IATA Urges EU to redirect carbon tax revenues to boost SAF market

March 19, 2026 in Science and Technology, Transport, Travel & Tourism by Editor

IATA is pushing the EU to redirect aviation carbon revenues into sustainable aviation fuel development, warning that current policies risk undermining competitiveness and slowing decarbonisation.

 

International airlines lobby IATA, has called on European policymakers to redirect aviation sector contributions under the European Union Emissions Trading System (EU ETS) towards accelerating the development of a competitive and scalable sustainable aviation fuel (SAF) market.

The appeal comes as the aviation industry faces rising compliance costs under the EU’s carbon pricing regime, with IATA arguing that a greater share of revenues generated from airlines should be reinvested into decarbonisation efforts—particularly SAF production.

According to the industry body, rechanneling these funds could help close a significant financing gap and support the emergence of a price-competitive, open and mature SAF market across Europe. Current estimates suggest that meeting the EU’s SAF demand could require between €57 billion and €67 billion by 2035, rising to as much as €376 billion by 2050.

The aviation sector is expected to surrender nearly 330 million carbon allowances between 2026 and 2030, generating billions of euros for EU member states. However, IATA notes that only a small fraction of these revenues is currently being reinvested into aviation’s green transition, with existing support mechanisms such as the SAF allowance scheme covering just 4–5 percent of industry needs over the same period.

IATA’s call comes amid growing scepticism among European policymakers over the effectiveness of the EU ETS and its impact on competitiveness. The concerns echo findings in the Draghi Report, which identifies high costs, regulatory complexity and underinvestment as key constraints on Europe’s economic resilience. In a period marked by geopolitical volatility and supply chain disruptions, IATA argues that maintaining strong air connectivity is critical to the region’s global standing.

IATA Director General Willie Walsh argues that a review of the EU ETS presents an opportunity to realign climate policy with practical decarbonisation outcomes.

“European aviation policy must bolster competitiveness as it advances decarbonization. Reviewing the EU ETS offers a critical opportunity to refocus efforts on cost-effective emission reductions. The priority must be the full implementation of CORSIA, the reinvestment of EU ETS revenues into SAF and other credible decarbonization solutions, and the elimination of overlapping measures that add cost and complexity without environmental gain. By doing so, we will protect European air connectivity—a vital strategic asset foundational to EU integration, trade, and commerce. Amid global economic strain and geopolitical volatility, the EU ETS review must deliver a harmonized climate policy framework that balances the sector’s competitiveness with its climate ambitions,” he said.

Beyond funding, the lobby is also advocating for structural reforms to support SAF adoption. A key proposal is the introduction of a “book-and-claim” system, which would allow airlines to purchase SAF credits regardless of where the fuel is physically supplied. This approach is seen as critical for building a liquid and transparent SAF market, particularly in regions without direct access to supply hubs.

At the same time, IATA is warning against policy fragmentation. It is urging the EU to fully align with the International Civil Aviation Organization’s global carbon framework, known as Carbon Offsetting and Reduction Scheme for International Aviation, rather than layering additional regional measures that could increase costs without delivering proportional environmental benefits.

IATA argues that without a more balanced approach, rising carbon costs could weaken air connectivity, limit consumer choice and divert capital away from long-term green investments. It is also calling for a reconsideration of the phase-out of free emissions allowances for airlines, warning that a sharp increase in cost exposure could undermine both operational resilience and decarbonisation efforts.

The debate comes at a critical juncture for the aviation sector, as it seeks to scale up sustainable fuel production while maintaining global competitiveness. For IATA, the solution lies not in increasing the financial burden on airlines, but in ensuring that existing carbon revenues are strategically reinvested to accelerate the industry’s transition to net-zero emissions.