Aviation: Implementation of the EU ETS 1 and CORSIA

Aviation was the first new sector to be included in the EU ETS 1 in 2012.

Further expansion took place in 2016 when the Contracting States of the International Civil Aviation Organisation (ICAO) agreed on a global mechanism, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) to offset emissions from international aviation. From 2024, an offsetting obligation of 85 percent above a 2019 baseline was stipulated for international flights.

CORSIA will be implemented swiftly and uniformly for all Member States through European regulations. An amendment to the EU ETS 1 Monitoring & Reporting Regulation (EU) 2018/2066 harmonised the monitoring methods for EU ETS 1 and CORSIA enabling aircraft operators to create a single standardised monitoring plan for both systems. As part of ‘Fit for 55’ initiative, the scope of the Directive 2003/87/EC has been adapted so that the CORSIA offsetting obligation now includes flights to third countries and flights between third countries. In short, EU ETS 1 now applies to intra-European flights and CORSIA to all remaining international flights.

Maritime Transport

As part of the ‘Fit for 55’ programme, starting in 2024, the European Union has decided to include the maritime transport sector in the existing EU ETS 1. Allocations will be made entirely through regular auctions. A transitional phase is planned for 2024 and 2025, during which emission allowances need only to be surrendered for a portion of the verified emissions (2024: 40 per cent, 2025: 70 per cent). From 2026 onwards, allowances must be surrendered for all verified emissions. For 2024 and 2025, the corresponding number must be cancelled from the auction volume for emissions not covered by allowances.

In 2024, and for the first time, carbon dioxide emissions (CO2) will be recorded for maritime transport in EU ETS 1. This will be followed by methane (CH4) and nitrous oxide (N2O) emissions starting in 2026. The obligations under the EU Maritime Transport Regulation, which was also amended parallel Directive 2003/87/EC, continue to apply. At the same time, they form the basis for the monitoring, reporting and surrender obligations for the maritime scope of EU ETS 1.

At a global level, the International Maritime Organisation (IMO) of the United Nations has adopted a revised GHG strategy to achieve net-zero GHG emissions by around 2050, including interim targets for 2030 and 2040. To achieve these targets, a package of measures is to come into force in 2027, consisting of both a technical element and a market-based element.

In the future, there will be a need to discuss the interaction of both instruments, that means the EU ETS 1 and the forthcoming global market-based approach still to be introduced by the IMO.

New emissions trading for transport and buildings (EU ETS 2)

The Fit for 55 package also introduces a new, independent emissions trading system covering buildings, road transport and other sectors in the EU (EU ETS 2). It thus encompasses a large part of the scope of the EU Effort Sharing Regulation (ESR). From 2027 onwards, the number of allowances is to decrease linearly by 5.1 per cent each year, and from 2028 onwards by 5.38 per cent of the respective reference amount. Further, more detailed information is available on the topic page ‘EU ETS 2 for buildings and transport’.

Analogous to the German National Emissions Trading Scheme (nEHS), the EU ETS 2 is an upstream system. This means that it is not fuel users, that means cars or heating systems, who are obliged to participate but the companies that place fuels on the market within the scope of the EU ETS 2 (for example natural gas suppliers). As in the nETS, EU ETS 2 covers fuels placed on the market that are subject to energy tax. However, a key difference is that the scope of EU ETS 2 is limited to certain users of the fuels, that means fuel consumption in the aforementioned sectors.

The total availability of emission certificates (the cap) is derived from the obligations arising from the ESR for the sectors concerned. The aim is to reduce emissions in the building and road transport sectors by 43 percent by 2030 compared to 2005 and by 42 percent in the additional sectors. The quantity of allowances should annually decrease linearly by 5.1 percent of the reference quantity in 2027 and by 5.38 percent from 2028 onwards. Further, more detailed information is available on the topic page ‘EU ETS 2 for buildings and transport’.

Prospective Involvement of Other Sectors

The scope of the EU ETS could be extended in future to include additional sectors, greenhouse gases, emitters and negative emissions, also known as carbon dioxide removals (CDR). The possible extensions mentioned in Article 30 (Directive 2003/87/EC) are particularly important in this context. These include, for example, the potential integration of permanent CDR, the inclusion of installations for the incineration of municipal waste and, where appropriate, landfills, and the inclusion of installations with a total rated thermal input below 20 MW. If landfills were to be included in the EU ETS, an extension to methane and nitrous oxide emissions could also be considered.

In addition, discussions are focusing on the possible inclusion of further sectors, with a view to incorporating agriculture and land use (Land Use, Land Use Change and Forestry (LULUCF)). In a few years' time, these sectors will remain as larger sectors outside the European emissions trading system. Currently, agriculture, whose reduction target is covered by the ESR, accounts for more than 10 per cent of emissions in the EU. In contrast, the land use sector, whose emissions are regulated by the LULUCF Regulation, currently absorbs more greenhouse gases than it emits, making it a net carbon sink. The contribution of these two sectors is crucial to achieving climate targets.

Including these sectors in the EU ETS would not only enable the achievement of reduction targets in line with the politically defined reduction pathway and interoperability with other sectors and climate protection policies, but also improve incentives for emission reductions along the value chain. However, there are a number of difficulties and challenges in implementing an emissions trading system in these sectors. These include the adequate monitoring of emissions, the very large number of agricultural holdings in the EU, and possible conflicts of interest, for example with regard to environmental protection and animal welfare.

Climate Change 45/2026: Options for implementing limits for CDR integrated into the EU ETS 1

Climate Change 25/2026: Integration of Landfills into the EU-ETS 1