Turbulence Ahead: Effective and Efficient Climate Policy in Aviation

Decarbonising aviation is a major challenge. It requires not only determined political measures but also strong incentives for the use of sustainable aviation fuels (SAFs). At present, both market-based and regulatory instruments are used to drive decarbonisation – for example the European Emissions Trading System (EU ETS), the EU-wide SAF blending quota and the international compensation system CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation). A new ZEW study shows: The cost effectiveness of climate policy instruments is determined by the structure of a market and the degree of competition. Under conditions of perfect competition, CO2 taxes are a cost-effective way to reduce emissions. However, if air carriers have market power, SAF quotas are more advantageous as they stabilise demand while promoting the use of sustainable fuels. The EU’s climate policy measures in the aviation sector are useful in reducing emissions, but their global impact is limited. The sharp rise in passenger numbers is driving up the cost of achieving net-zero emissions growth significantly. This underlines the fact that international measures and regulatory incentives for the use of SAFs are indispensable. If the off-setting certificates used under CORSIA fail to achieve genuine emission savings, there is a risk that the industry will continue to rely on fossil aviation fuels, and the decarbonisation of aviation will be delayed.

Rausch, Sebastian, Anna Straubinger and Mirko Hornung (2026), Turbulence Ahead: Effective and Efficient Climate Policy in Aviation, ZEW policy brief No. 26-02, Mannheim