The ETS Funding Engine: Scaling Europe’s Strategic E-fuel Marketplace for Delivery & Aviation

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Making the ETS a strategic funding device for aviation and transport

Abstract

The EU Emissions Buying and selling System (ETS) overview proposal revealed in July 2026 is meant to make the EU’s most important local weather coverage mechanism match for its 2040 local weather targets. It additionally carries the ambition to show the ETS into an ‘’engine for innovation and funding”.

This coverage transient seems on the funding dimension of the ETS proposal with respect to the aviation and maritime sectors. They’re main contributors to the ETS income era. We argue, nevertheless, that the proposed framework is just not match for function to adequately assist clear gas investments in these hard-to-abate sectors.

The ETS Overview is a chance to arrange a tailored funding device to de-risk and increase the manufacturing and uptake of e-fuels, utilizing the ETS funds from aviation and transport. Early monetary assist is essential for the event of a home e-fuels worth chain, Europe’s geostrategic autonomy and the EU’s industrial place within the international competitors for clear applied sciences. RFNBOs are probably the most scalable fuels wanted to achieve the targets underneath FuelEU Maritime and ReFuelEU Aviation.

Key suggestions:

1. Use nationwide ETS revenues: earmark 50% of nationwide ETS revenues for decarbonisation assist in precedence sectors, together with for the manufacturing and uptake of aviation and maritime e-fuels, and guarantee compliance by way of stricter reporting guidelines.
2. EU-level ETS funds: embrace aviation and maritime sectors within the scope of the ETS Funding Booster, Industrial Decarbonisation Financial institution (IDB) and Modernisation Fund to allow e-fuels assist and guarantee fairness throughout hard-to-abate sectors.
3. Create an e-fuels funding pool: channel ETS revenues and different funding sources to finance a market middleman for e-fuels by 2028.
4. Implement market-making schemes like double-sided auctions (DSAs): these devices are wanted to unlock pending last funding choices and scale the rising European e-fuels market by de-risking and connecting provide.
5. Enhance SAF and SMAP allowance design: whereas these market-based schemes can’t substitute the structural market-making and de-risking perform of DSAs, their design ought to be improved to assist maximise offtake assist for e-fuels.

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