How are Environmental Regulations Reshaping European Aviation Fuel Costs

Implied Fuel Cost Scenario Analysis

Europe sets an advanced agenda for environmental regulations, particularly through the implementation of EU Emissions Trading Scheme (EU ETS) and mandatory Sustainable Aviation Fuel (SAF) blends via Refuel EU aviation. These regulations directly impact airlines’ operational costs, as these compliance mechanisms – whether in the form of emissions allowances, carbon offsets, or SAF – influence fuel costs.

Figure 2 above demonstrates the average cost of consuming one Metric Tonne (Mt) of jet fuel in Europe, in the years 2024, 2025 and 2030 due to environmental compliance:

2024

• The only compliance was EU ETS and UK ETS.
• Very few SAF offtake agreements, but no mandatory blends.
• CORSIA was voluntary.
• Fuel cost was €804.8 /Mt.

2025

• The EU ETS will halve free allowances, while the UK ETS will see a slight reduction.
• SAF blending becomes mandatory at UK and EU airports, driving up fuel uplift costs. Limited SAF production in Europe will keep prices high despite available EU SAF allowances.
• Although CORSIA is still voluntary, 129 states have participated in the scheme.
• Fuel costs are expected to be €862.2 /Mt, a 2% increase compared to 2024.

2030

• Zero free allowances for EU ETS and UK ETS, tightening supply and pushing the price of allowances higher.
• SAF mandates will rise to 10% in the UK and 6% in the EU, incorporating Alcohol to Jet (AtJ) and Power to Liquid (PtL) fuels.
• CORSIA becomes mandatory, with higher costs due to increased demand for offsets and pricier accredited options.
• Fuel costs are expected to be €1036.9/Mt, a 6% increase compared to 2024.

The Cost of Sustainability

As the aviation industry navigates an evolving regulatory landscape, the financial implications of sustainability are becoming increasingly evident.

For routes with high price sensitivity, rising fuel and compliance costs - projected to increase by as much as 39% by 2030 - may influence demand. For many carriers, the challenge of managing these escalating expenses could strain profitability. Despite this, proactive environmental measures, such as securing SAF offtake agreements, remain limited among airlines, with only a handful of operators demonstrating readiness to adapt.

Europe stands as a forerunner in sustainable aviation policies. However, with competitive gaps expected to widen and fuel costs projected to rise significantly by 2030, it will become increasingly clear that the industry's progress will be limited by its slowest adopters. This underscores the urgent need to harmonise policies and incentives to ensure a unified approach to sustainable aviation globally.

For detailed operator fuel cost forecasts, connect with our team or access our full analysis.

IBA’s sustainability expertise and extensive sustainable aviation data, powered by IBA NetZero, equips the industry with the critical insights required to navigate these challenges. The powerful combination empowers aviation stakeholders to identify opportunities, benchmark progress, and implement effective strategies for long-term sustainability.

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Author

Archie Brown – ESG Analyst

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