European Commission adopts rules on ETS support system to accelerate SAF use

Photo: European Commission

The European Commission adopted Feb. 6 a delegated regulation setting out the EU rules for the support system established and financed by the EU Emissions Trading System to speed up the use of sustainable aviation fuel (SAF). 

The European Climate Law sets an economy-wide target of at least 55 percent net greenhouse-gas (GHG) emissions reductions by 2030 compared to 1990 levels.

Alongside carbon pricing, the EU ETS funds an innovation fund to support innovative clean-tech projects, including in the aviation sector aiming to reduce its climate impacts as well as specific support to bridge the cost difference for the use of alternative fuels. 

The 2023 revision of the EU ETS directive provides a support mechanism for the use of eligible aviation fuels.

To incentivize early uptake of the best-performing alternative fuels in terms of emissions-reduction potential, 20 million EU ETS allowances, estimated at around 1.6-billion euros, are set aside Jan. 1, 2024. 

The allowances cover all or part of the remaining price differential between fossil kerosene and the eligible aviation fuels used by individual commercial-aircraft operators on their flights covered by effective carbon pricing through the EU ETS.

A level playing field is ensured, with all airlines that operate on these routes being treated equally.

To operationalize this support mechanism, the commission adopted this delegated regulation to establish the rules for the yearly calculation of the price difference between eligible aviation fuels and fossil kerosene, taking into account incentives from the price of carbon and from harmonized minimum levels of taxation, as well as the rules for allocating the resulting allowances. 

The next steps are for the airlines to report the use of these fuels during 2024, which should take place by March 31, and for the commission to publish the fuel-price differences by May 31.

This will be based on a technical report to be published by the European Union Safety Agency.

Finally, by Aug. 31 the commission will adopt a decision indicating the allocation of allowances per commercial airline that applied for this support mechanism. 

The delegated act has now been submitted to the European Parliament and Council of the EU for scrutiny.

Provided these institutions do not raise any objections within two months, it will then be published in the official journal and enter into force.

To read a Q&A on the ETS delegated regulation bridging the cost difference for SAF, click here.