A coalition of 27 clean aviation companies and electro-fuel (e-fuel) producers is urging the European Commission to use its 2026 review of the European Union Emissions Trading System (EU ETS) to end the scheme’s exemption for international flights.

The Commission must assess by July 1 whether to propose extending carbon pricing to flights to and from Europe, with the current exemption already due to lapse at the start of 2027.

The group projects that expanding the carbon pricing mechanism to international operations, which generate 70% of EU aviation emissions, would generate up to €79 billion in revenues by 2035 and wants a portion of any revenue earmarked to finance sustainable aviation infrastructure, domestic e-fuel production and regional electric propulsion technologies.

The coalition says the European airline sector has received more than €8 billion in free EU ETS allowances and pays no fuel duty or VAT on jet fuel. It points to analysis estimating that the exemption of international flights cost the EU around €26 billion in foregone ETS revenue between 2012 and 2023, money it argues could have funded the sector’s transition.

Sustainable aerospace firms argue that continuing these implicit subsidies distorts the market, disadvantaging next-generation operators and propulsion developers competing against established legacy networks.

“Pricing emissions fairly – and giving investors the regulatory certainty they need – is what creates a real commercial business case, and it is the businesscase that drives long-term investment,” said Felix Leworthy, chief commercial officer at ETFuels

He added that a level playing field “reduces Europe’s dependence on fossil fuel imports, builds a competitive industry and positions Europe to lead in the clean energy economy.”

The proposed revisions coincide with efforts by European aerospace startups to commercialise battery-powered, electric and hybrid regional airframes by the 2030s. Substantive capital injection is seen as critical for scaling the supply chain, particularly for direct air capture (DAC) systems required for e-kerosene synthesis.

Philip Duggan, chief executive at Nordic Generation Fuels, warned that while initial EU support exists, the Commission must establish rigorous carbon pricing within the upcoming EU ETS revision to anchor the sector’s green industrial strategy. Duggan argued that the update “provides the perfect opportunity for the Commission to show its commitment to clean industry in earnest.”

David Mulrooney, business development manager at NEG8 Carbon, said that the structural reform of the EU ETS functions as the primary financial architecture determining whether the regional e-fuel ecosystem achieves commercial scale.

Legacy carriers and groups like the International Air Transport Association (IATA) view the matter differently. They point out that international aviation already has a global climate tool: ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). This scheme requires airlines to offset emissions growth and expands significantly in 2027. Airlines argue that layering a European tax on top of a global system creates double regulation, administrative mess, and extra costs without helping the environment.

The dispute ultimately rests on whether the UN system is strong enough. Critics argue it only offsets emissions above a baseline, relies on weak carbon credits, and lacks enforcement. Defenders counter that it is the only globally agreed tool for an international industry.

The upcoming July assessment will not end the exemption immediately, as any legislative changes require time. However, it will reveal where Brussels stands. The decision will shape the financial reality of European aviation and the direction of its climate policy for the next decade.