Other carbon pricing initiatives

In addition to the EU ETS and CORSIA, there are several carbon pricing initiatives being implemented or planned that are relevant for the aviation sector.

In recent years, several airlines have introduced voluntary offsetting initiatives aimed at compensating, partly or in full, those CO2 emissions caused by their operations that are not mitigated by in-sector measures. Such voluntary initiatives have the potential to contribute to a more sustainable aviation sector, assuming that investments are channelled to high quality offset credits. However, there has been some criticism of the quality of offset credits in this unregulated market [26] .

In order to direct investments towards sustainable projects and activities, the EU has also introduced a classification system, or “taxonomy” [27] . This taxonomy is expected to play an important role in scaling up sustainable investment and implementing the European Green Deal by providing companies, investors and policymakers with definitions of which economic activities can be considered environmentally sustainable. Technical screening criteria for aviation activities that fall under the sustainable investment taxonomy are currently being developed and are foreseen to be adopted during 2022.

Aviation fuel is currently exempted from taxation under the EU Energy Taxation Directive. EU Member States could in theory tax fuel on a bilateral basis, although none currently do so [28] . As part of the ‘Fit for 55’ Legislative Package, the European Commission has proposed to introduce minimum rates of taxation that would encourage a switch to sustainable fuels as well as more fuel-efficient aircraft [29] . According to the proposal, the tax for fossil based aviation fuel would be introduced gradually from 2023 before reaching the final minimum rate of €10.75/Gigajoule (approximately €0.38 per litre compared to an average price of aviation fuel in 2021 of €0.46 per litre [30] ) after a transitional period of ten years. In comparison, sustainable aviation fuels would incur a zero tax rate during this same period and after that benefit from a much lower minimum tax rate.

A pilot in the airplane's cockpit