressed.
- Airlines can comply by:
- Buying carbon offsets, or
- Using sustainable aviation fuels to reduce their obligations.
CORSIA is designed as a global approach to aviation emissions. However, it mainly relies on offsetting rather than directly reducing emissions, which has raised concerns about its effectiveness.
Does CORSIA actually reduce aviation emissions?
Not significantly. CORSIA focuses on offsetting emissions rather than reducing them directly.
It covers only a limited share of emissions, relies heavily on offsets, and does not align with the level of emissions reductions required under the Paris Agreement.
- Read SASHA’s policy briefing for a more in-depth analysis of CORSIA’s shortcomings.
ETS vs. CORSIA – what’s the difference?
The EU ETS and CORSIA take fundamentally different approaches:
- ETS:
- Caps emissions and puts a real carbon price on pollution.
- Covers 100% of emissions for included flights.
- Has strong enforcement and penalties.
- CORSIA:
- Relies on offsetting emissions growth, not reducing emissions.
- Covers only a small share of emissions.
- Has weak enforcement and is not fully mandatory until 2027.
In practice, the ETS drives real emissions reductions, while CORSIA has so far delivered little to no tangible impact.
What is the EU’s upcoming review of CORSIA?
The European Commission will review CORSIA by July 2026 to assess whether it delivers meaningful climate benefits.
This review will determine whether the EU continues to rely on CORSIA or bring international flights back into the ETS.
What is the EU proposal and what would it change?
If CORSIA is found to be insufficient, the EU is expected to consider extending the ETS to cover all flights departing from EU airports.
This would ensure that international aviation emissions are priced, closing a major gap in the current system.
What happens if the EU decides not to extend the ETS to international flights?
If the EU decides not to extend the ETS to international flights, the EU is set to lose a further €130bn between 2027-2035. Long-haul flights emissions will continue to be unregulated.
This would also weaken EU climate policy and risk undermining its ability to meet climate targets.
5. Impacts on EU competitiveness, innovation, climate finance and leadership
How can extending the ETS strengthen EU airlines’ competitiveness and innovation?
Some airlines argue that extending the ETS would harm competitiveness, but the impact is expected to be minimal, with ticket prices rising by just 2–6%.
For example, a typical round-trip economy ticket from Paris to New York costs around €480–€500 on average, meaning the estimated 2–6% ETS-related increase would translate to roughly €10–€30 per ticket – a relatively small change compared with overall fare costs.
In practice, it can strengthen competitiveness in two ways:
- Level the playing field: All airlines flying from Europe would face the same carbon cost, removing the current advantage for non-EU carriers on international routes.
- First-mover advantage: By pricing emissions earlier, EU airlines are pushed to become more efficient and invest in cleaner technologies ahead of global competitors. And some of the revenues from that pricing can be used to support EU frontrunner technologies.
As global aviation moves toward stricter climate rules, airlines that adapt first will be better positioned to compete. Extending the ETS also helps drive investment and innovation in low-carbon aviation, ensuring EU airlines and industry remain competitive in a rapidly evolving global market.
Is carbon leakage a real risk?
Carbon leakage – where airlines or passengers reroute via non-EU hubs to avoid costs – is often raised by industry as an argument against including international flights in the ETS. Yet, evidence shows it is limited.
Estimates suggest only around 3% of emissions savings would be lost overall, mainly to specific long-haul routes to Asia.
The potential savings from detouring via hubs like Istanbul or Dubai are only 1–4%. In practice, most travellers are unlikely to take longer, less convenient journeys to save a relatively small cost. In addition, the Iran war could have a lasting impact on flights transiting through the Gulf.
Airlines themselves are also unlikely to reroute flights on a large scale, as the operational and commercial disadvantages – longer routes, higher fuel and crew costs and lost connectivity – generally outweigh the relatively small carbon cost savings.
As a result, only a small number of passengers on certain long-haul routes are likely to reroute. Any remaining risks can be addressed through simple, targeted policies, meaning leakage is small compared to emissions reductions achieved from extending the ETS.
How can extending the ETS strengthen the EU’s leadership and its energy security?
Europe already has a strong industrial base – from aircraft manufacturers to sustainable aviation fuel (SAF) producers and research institutes. Extending the ETS can:
- Drive early demand for low-carbon aviation solutions.
- Position European companies as global leaders and exporters in clean aviation technologies.
- Reduce airlines’ exposure to volatile fossil fuel prices, improving cost stability and resilience to oil markets.
By accelerating the shift to domestically produced clean fuels, the EU can make its aviation sector less vulnerable to global oil shocks, while strengthening both energy security and global leadership.
How would this help fund the EU’s climate commitments?
Extending the ETS to international flights could generate billions of euros in additional revenue each year.
This is new, predictable funding that does not need to come from taxes or existing budgets – it comes directly from pricing pollution.
These revenues can be used to:
- Fund clean aviation technologies and fuels.
- Support climate action within the EU.
- Contribute to international climate finance, including support for climate vulnerable countries.
At a time of rising climate impacts and pressure on public finances, this offers a way to close funding gaps while upholding the polluter-pays principle.
Why is this decision a test of EU leadership?
In 2012, the EU yielded to external political pressure. Today, it knows the ETS works both in reducing emissions and raising revenues.
Failing to extend the ETS would send an even stronger message than acting: it would undermine the EU’s credibility and encourage others to delay climate action. However, acting would reinforce Europe’s role as a climate leader.
At a time of geopolitical instability, the EU must demonstrate it can stand up to external pressure – including from the US – and enforce its own rules. This is a test of whether Europe leads or yields when its interests are challenged.
6. Fairness and social impact
Is the current system socially fair?
No. The current system is uneven and regressive.
Today, shorter flights within the EEA – more commonly taken by lower- and middle-income travellers – are covered by the EU ETS, while long-haul international flights are not.
This means that the average family flying within Europe pays for their emissions, but a more affluent traveller flying long-haul to New York or Dubai does not. Nor do passengers taking frequent intercontinental business trips.
How would extending the ETS improve fairness?
Including international flights would ensure that all aviation emissions are treated consistently, so those who pollute more pay more.
This would better align with the polluter-pays principle.
Moreover, pricing these emissions creates a source of predictable revenue that can fund climate mitigation and adaptation, both in Europe and globally. Funds raised could help the aviation sector transition to low-carbon fuels, support climate action in Europe, and finance adaptation and resilience projects in Small Island Developing States (SIDS) and Least Developed Countries (LDCs). This would allow the EU to uphold climate justice while addressing the aviation industry’s climate responsibility.
Want to learn more?
Here are some useful resources:
