European Airline Sector: New proposal on EU ETS could weigh into aviation

Research evidence excerpt

European Airline Sector: New proposal on EU ETS could weigh into aviation

Global Research

17 July 2026ab

European Airline Sector Equities

Europe including UKNew proposal on EU ETS could weigh into

aviation Airlines

Jarrod Castle, CFA

Analyst

jarrod.castle@ubs.com

Without mitigation Aviation would have continued to grow emissions +44-20-7568 8883

Per the EU aviation accounts for 4% of EU total CO2 emissions but without measures Cristian Nedelcu, CFA

would grow to 90% of EU CO2 emissions. A large part of this increase is long haul Analyst

flights which were to be subject to the Carbon Offsetting and Reduction Scheme for cristian.nedelcu@ubs.com

International Airlines (CORSIA) to address growth in carbon. Given the CORSIA offsets +44-20-7568 4375

cost roughly a quarter of EU ETS offsets the EU wants to equalise by (1) any flight 5k or Amal Patel

less subject to EU ETS, and (2) if you are paying CORSIA costs than you will only pay the Analyst

differential of the EU ETS scheme vs CORSIA costs. amal.patel@ubs.com

+44-20-7568 3973

Practical implications of the new EU ETS proposal Alisa Dudchak

The EU ETS proposal will only cover departing flights situated in the EEA (would include Analyst

UK and Switzerland) and landing no further than 5k from the largest airport at the alisa.dudchak@ubs.com

centre of Europe. This scheme will apply from 2029 rather than 2027, for a period of +44-20-7567 0844

four years with a review in 2032 (same year CORSIA was to be reviewed). The EU

acknowledges that they need to increase the total number of allowances available to

aviation in proportion to emissions newly included in scope. However, allowances will be

reduced by surrender obligation related to CORSIA. It is unclear how many allowances

the European airlines under our coverage will receive.