By extending the European Union Emissions Trading System (EU ETS) to flights departing the European Economic Area (EEA) and landing within a 5,000 km radius of Frankfurt from 2029, the European Commission risks creating greater market uncertainty, uneven competitive burdens and overlapping obligations for airlines operating in Europe, even with the proposed cost-deduction mechanism.
Airlines are already under significant cost and operational pressure. Adding another layer of compliance would increase both cost and complexity, leaving carriers to manage two parallel regimes with very different requirements.
CORSIA is not beyond criticism. It still needs stronger supply integrity, clearer eligibility rules and credible enforcement. But the answer is to strengthen the global framework as it enters its mandatory phase, not create a fragmented alternative before it has had the opportunity to operate at full scale.
When the EU ETS was expanded to cover aviation in 2012, it applied to flights in and out of the European Economic Area (EEA). Within the year, the European Commission decided to press pause. Anticipating a global mechanism to price aviation emissions (which became CORSIA), the EU introduced a "stop-the-clock" exemption for international flights to give the new global scheme time to take shape.
Under the revised ETS Directive, the Commission had until July 2026 to assess whether CORSIA was delivering Paris-aligned reductions with sufficient global participation. Only then would they decide whether to end or continue the exemption. Today, the Commission released the draft amendment to the EU ETS directive, which proposes postponing the long-haul exemption to 2032. Instead, they plan to extend ETS coverage to flights departing EEA airports to third countries within a 5,000 km radius of Frankfurt, Germany. This will apply from 2029 for four years, conditional on a review in 2032. Flights beyond the 5,000 km radius remain exempt. The exemption also still applies to routes to least developed countries and small island developing states, departures from outermost European regions and low-traffic destinations. Extending the EU ETS before CORSIA’s mandatory phase has been tested risks weakening confidence in the global framework and creating a more fragmented market.
It is crucial to remember that CORSIA was built to scale in phases:
This was a conscious design choice in which EU member states were active collaborators. The Commission's current assessment has been carried out before the mandatory phase even begins. In other words, the Commission is assessing a mechanism designed for gradual implementation before its decisive phase has begun.
The progress achieved so far is encouraging:
The logical step is to let the first official compliance cycle finish before declaring the global framework insufficient. The proposal itself recognises that CORSIA’s future development still matters to the long-term scope of the EU ETS. The text keeps the current intra-EEA scope unchanged through 2027–2028 and includes a reversal clause. If the review by 1 July 2032 finds that CORSIA has been strengthened and its participants cover more than 70% of international aviation emissions, the ETS is to be scaled back to intra-EEA flights. An extension that policymakers are prepared to unwind within four years is an extension where they could have easily waited for the evidence.
The EU has been here before. Europe's previous attempt to bring international flights into the ETS triggered threats of trade retaliation, diplomatic objections invoked under the Chicago Convention, and ultimately led to the "stop-the-clock” decision. While that friction catalysed the international agreement that led to CORSIA, at least one of the countermeasures still remains in force today. IATA has since warned that the proposed extension could undermine European competitiveness and has called for full support for CORSIA as the agreed global mechanism.
The EU proposal to amend the Directive will be subject to strong feedback and negotiation; it is likely that proposals will change materially before they can be adopted.
The cost burden of an extended ETS would fall heavily and unequally on European carriers:
Rather than sidelining a decade of collaborative, multilateral progress, European policymakers must direct their efforts towards forging CORSIA into a robust global compliance market. We must acknowledge that CORSIA's current phase needs to become more robust. However, the solution to a growing global framework is to tighten rules, improve supply criteria, and raise ambition levels through the ICAO Council, the upcoming Assembly, and post-2035 negotiations. This is an opportunity for policymakers and airlines to strengthen CORSIA as the first global market-based scheme covering an entire sector.
Strengthening CORSIA is also the fastest route to reversing the extension. As highlighted in the proposal's review clause, a stronger CORSIA would scale the ETS back to its intra-EEA scope. We see a crucial opportunity for both legislators and airlines to continue strengthening this already-functioning global scheme, as the first and only compliance mechanism of its kind.
The proposal must now navigate the European Parliament, the Council, and the trilogue negotiations, a process that historically takes months to years, but that is currently ring-fenced with the expiry of the current derogation set for 31 December 2026. With the Commission’s summer recess and the ensuing lengthy legislative process, there will likely be a lapse in legislation between December 31, 2026 and the time the amendment is passed. How the Commission will choose to enforce the extension of the derogation remains to be seen. However the use of non-enforcement guidance to member states, in a repeat of 2012, may be anticipated in contradiction to Commission's earlier statements. This would allow breathing space to airlines watching the CORSIA derogation clock closely.
For policymakers: This legislative window represents a crucial opportunity to refine and strengthen CORSIA through ICAO, directing diplomatic energy where the global framework actually gets built.
For airlines: Airlines should now assess their CORSIA compliance exposure and start procurement ahead of the Phase 1 CORSIA compliance deadline. A strong demand signal showcases an already-functioning market.
The EU spent a decade helping to build the world's first global, sector-specific carbon market. The smart play now is to let it take off.
South Pole can help airlines assess route-based exposure, model the potential interaction between EU ETS and CORSIA, and determine what changes may be needed to their compliance and procurement strategy.
