The European Commission's proposal for ETS expansion

Reports in the market indicate that the European Commission plans to unveil a proposal on 15 July 2026 as part of a broader Emission Trading Scheme reform, requiring all airlines operating flights within Europe to purchase carbon allowances for outbound flights from the EU. Currently, ETS obligations apply only to intra-European routes. Using levels from 1990, the proposal aims to achieve a 90% reduction in emissions by 2040.

With industry and member state opposition already coalescing (including from 15 airlines represented by Airlines for Europe), whether this proposal will ultimately come to fruition remains uncertain.

From a legal and regulatory perspective, the proposal raises significant questions. It would impose new compliance obligations on all airlines operating departing flights, creating potential friction with bilateral air services agreements, non-EU emissions trading regimes, and CORSIA (please visit our recently published article for further information on CORSIA and its new requirements), and may present cross-border practical challenges where third countries refuse to cooperate.

In 2012, the EU attempted a similar expansion but reversed course under fierce opposition from the US, China, and Brazil, driven by a combination of sovereignty concerns, competitiveness, and fear of undermining CORSIA. The Commissions' plans, therefore, are ones to watch closely. Airlines, trade bodies, and in-house legal teams might consider it prudent to track developments now, both to assess direct compliance exposure and to engage with the consultation process before positions harden.

We continue to monitor this space as the proposal takes shape.