The price of fit for 55
The EU Commissions’ Fit for 55 legislative package includes a number of proposed measures that aim to make the aviation sector more sustainable and reduce aviation emissions. By modelling these measures within the NetCost model, we can evaluate the accompanying cost increase.
Based on the model estimations, we find that the annual cost of the Fit for 55 proposal increases from €12.8 billion in 2030 to €21.8 billion in 2035 and €34.4 billion in 2050. The main cost component in 2030 is EU-ETS, whilst in 2035 and 2050 and also for the total period, it is (by far) the ReFuelEU Aviaton initiative. For the 2023-2050 timespan, €305 billion out of the complete €577 billion Fit for 55 cost assessment are due to ReFuelEU SAF blending mandate. CORSIA takes up only a minor part of the total costs with only €35.8 billion for the total period – though, its annual cost in 2050 is higher than that of EU-ETS and the ETD. Allowances for the EU-ETS are the main cost component in 2030 with €6.4 billion out of the total €12.8 billion cost increase for that year. The ETD plays a somewhat constant role over time with costs increasing from €4 billion in 2030 to €5.1 billion in 2035 and subsequently decreasing to €3.3 billion in 2050. The first increase is due to increasing taxation rate during the transition period ending in 2033, whilst the subsequent decrease is due to the increased uptake of SAF (and therefore lower kerosene tax costs). The costs associated with ReFuelEU increase from €2.4 billion in 2030 to €9.0 billion in 2035 and €25.4 billion in 2050. The drop in costs per ton of SAF, as shown in Table 1, are eclipsed by the increased mandate and thus the increased uptake of these fuels. EU-ETS cost are expected to decrease from 2035 to 2050, largely due to the increased use of SAF, for which no ETS allowances have to be surrendered.
To forecast the changes in costs, we use the highly detailed market model called the NetCost passenger choice model. This model was also used in the study ‘Destination 2050: A Route To Net Zero European Aviation’ by NLR and SEO. In this way, we are able to generate the expected fares for a set of typical routes, including a break-down highlighting the contribution of each Fit for 55 measure on annual costs.
Do you have any questions about this publication?
Feel free to contact Stef Konijn via e-mail or phone. He will respond to your questions as soon as possible.