Airlines could be in line for 2 billion euros in European Union funding to help them switch to sustainable fuels, under reforms to strengthen Europe's climate change policies.
The European Parliament on Tuesday approved a revamp of the EU carbon market, which would use proceeds from 20 million CO2 permits to compensate airlines that use sustainable fuels.
At today's CO2 price, that would total 1.9 billion euros, which airlines can claim from 2024 to 2030 to cover the price difference between fossil fuel-based kerosene and greener fuels, which are currently far more expensive.
Aviation is seen as one of the hardest sectors to decarbonize, with zero-emission aircraft not expected for over a decade. In the nearer term, sustainable fuel is one of the few options to air travel's carbon footprint.
The EU carbon market reform still needs formal approval from EU countries, due later this month, before it becomes law.
Separately, the EU is also developing binding targets for airlines to increase their use of sustainable fuels.
Campaign group Transport & Environment said the EU funds should be coupled with binding targets and more industry investments, to kickstart a market for green fuels.
"Subsidies alone will not be enough to trigger the switch to e-fuels," the group's aviation director Jo Dardenne said.
Airlines are set to face higher costs for polluting in Europe in the coming years. As part of the carbon market reforms, the EU will stop giving free CO2 permits to airlines from 2026, meaning they will need to buy a permit to cover every ton of CO2 they emit.
EU carbon permits were trading at around 94 euros per ton of CO2 on Tuesday.
Industry group Airlines for Europe welcomed the funding, but called for further support for green fuels, noting that the loss of free CO2 permits could cost airlines 6 billion euros per year - potentially raising ticket prices.
"Europe should be throwing its weight behind SAF production to ensure the SAF well doesn't run dry before it even gets started," an A4E spokesperson said.
Reuters