ICAO Pushes Back Against the Proposed Expansion of the EU ETS
Airlines now face greater uncertainty over the future treatment of international aviation emissions
ICAO has raised concerns about the European Commission’s proposal to expand the EU Emissions Trading System to more international flights from 2029.
In its statement, ICAO warned that extending the EU ETS beyond its current scope could weaken CORSIA, create overlapping carbon obligations and lead to a more fragmented approach to international aviation emissions.
The statement came shortly after the European Commission proposed bringing additional flights departing from European Economic Area airports into the EU ETS.
The proposal is not yet final. It must still be considered by the European Parliament and the Council.
For airlines, the debate creates a new layer of uncertainty around future carbon costs, reporting requirements and the relationship between EU ETS and CORSIA.
Why ICAO is concerned
ICAO developed CORSIA as the global market-based measure for international aviation emissions.
Under CORSIA, eligible airlines monitor and report emissions from international flights. Where an offsetting obligation applies, operators must cancel eligible emissions units.
ICAO’s concern is that expanding a regional scheme such as the EU ETS could reduce the consistency that CORSIA was designed to provide.
Its statement focuses on three main issues.
Risk of overlapping carbon costs
Some flights could become subject to both EU ETS and CORSIA requirements.
The European Commission is expected to include a mechanism to recognise certain CORSIA-related costs. However, the final treatment has not yet been agreed.
Airlines may therefore need to manage two separate systems for the same route, even where some financial adjustment is ultimately provided.
A more fragmented compliance environment
CORSIA was intended to provide one common framework for international aviation.
ICAO is concerned that a wider EU ETS could encourage other regions to introduce their own carbon measures. This would increase complexity for airlines operating across several jurisdictions.
Impact on confidence in CORSIA
ICAO believes that broad participation and consistent implementation are central to the effectiveness of CORSIA.
It has warned that additional regional measures could reduce confidence in the global scheme and create different carbon costs for airlines competing on similar routes.
Why the EU wants to expand the system
The European Commission takes a different position.
The EU originally intended its aviation emissions trading system to cover flights arriving at and departing from EEA airports. The scope was later reduced while ICAO developed and introduced CORSIA.
The Commission was required to review whether CORSIA provided sufficient environmental coverage and ambition.
Following that review, it has proposed extending the EU ETS to additional international departures from EEA airports.
The EU argues that aviation needs to make a greater contribution to its climate targets. It also believes that the existing scope does not adequately cover emissions from flights between Europe and nearby international destinations.
Another concern is competition.
European airlines may face EU ETS costs on certain services while competing airlines can carry passengers through nearby non-EEA hubs without facing the same carbon price.
EU ETS and CORSIA work differently
Although both schemes create obligations for airlines, they are not equivalent.
Under the EU ETS, an aircraft operator must surrender an allowance for each tonne of CO₂ covered by the scheme. The financial cost is linked to the market price of EU allowances.
CORSIA is an offsetting system. An airline’s obligation is based on its calculated share of emissions growth above the relevant baseline.
This difference is important.
A flight covered by the EU ETS may create a cost linked to a much larger share of its emissions than the amount subject to offsetting under CORSIA.
Airlines should therefore not assume that their existing CORSIA budget provides a reliable indication of future EU ETS costs.
What happens next
The Commission’s proposal will now move through the EU legislative process.
The European Parliament and the Council could change the geographical scope, exemptions, implementation date or the treatment of CORSIA costs.
ICAO and its Member States are also likely to continue engaging with the EU during the negotiations.
The final rules may therefore look different from the initial proposal.
However, airlines should not wait for the legislative process to end before reviewing their exposure.
The possibility of additional international flights entering the EU ETS from 2029 is now a material financial and compliance risk.
What this could mean for airlines
The greatest challenge is the lack of certainty.
Airlines may need to prepare for a system in which some international routes are subject to both EU ETS and CORSIA-related requirements.
This could affect:
- Carbon budgets
- Route profitability
- Passenger and cargo pricing
- EU allowance procurement
- CORSIA unit purchasing
- Monitoring plans
- Verification arrangements
- SAF claims
- Internal data controls
Non-European airlines operating regular departures from EEA airports may be particularly affected.
For some operators, the proposal could significantly increase the number of flights covered by the EU ETS and create a much larger annual allowance requirement.
Will airlines pay twice
ICAO has highlighted the risk of double charging. The final outcome is likely to be more complex.
Airlines may not be required to pay the full EU ETS cost and the full CORSIA cost for the same emissions. The EU proposal is expected to account for eligible CORSIA compliance costs.
Even so, operators may still face:
- Separate calculations under each scheme
- Different reporting rules
- Additional verification requirements
- Timing differences between obligations
- More evidence and record keeping
- Cash flow pressure from allowance purchases
- A remaining cost difference between CORSIA units and EU allowances
The administrative burden may increase even where direct financial duplication is reduced.
Airlines should assess their exposure now
Airlines already have enough information to begin a preliminary assessment.
The first step is to identify international flights departing from EEA airports that may fall within the proposed expanded scope.
Operators should then calculate the historical emissions from those routes and apply a range of EU allowance prices to estimate the possible cost.
The assessment should also consider whether the same flights fall under CORSIA and how any adjustment for CORSIA costs could affect the final EU ETS liability.
Airlines should also review whether their current monitoring plans, fuel records and reporting systems can support the additional routes.
This is particularly important for operators with wet-lease flights, incomplete fuel records or data received from third parties.
VURDHAAN’s view
The disagreement between ICAO and the European Union is likely to continue as the proposal moves through the legislative process.
ICAO wants to protect a common global framework for international aviation. The EU wants a stronger carbon price and wider coverage of aviation emissions.
Airlines do not need to predict the final political outcome.
They need to understand their exposure under the most realistic scenarios.
VURDHAAN can support airlines with an exposure and cost assessment covering:
- Route-level scope analysis
- Historical emissions calculations
- EU allowance cost scenarios
- CORSIA applicability and estimated offsetting costs
- Potential overlap between the two schemes
- Available exemptions
- Monitoring and reporting readiness
An early assessment can help airlines estimate the potential financial impact, identify gaps in their data and include the risk in budgeting, pricing and network planning.
Airlines operating international departures from EEA airports should begin assessing their exposure now. VURDHAAN can help identify the routes that may be affected and estimate the potential EU ETS and CORSIA costs under different regulatory outcomes.
This article reflects ICAO’s statement and the European Commission proposal published in July 2026. The proposal remains subject to negotiation and its final scope, timing and treatment of CORSIA-related costs may change.