The European Union has long positioned itself as a global climate leader, promoting policies to cut emissions and enhance sustainability. One of its latest initiatives, the ReFuelEU Aviation regulation, mandates that at least 2% of fuel at EU airports be sustainable aviation fuel (SAF) starting in 2025, rising to 70% by 2050. The law also bans fuel tankering, a common cost-saving practice whereby airlines carry extra fuel to avoid higher prices at destination airports.
While this may seem like a victory for the environment, the reality is quite different. The legislation will be a game-changer for the EU aviation sector. It risks driving up consumer costs and weakening Europe’s aviation competitiveness. This is yet another example of the EU prioritizing regulatory ambition over economic and practical considerations.
Why the EU Should Rethink the ReFuelEU Aviation Regulation
The EU’s RefuelEU Aviation Regulation is a misguided attempt at greening the aviation sector. It is fraught with economic and logistical challenges that risk undermining the EU aviation sector without achieving meaningful environmental benefits.
Sustainable Aviation Fuels (SAFs), made from renewable sources like biomass and synthetic fuels, are approximately 250% more expensive than conventional jet fuel, which is far from negligible, since fuel already accounts for 25% to 30% of an airline’s total costs. Airlines will be forced to either hike ticket prices, cut routes, or absorb losses. To fund this goal, the EU plans to subsidize SAF production through green bonds, taxes, and revenues from the Emissions Trading Scheme (ETS), shifting the financial burden onto taxpayers and distorting the market. Meanwhile, airlines that fail to meet SAF targets face hefty fines, further increasing their financial strain.
The regulation also bans tankering—loading cheaper fuel at certain airports to avoid higher costs elsewhere—because the extra weight increases emissions. Yet, it treats fuel weight differently from passenger or cargo weight, even though all three increase fuel consumption. Worse, banning tankering will hurt regional airports with limited fuel suppliers, where fuel prices can be up to 55% higher than at major hubs. With around 21% of flights relying on tankering to manage costs, airlines may respond by cutting routes to smaller airports, reducing regional connectivity and competition.
Meanwhile, non-EU airlines are getting a free pass. Gulf and U.S. carriers connecting through non-EU hubs are exempt from the SAF rules on many routes, giving them a cost advantage over EU airlines. This is not the first time EU regulations have handed relative advantage to non-EU carriers. The Emissions Trading Scheme (ETS) already costs 25 times more than the international CORSIA scheme, and the Air Passenger Duty penalizes direct long-haul flights more than those with layovers—effectively encouraging passengers to connect through non-EU hubs. RefuelEU adds to these burdens, threatening EU airlines’ market share and undermining industry competitiveness.
Beyond the financial strain, airlines will face a new wave of administrative costs. From 2025, they must ensure that 90% of their yearly aviation fuel is uplifted at EU airports to comply with tankering restrictions. Failure to meet SAF blending and uplifting obligations will result in penalties at twice the average yearly price of conventional jet fuel.
Furthermore, the SAF blending targets are wildly unrealistic: 2% by 2025, 6% by 2030, and 70% by 2050—despite SAFs currently making up just 0.1% of aviation fuel use. Meeting these targets requires a massive production expansion. EU’s current production capacity is just 0.24 million tonnes—barely 10% of the 2030 target. A 2023 briefing paper estimates that reaching the 2050 goal would require $1.45 trillion in capital investment and up to 250 new SAF plants—a colossal demand with no clear roadmap for delivery. Worse still, producing Power-to-Liquid fuels, a key type of SAF, could require up to 5.5% of the EU’s total renewable electricity by 2050—a staggering figure in a region already struggling with energy constraints.
The airline industry is already sounding the alarm. Lufthansa CEO Carsten Spohr has warned that there is a 99% chance that the SAF mandate will not be met. Despite this, European officials insist that the target remains achievable. Tensions between airlines and fuel companies are already high—airlines argue that SAF production is insufficient, while fuel companies claim that demand is too low to justify scaling up production. Failure to meet the targets could lead to heavy penalties, and the EU’s environmental labeling scheme may further harm airlines’ market share by influencing consumer behavior.
Ironically, the narrow focus on SAFs could have unintended environmental consequences. SAF production, heavily reliant on biofuels, carries environmental trade-offs such as changes in land use, deforestation, water consumption, and competition with food crops, potentially undermining the EU’s broader environmental goals while achieving only marginal reductions in aviation emissions.
Conclusion
In sum, the EU aviation sector plays a crucial role in trade, tourism, and economic integration. Yet, it is at risk of losing its competitive edge to global rivals and will suffer significantly. Rising costs will likely be passed on to passengers, making air travel less affordable, especially for lower-income travelers. Smaller carriers and low-cost airlines with slimmer profit margins will struggle to absorb these costs, potentially leading to service cuts and job losses.
Rather than imposing costly mandates, the EU should embrace a market-driven approach that fosters innovation and competition. History shows that market incentives—not heavy-handed regulation—drive technological progress. A cleaner aviation future is possible only if Brussels lets the market lead, without forcing consumers or the EU aviation industry to bear the cost.
Photo by Arno Senoner
