The EU is Planning to Add Aviation to Its Emissions Trading System

The European Commission published proposals ​to start applying costs on emissions from ​international flights departing Europe and landing in countries up ​to 5,000 kilometers from the continent’s geographic center (Frankfurt, Germany) starting in 2029. This is part of the EU’s climate policy and would capture emissions from flights to hubs in Turkey and ​the Middle East but exclude direct flights from Europe to the United States and to key areas in Asia. Despite the United States being excluded, U.S. officials are still ​concerned about ⁠the proposal. The EU proposal also expands coverage to all incoming and departing flights by business and private jets, regardless of the travel distance or the geographic location of the origin or destination.

In 2012, the United States blocked a previous attempt by the European Union (EU) ⁠to ​expand its Emissions Trading System (ETS) to ​cover international flights. Congress authorized the Secretary of Transportation to ban U.S. carriers from complying with the ETS in response to the EU’s aviation mandate. It is estimated the ETS has added €260 billion ($297 billion) to energy costs since 2013.

According to the American Action Forum, beginning in 2032, the EU may expand the scope to include all flights departing from European countries, including all direct EU-U.S. commercial flights. That could lead to an annual compliance burden of at least €9 billion ($10.2 billion) for U.S. airlines. Some EU-North American flights could see an average increased cost of $48 per passenger, assuming a carbon price of €140 ($159) per metric ton of carbon dioxide in 2032. To avoid double carbon pricing, the EU proposal states that it would continue to support the UN’s international aviation emissions mitigation framework and introduce “a deduction mechanism for costs incurred.”

The UN’s International Civil Aviation Organization implemented a global framework, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), to reduce emissions in the global aviation sector. CORSIA sets baseline emissions benchmarks for airlines, with any excess emissions above the threshold offset by purchases of eligible carbon credits. As of January 2026, 130 countries participated in CORSIA on a voluntary basis, including the United States. CORSIA’s voluntary phase runs from 2021 to 2026, and its mandatory phase begins in 2027, in which the Trump administration does not plan to participate.

The EU proposal states that if CORSIA is proving to be ambitious, efficient and successful, the scope of effective carbon pricing under the ETS will be reduced to flights within the European Economic Area (EEA) and departing to the UK, Switzerland, to and from Gibraltar, and other countries taking advantage of the Emissions Trading System. If CORSIA does not deliver, the Commission may consider extending the scope to full departing flights.

Thus, beginning in 2029, direct and long-haul commercial flights from the EEA to the United States would be exempt from the proposed 5,000-kilometer-radius rule, as the United States is well beyond the perimeter of the EU. Connecting flights, however, could be subject to the new rule. For example, on a Frankfurt-Istanbul-San Francisco itinerary, the initial Frankfurt-Istanbul leg would be subject to the new rule, and travelers on that leg would incur higher costs. Therefore, travelers would have an incentive to take a direct flight from the EEA to the United States to avoid incurring increased costs.

Leakage

According to the International Council on Clean Transportation’s (ICCT) latest report, there are 185 EU-to-U.S. flight routes that would be subject to carbon leakage, where travelers take alternative flights to avoid paying the higher costs of the EU’s Emissions Trading System. Among these potential leakage routes, flights from the EU to North America would incur an average additional cost of €21.4 ($24.30) per passenger, which is about 6.4% of a typical airfare. Some examples of leakage-prone routes are Frankfurt Airport to San Francisco International Airport, Paris Charles de Gaulle Airport to John F. Kennedy Airport, and Munich Airport to San Francisco International Airport.

The ICCT estimates that expanding the Emissions Trading System to all departing flights would generate approximately €9 billion annually, assuming a baseline carbon price of €70 ($80) per metric ton of carbon dioxide at 2023 levels. Transatlantic routes account for about 52% of the global leakage-prone flight volume, which the American Action Forum uses for market share. Applying this percentage, direct EU-U.S. flights would account for approximately €4.5 billion in gross annual compliance costs. By 2032, the carbon price could more than double to at least €140 per metric ton of carbon dioxide, based on the EU’s emissions-reduction targets, which would increase compliance costs for EU-U.S. flights to more than €9 billion, not accounting for growth in air traffic.

Analysis

The EU is planning to add aviation within a 5,000-kilometer radius to its Emissions Trading System beginning in 2029, which would exclude the United States based on distance. The EU is also considering expanding the program to all flights in 2032 if the UN aviation program, which becomes mandatory next year, fails to meet its emissions-reduction goals. If the EU were to include all flights in its emissions trading system, the United States could invoke the European Union Emissions Trading Scheme Prohibition Act, which Congress passed in 2011, to prohibit U.S. airlines from complying with the EU system. U.S. airlines operating within the EU would then be caught in a legal battle bound by EU law but legally prohibited from doing so by the U.S. government. Another issue is that the EU and the United States have signed an “Aviation Transport Services” agreement that aims at “opening access to markets and maximizing benefits for consumers, airlines, labor, and communities on both sides of the Atlantic.” It is unclear how adding aviation to the EU’s Emissions Trading System would affect this agreement.

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