Future goals to address the climate impact of the aviation sector are expected to be achieved by in-sector measures (technology, operations, fuels) that are incentivised by Market-based Measures (MbMs) through pricing of carbon emissions. This chapter provides an overview of the key MbMs that have been put in place for the aviation sector, including the EU's Emissions Trading System (ETS) and ICAO's Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), as well as other sustainable finance initiatives.
Market-based measures incentivise ‘in-sector’ emissions reductions from technology, operational measures and sustainable aviation fuels, while also addressing residual emissions through ‘out-of-sector’ measures.
Emissions trading systems (e.g. ETS) have a greenhouse gas emissions cap covering various economic sectors, while offsetting schemes (e.g. CORSIA) compensate for emissions via reductions in other sectors but without an associated cap.
During 2013 to 2023, the EU ETS led to a net CO2 emissions reduction in aviation of 206 Mt through funding of emissions reductions in other sectors, of which 47 Mt was in 2021-2023.
EU ETS allowance prices have increased in the recent years, reaching an average annual price of more than €80 per tonne of CO2 in 2022 and 2023.
Revisions were agreed to the EU ETS in 2023, including a gradual phase-out of free allowances to airlines and a reduction to the aviation emissions cap from 2024 onwards.
Monitoring, reporting and verification of CO2 emissions under CORSIA began in 2019. As of 2025, 129 out of 193 ICAO States have volunteered to participate in the CORSIA offsetting scheme.
Offsetting under the CORSIA scheme is expected to start for the year 2024 based on data to be reported in 2025. A total of 19 Mt of CO2 emissions are forecast to be offset for flights departing from Europe during CORSIA’s first phase in 2024-2026.
The first emissions units have now been authorized for use in CORSIA, complying with the UNFCCC rules on avoidance of double-counting of emissions reductions.
Technology to capture carbon from the air and store it underground is being developed to support the broader decarbonisation efforts of the aviation sector.
The EU Taxonomy System sustainable finance initiative has been amended to include aviation activities.
No agreement has been reached on proposals to revise the Energy Taxation Directive to introduce minimum rates of taxation on fuel for intra-EU passenger flights.
