Fit for 55


KEY MESSAGES


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EU airlines and their employees have already and will continue to substantially invest in decarbonisation. E4FC members, therefore, welcome the proposed measures to significantly reduce CO2 emissions and to achieve CO2-neutrality in aviation by 2050. However, the Fit for 55 proposals contain certain elements that will increase the risk of carbon leakage due to substantial cost increases for European companies and competitive distortions vis-a-vis third country carriers, if no adjustments are made.

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The E4FC members are committed to market-based CO2-reduction instruments like the EU ETS as they limit, reduce and price the permissible CO2 emissions for participating sectors. The revision of the EU ETS, however, must address the risk of carbon leakage and competitive disadvantages for EU-network airlines, for instance by introducing fair compensation allowances.

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Sustainable Aviation Fuels (SAF) are a great lever to decarbonise aviation. The proposed ReFuelEU Aviation Regulation provides a solid basis for scaling up the development, production and usage of SAFs throughout the upcoming years. For the foreseeable future, however, SAFs will be more expensive than fossil fuels. Therefore, an unbalanced SAF-mandate would distort competition with the rest of the world and shift traffic outside of the EU. Smart modifications to the ReFuelEU Aviation Regulation can and must prevent these adverse effects without weakening decarbonisation ambitions.


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Imposing taxes on fuels will not guarantee any positive impact on the environment and at the same time is detrimental to the competitiveness of the EU aviation industry, including its jobs. The proposal imposes a financial burden on EU airlines without guarantees that the money will be spent on decarbonisation, while it should be invested in new and sustainable innovations such as new generation, environmentally friendly aircraft, SAFs and other energy related projects.


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Aviation is a global industry and legislation should not stop at the borders of the EU. The European Commission is rightfully proposing a Carbon Border Adjustment Mechanism (CBAM) for other industries in order to ensure a level-playing field. The aviation sector – as currently not being under the scope of CBAM - needs a comparable set of instruments, as it is identified as the fourth most exposed sector to carbon leakage.


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The EU should ensure environmental and social regulatory convergence in existing and new comprehensive air transport agreements.


The members of E4FC are fully committed to reducing their carbon footprint and support the ambition set out in the European Commission’s Fit for 55 package. The proposed initiatives will however require substantial investments and will add to the costs of European airlines, thereby impacting the global competitiveness of European network airlines and their employees. Therefore, airlines and employees together with the other stakeholders in the value chain will have to work together with policymakers to agree on adaptations of parts of the proposals with a dual objective:

Define new, smart legislation that helps the realisation of the ambitious plans and does not lead to carbon leakage.


EU Emissions Trading System

Aviation is a global industry, therefore, unilateral measures could be counter-productive and could result in distortion of competition within the EU as well as globally. While the European Commission’s proposal for the Carbon Border Adjustment Mechanism is not applicable to aviation, the principle of carbon leakage for the aviation sector should be recognised by the regulators and remedies should be construed, e.g. in the revision of EU ETS.

The revision of the EU ETS must address the risk of carbon leakage and thereby ensure a level playing field between EU and non-EU carriers. In the current EU ETS, airlines receive free allowances non-specifically and without direct connection to the degree of potential competitive disadvantage. To address the problem of carbon leakage adequately and to allow for a  smart, balanced and more efficient regulation, a new and different system could be introduced that specifically targets the fraction of air traffic actually exposed to the risk of carbon leakage. 


Regulation on ensuring a level playing field for sustainable air transport

The proposed ReFuelEU Aviation Regulation aims to increase the production and uptake of SAF in Europe in the coming years. For the foreseeable future, however, SAF will be more expensive than fossil fuels. Therefore, an unbalanced SAF mandate would distort competition with the rest of the world and shift traffic outside of the EU. E4FC advocates for financial support for the development and deployment of SAFs bridging the price gap between fossil fuels and SAFs, which are currently three to six times more expensive. Synthetic fuels are even eight to ten times more expensive than regular kerosene.

While the current proposal ensures a level playing field only for intra-EU traffic, it has significant distortive effects regarding intercontinental journeys, including feeder flights. These effects will not be solved by the proposed prevention of tankering[1] practices, as it is neither feasible, nor does it address long-haul flights from non-European hubs. Taking, for instance, a flight from Madrid via Frankfurt to Beijing and back, EU airlines are subject to the elevated fuel price for three out of four flights. In contrast, the SAF-blending target affects non-EU airlines only for the first flight to its non-EU hub. The second, longer flight is not covered by the regulation, nor is the return journey from a non-EU hub to Europe.  The SAF mandate must, therefore, be designed in such a way that it ensures an ambitious growth market for SAF and at the same time a level international playing field.

[1] Tankering practice: aircraft operators uplift more fuel than necessary, with the aim to avoid refueling partially or fully at a destination airport.


Taxation of energy products and electricity

The introduction of fuel taxes would merely have a marginal positive impact on the environment by reducing demand, therefore the members of E4FC strongly oppose the Commission’s proposal as the foreseen taxation system does not contribute to the objective of effectively reducing greenhouse gas emissions. Such a tax does not make the (future) flights more sustainable. EU airlines are committed to effective, sustainable solutions and are ready to directly invest in sustainable fuels and new, environmentally friendly aircraft that are at the heart of decarbonising the industry. But the design of this tax leads governments to take away financial resources from the airlines that could otherwise be allocated to this cause, but instead it will be detrimental to the global competitiveness of the EU aviation industry, including its jobs. A tax may result in unintended negative consequences such as detours and consequently higher CO2 emissions.