Making Fit for 55 fit for purpose

Sebastian Mikosz, IATA’s SVP, Environment and Sustainability, says more thought is needed to make the EU’s Fit for 55 proposals effective.

Climate change represents an existential challenge to our way of life, and the airline industry is committed to a sustainable future.

At the IATA AGM in October 2021, airlines agreed to achieve net zero CO2 emissions by 2050. To reach this ambitious goal, the aviation industry has unveiled a raft of initiatives, from major purchases of sustainable aviation fuels (SAF) and investments in the SAF supply chain, to prototype electric and hydrogen aircraft.

But bringing sufficient SAF to market, and making radical new technology a reality, will need a massive effort from industry and governments working together.

With its aim to cut emissions across the EU 55% by 2030, the European Commission’s Fit for 55 environmental proposals are a vital opportunity to deliver a significant boost to sustainable aviation, unleashing investment in green technologies and operational efficiencies.

Unfortunately, if the Fit for 55 proposals are adopted in their current form, it will likely represent a missed opportunity. Instead of promoting green technologies and operational efficiency improvements, making flying sustainable for all, the package aims to reduce flying by raising economic barriers and making it significantly less affordable.

For aviation, Fit for 55 has three distinct proposals: A mandate for the use of SAF, a reform of the EU Emissions Trading Scheme (EU ETS), and a proposed fuel tax. Taken together, our estimates are that by 2035 Fit for 55 could add €38 per ticket on an average flight in Europe, and €205 on the average transatlantic flight. This would mark the end of low-cost air travel in Europe as we know it and reverse decades of democratization of flying.


Flexible fueling with SAF

The key to sustainable air travel is to increase the amount of sustainable aviation fuel (SAF). Airlines used every drop of the 100 million liters of SAF that was delivered in 2021. Thanks to billions of dollars in forward purchase agreements from airlines, more SAF producers are entering the market and we expect SAF production to expand over the coming years. Nevertheless, the European Commission proposal envisages a challenging mandate for airlines to use 20% SAF on all flights departing EU airports from 2035.

The problem with this approach is that forcing all airports to source SAF will lead to logistical issues, localized monopolies, and excessive costs. It would be far better to provide greater flexibility by allowing airlines to purchase SAF from wherever it is cheapest. It is also environmentally inefficient to insist on transporting SAF to almost every airport in Europe. This problem could be addressed through a flexibility mechanism that separates the physical use of SAF from the sustainability gain claimed by the airline. This will drive greater efficiency, reduce costs, and encourage more production.

There is also the problem of the geographic scope of such a mandate. If applied to all international flights leaving the EU, this could simply benefit non-EU airlines that can refuel at non-EU airports with no SAF mandate. The difference could amount to around €42 per passenger on a typical Europe-Asia flight.

In short, we believe that incentives on fuel producers to deliver more SAF would be a simpler and better solution than a complicated mandate on use. In effect, more carrots and fewer sticks. This is the approach that has been taken in the United States, which has delivered considerably higher SAF production and use than the EU.


A global solution

Reducing CO2 is a global challenge, and aviation is a global industry. It therefore follows that coordinated global action to reduce aviation emissions should be the goal of the industry and regulators alike.

In 2016, ICAO agreed to introduce the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA obliges airlines to purchase verified carbon offsets to cover emissions increases above a baseline level and applies to all international flights between countries participating in the scheme. At present, EU airlines do not comply with CORSIA for international flights between European States because the EU applies its own Emissions Trading Scheme rather than CORSIA. The failure to apply CORSIA gravely undermines multilateralism in ICAO on climate change. CORSIA’s scope and environmental effectiveness is considerably wider than that of the EU ETS. For example, the EU has no jurisdiction to apply its ETS to a flight between Japan and the United States, whereas that flight would fall under CORSIA.

Unfortunately, by insisting on its own solution, the EU is risking the international consensus for CORSIA and potentially causing the collapse of the world’s first and only sector specific market-based measure. 

The Commission should propose to implement CORSIA in the EU. This would put the EU in a position to lead the debate on a long-term governmental goal for international aviation emissions that will match the industry’s own target of net-zero emissions by 2050.


Fuel taxes – government greenwash

The bluntest tool for reducing emissions is a jet fuel tax. Based on the average price of oil in 2021, the Fit for 55 jet tax proposal would lead to an almost 90% increase in the cost of jet fuel. By increasing the costs to the industry such a tax diverts resources that could otherwise be dedicated to investments in green technologies.

Most importantly, increasing the cost of flying does not lead to a proportionate reduction in fuel burn and emissions. If someone needs to fly then an increase in the flight cost may cause them to economize on the trip elsewhere—for example, a cheaper hotel, or fewer restaurant trips—rather than choose not to travel at all. It would also take a significant reduction in passengers to render a flight uneconomical for the airline, so even if a few passengers can no longer afford to fly, the flights and their associated emissions, would likely still occur.

‘Greenwash’ is when someone claims something is environmentally effective when in fact it makes little difference. An aviation fuel tax fits that description very well. A fuel tax reduces investment in green technologies and hurts the travel and hospitality sectors.


Making Fit for 55 fit for purpose

Overall, if adopted in their current form, the Fit for 55 proposals will succeed only in damaging the competitiveness of the EU’s own airlines for a marginal reduction in CO2. They could slow down the overall progress toward net zero, and, on some routes, even lead to increases in emissions.

The proposals undermine the international consensus for aviation climate action that has been delicately forged at ICAO. They fail to create appropriate regulatory incentives for the increase in SAF production that we desperately need. And they throw into reverse the process of connecting the peoples of Europe with each other and with the rest of the world that has been a driving force of European integration, employment, prosperity, and social development for generations.

But all is not lost. With some amendments, Fit for 55 can be made fit for purpose. In short, we have three key requests: One, implement a more flexible SAF quota allocation system; two, apply CORSIA to intra-EU flights; and three, drop the impractical fuel tax proposal. European air transport would then have a package of measures that would play a practical, effective role in helping aviation achieve its ambitious emissions targets. At the same time, consumers and Europe’s connectivity and competitiveness are protected and air travel does not return to being a preserve of the rich.


Credit | Sam Kerr