As aviation enters a new year, 2025 is already shaping up to be a transformative period for environmental and regulatory compliance. With the European Union’s Refuel Aviation Regulation and the UK Sustainable Aviation Fuel (SAF) Mandate taking effect, alongside a new administration in the United States, the global aviation sector faces evolving sustainability expectations.
Understanding the latest developments in aviation taxation, sustainable finance, emissions trading, and SAF mandates is essential for businesses navigating regulatory shifts. This article explores key updates and their potential implications for the aviation industry.
EU Taxonomy and Its Role in Aviation
The EU Taxonomy Regulation is a classification system that defines environmentally sustainable activities. Since January 2024, aviation-related activities—such as aircraft manufacturing, leasing, passenger and freight transport, and ground handling—have been included in the taxonomy.
However, the technical screening criteria determining compliance remain complex. In 2024, the EU clarified some of these criteria, particularly regarding:
- Interpretation of sustainability criteria: The European Commission responded to legal challenges, confirming the validity of aviation’s inclusion in the taxonomy.
- Global Replacement Ratio: A key metric introduced to ensure fleet expansion does not counter sustainability gains. As of November 2024, the EU Commission and EASA will publish this ratio annually.
The EU Taxonomy also interacts with the Corporate Sustainability Reporting Directive (CSRD), which mandates companies to disclose the percentage of their revenue aligned with sustainable activities. In February 2025, the EU introduced an Omnibus simplification package to streamline compliance, potentially delaying some reporting requirements.
These changes influence how aviation businesses demonstrate compliance with sustainability frameworks and access funding aligned with green finance initiatives.
Exploring a UK Green Taxonomy
The UK is considering developing its green taxonomy, with a consultation launched by the UK Treasury in November 2024. This follows a broader movement to channel finance into sustainable industries and ensure alignment with global frameworks, including the EU Taxonomy.
The outcome of this consultation will shape how aviation investments and sustainability-linked financing evolve in the UK. A clear and interoperable taxonomy for the aviation sector could unlock new transition financing mechanisms to support emissions reductions.
Transition Finance and Its Impact on Aviation
Transition finance is a critical factor in enabling aviation’s shift to lower-carbon operations. However, concerns around greenwashing have made financial institutions hesitant to invest in high-emitting industries.
The UK Transition Finance Market Review, published in October 2024, outlines best practices for financing sustainability-linked projects. Key recommendations include:
- Principles-based transition finance: A structured approach to ensure financial products align with genuine emissions reduction goals.
- New sustainability labels: The Loan Market Association (LMA) is exploring a “use of proceeds” label for financing projects with a sustainability focus.
- Reporting obligations: Large corporations may need to publish transition plans detailing their decarbonization strategies.
While aviation remains a hard-to-abate industry, improving access to sustainability-linked financing could accelerate investment in low-emission aircraft, fuel alternatives, and operational efficiencies.
UK Consultation on CORSIA Implementation
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) continues to be adopted by participating countries, including the UK, EU, and the US. Under CORSIA, airlines must offset emissions that exceed baseline levels by purchasing Eligible Emissions Units (EEUs) or using Sustainable Aviation Fuel (SAF).
The UK launched a consultation in December 2024 on implementing the second phase of CORSIA. Key discussion points include:
- Aligning UK compliance with CORSIA standards to minimize regulatory discrepancies.
- Incorporating non-CO2 emissions into future aviation emissions trading schemes.
- Defining penalties for non-compliance, with potential fines of £100 per unmet EEU obligation.
One major debate is whether the UK should fully implement CORSIA or adopt a hybrid model that integrates it with the UK Emissions Trading Scheme (UK ETS). A UK ETS-only approach would mirror the EU strategy, avoiding double compliance costs for airlines operating between Europe and the UK.
The final decision will impact airline operational costs, emissions offsetting strategies, and future regulatory alignments between the UK and international aviation standards.
Sustainable Aviation Fuel (SAF) Mandates and Compliance
SAF mandates are becoming a global regulatory tool for reducing aviation emissions. Different regions adopt varied approaches, from financial incentives to compulsory fuel blending targets.
EU SAF Regulations
The EU Refuel Aviation Regulation, effective January 2025, imposes minimum SAF blending requirements for fuel suppliers:
- 2% SAF blending from 2025-2029
- 6% SAF by 2030, with incremental increases thereafter
The regulation also includes:
- A refueling obligation: Airlines must uplift at least 90% of their fuel needs at EU airports to prevent tankering practices.
- A reporting requirement: Airlines and fuel suppliers must submit annual data on fuel purchases and blending ratios.
Additionally, the EU rejected a “book-and-claim” SAF trading system, meaning fuel must be physically supplied at EU airports rather than traded as credits.
UK SAF Mandate
The UK SAF Mandate, also effective January 2025, is even more ambitious than the EU standard, requiring:
- 2% SAF blending by 2025
- 10% SAF blending by 2030
Unlike the EU system, the UK mandate includes:
- A buy-out mechanism: Fuel suppliers unable to meet SAF targets can pay a penalty per liter instead of purchasing SAF.
- Tradeable SAF certificates: Fuel suppliers can trade SAF credits to meet compliance targets.
To support SAF adoption, the UK has also introduced a Guaranteed Strike Price scheme, which provides financial stability to SAF producers by ensuring a minimum price per liter. This scheme is expected to be implemented by the end of 2026.
While the US relies on tax incentives for SAF development, the UK and EU have taken a regulatory approach, which may influence global SAF policy trends.
Conclusion
The aviation sector is at a turning point, with new regulations and sustainability mandates reshaping how airlines operate and comply with environmental standards.
- The EU and UK SAF mandates will drive significant shifts in fuel procurement and emissions reduction strategies.
- Transition finance and green taxonomies will influence investment in sustainable aviation.
- CORSIA and emissions trading adjustments will create new compliance challenges for airlines.
As the industry navigates these changes, collaboration between airlines, regulators, and sustainability consultants will be essential. With strategic adaptation and investment in cleaner aviation solutions, airlines can stay ahead in an increasingly sustainability-driven regulatory landscape.