Aircraft operators participating in the EU ETS are required to surrender allowances corresponding to their annual CO2 emissions. These allowances can be obtained from a variety of sources. Currently, the European Commission is working on establishing regulations for the cancellation of carbon offset units under CORSIA for EU-based aircraft operators.
Free allocation of EU ETS allowances
Starting in 2024, the allocation of free allowances for the aviation sector under the EU ETS significant changes. The allocation is no longer based on historical tonne-kilometre data from 2010, as it was for the 2012-2023 period. Instead, for 2024 and 2025, the European Commission recalculated the distribution of free allowances based on the verified emissions of active aircraft operators in 2023.
The allowances will be issued by June 30th of the respective year, without operators needing to apply for this. From 2026 onwards, except for the SAF allowances, there will be no more free allocation. Starting in 2026, a comprehensive transition to full auctioning of aviation allowances will take place.
These changes are part of the EU's broader efforts to align the aviation sector with its climate goals, including the overall objective of reducing greenhouse gas emissions and achieving carbon neutrality by 2050.
Fuels Eligible for ETS (FEETS) support
Twenty million allowances are set aside exclusively for compensation of the price difference between sustainable aviation fuels and conventional aviation fuel between 2024 – 2030. These so-called eligible aviation fuels are sustainable aviation fuels that are eligible for support if they comply with requirements laid down in the MRR and REDII. This additional allocation for eligible aviation fuels is called FEETS (Fuels Eligible for ETS) support. Allowances are distributed according a ‘first come first serve’ principle. Calculation of the FEETS support will be in accordance with an implementing regulation detailing the calculation methodology and is carried out by the competent authority.
Aircraft operators may request each year retrospectively FEETS support aligned with the amount of eligible aviation fuels they have reported in their annual emissions report. To provide a structured framework, supplementary legislation is anticipated in 2024. This legislation is expected to outline the guidelines governing the process of FEETS support requests. More information will be provided at a later date.
An alternative method to acquire allowances is through participation in auctions, such as those held at the Leipzig Energy Exchange (EEX). This participation is voluntary. Furthermore, a fundamental aspect of emissions trading, known as a "cap and trade" system, allows allowances to be traded among individual emitters. Companies across different sectors covered by emissions trading can also trade emissions allowances. Beyond companies subject to emissions trading, all legal entities and individuals can engage in allowance trading. Various financial intermediaries offer a range of services in practice, and local banks may provide assistance in this regard as well.
Please visit our webpage for more information on obtaining emission allowances.
Aircraft operators are required to surrender one emissions allowance for each tonne of CO2 emitted. The deadline for surrendering the necessary emission allowances is September 30th of the year following the reporting year. Within the EU ETS, various types of emission allowances are utilised.
For more information on the different emission allowances, please visit our website.
For further information on the transaction of emission allowances, please consult our dedicated webpage.
CORSIA carbon offset units
CORSIA does not include provisions for free allocation of emission allowances or free carbon offset units.
Cancellation of CORSIA carbon offset units
Under CORSIA, aircraft operators must cancel their carbon offsetting obligation, with eligible units, at the end of each compliance period. For emissions during the compliance period spanning from 2021 to 2023, operators must cancel the units by January 31, 2025 if offsetting is required. The NEa provides notice of the required off setting obligation by November 30th. Similarly, for emissions occurring in the compliance period from 2024 to 2026, the cancellation must be completed by January 31, 2028. Detailed eligibility requirements for units to be used by EU-based airlines for offsetting is expected to be published in commission implementing regulation planned for quarter 1 , 2025. More information is available here: Aviation emissions – detailed eligibility requirements for units to be used by EU-based airlines for offsetting (europa.eu)