Aviation continues to enjoy massive tax privileges, dodging around €20 billion in taxation every year through exemptions on kerosene and no VAT on tickets. These loopholes are fundamentally incompatible with the EU’s climate objectives and the polluter-pays principle, which require proper taxation and carbon pricing. The exemptions underscore the need to extend the EU ETS to long-haul flights.

Still, airlines continue to lobby against full carbon pricing, claiming it would significantly increase ticket prices and reduce demand. To assess these claims, Carbon Market Watch commissioned consultancy CE Delft to evaluate the impacts of extending the EU ETS to all departing flights from the EEA.

The results of the study are clear: Extending the ETS to all departing flights would have only a marginal effect on ticket prices and demand. This is especially apparent when compared to the geopolitical premiums on fossil fuel prices. For example, for an economy class, Frankfurt-Singapore return ticket, the price increase would only be 0.9%, with a corresponding demand reduction of only about -0.95%. The geopolitical premium on fossil fuel prices embedded in the ticket would be 5.6 times higher than ETS costs.

This policy briefing presents the study’s key findings and outlines recommendations for fairer, more effective carbon pricing in Europe. The study includes real-world case studies that show just how small the impact of extending the EU ETS to all departing flights from the EEA would actually be.