IATA Urges Overhaul of EU Carbon Market Rules to Protect Aviation Competitiveness

The industry body is urging EU policymakers to realign climate measures with global frameworks while accelerating investment in sustainable aviation solutions.

Geneva/Brussels: The International Air Transport Association (IATA) has called for a comprehensive review of the European Union’s Emissions Trading System (EU ETS), warning that current policies risk undermining Europe’s aviation competitiveness, increasing costs, and weakening connectivity at a time of global economic and geopolitical uncertainty.

The industry body is urging EU policymakers to realign climate measures with global frameworks while accelerating investment in sustainable aviation solutions.

Push for Global Alignment Through CORSIA

At the centre of IATA’s recommendations is the full implementation of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), the global emissions framework agreed under the International Civil Aviation Organization (ICAO).

IATA argues that the EU’s current approach—layering regional rules on top of CORSIA—creates:

• Regulatory fragmentation

• Higher compliance costs

• Administrative complexity without added environmental benefit

To ensure consistency, IATA is calling for CORSIA to apply to all international flights, including intra-European Economic Area (EEA) routes, without additional EU-specific conditions.

“European aviation policy must bolster competitiveness as it advances decarbonization,” said Willie Walsh, IATA Director General.

Sustainable Aviation Fuel: Call for ‘Book-and-Claim’ System

IATA is also advocating for the introduction of a Sustainable Aviation Fuel (SAF) book-and-claim mechanism under the EU ETS.

This system would allow airlines to:

• Purchase SAF credits without physically sourcing fuel at specific airports

• Claim emissions reductions based on verified transactions

• Operate on a level playing field regardless of geographic access to SAF supply

The association says such a model is critical to building a scalable, transparent, and liquid SAF market, while also reducing barriers to adoption.

Billions in Revenues—But Limited Reinvestment

A key concern highlighted by IATA is the lack of reinvestment of EU ETS revenues into aviation decarbonization.

• Airlines are expected to surrender nearly 330 million emissions allowances between 2026 and 2030

• This will generate billions of euros for EU Member States

However, current support mechanisms—such as the SAF allowance scheme—cover only 4–5% of industry needs for the period.

IATA is calling for:

• Greater reinvestment into SAF production and scaling

• Support for emerging zero-emission technologies

• Expanded financial incentives to close the cost gap between conventional fuels and SAF

The Sustainable Transport Investment Plan (STIP) estimates that:

• €57–67 billion is needed by 2035 for SAF development

• €268–376 billion will be required by 2050

Concerns Over Rising Costs and Industry Impact

With the phase-out of free emissions allowances in 2024, airlines are facing sharply rising compliance costs.

IATA warns that a sudden increase in financial burden could:

• Reduce air connectivity across Europe

• Limit consumer choice

• Divert capital away from green investments

• Weaken Europe’s position in global aviation markets

The association is urging the EU to consider reinstating free allowances temporarily to safeguard competitiveness during the transition.

Broader Economic and Strategic Context

IATA’s position aligns with growing concerns among EU policymakers about the bloc’s competitiveness, echoing findings in the Draghi Report, which highlights:

• High regulatory costs

• Complex compliance frameworks

• Underinvestment in key sectors

In a context of geopolitical volatility and supply chain disruptions, aviation is viewed as a strategic asset underpinning trade, tourism, and economic integration.

Balancing Climate Ambition with Economic Resilience

IATA emphasized that climate action and competitiveness must go hand in hand.

“Reviewing the EU ETS offers a critical opportunity to refocus efforts on cost-effective emission reductions,” Walsh said.

The association is calling for a harmonized policy framework that:

• Aligns with global standards

• Prioritizes measurable emissions reductions

• Avoids overlapping or duplicative regulations

• Maintains affordability for airlines and passengers

A Critical Policy Moment for European Aviation

With new EU ETS rules set to take effect from 2026, the upcoming review is being framed as a pivotal moment for the future of European aviation.

Industry leaders warn that without adjustments, current policies risk undermining both climate goals and economic resilience, while a balanced approach could position Europe as a leader in sustainable and competitive aviation.