Major European airlines could face an increase in costs exceeding €1.5 billion each if the European Union expands its emissions trading system (ETS) to include flights departing from the bloc, according to recent analyses of proposed carbon pricing reforms. The EU is currently revising the ETS, a key mechanism aimed at reducing greenhouse gas emissions, with discussions underway about extending its coverage beyond intra-EU flights to all outbound flights.

Transition Metrics, a consultancy specializing in carbon pricing, projects that the extension would particularly impact flagship carriers such as Lufthansa, British Airways parent company IAG Group, and Air France-KLM. The consultancy estimates additional costs of €1.8 billion for Lufthansa, €1.7 billion for IAG Group, and €1.5 billion for Air France-KLM in 2025. If these costs were passed on to passengers, it could translate into a ticket price increase of approximately €100 on a route like Frankfurt to Beijing. These new expenses represent a significant portion of the airlines' earnings — about 44% for Lufthansa, 23% for IAG Group, and 30% for Air France-KLM.

The figures are based on current carbon emissions and a projected ETS carbon price of €120 per tonne, which is notably higher than the forward price of €78.06 per tonne for 2027. Analysts suggest that while this price level is aggressive, it is plausible if the ETS is fully extended to cover all departing flights from the EU.

At present, the ETS applies only to flights within the EU, which has placed greater financial pressure on low-cost, intra-European carriers like Ryanair, EasyJet, and Wizz Air compared to long-haul operators. The proposed expansion follows difficulties with international efforts to regulate aviation emissions through the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia). Corsia relies on voluntary participation by governments and their airlines, but has not secured formal backing from some of the largest emitters, including the United States, India, and China. EU officials are reviewing Corsia’s effectiveness before deciding on extending the ETS, with some officials indicating that Corsia has not met expectations as the "gold standard" for aviation emissions reduction.

The potential ETS extension has sparked differing responses among airlines and industry representatives. Air France-KLM has publicly opposed extending the ETS to departing flights, expressing concerns that it would undermine competitiveness against non-EU carriers. Meanwhile, the trade association Airlines for Europe has urged the EU to focus on strengthening Corsia instead of expanding the ETS.

Both Lufthansa and IAG Group declined to comment on the proposed changes ahead of regulatory decisions. Meanwhile, industry stakeholders continue to monitor the situation closely, noting that airlines currently face uncertainty regarding how to manage compliance obligations for emissions allowances starting in 2027, a challenge compounded by early ticket sales for that period already underway.

As the European Commission deliberates on the next steps, the outcome will have significant financial and operational consequences for major European airlines, as well as broader implications for international aviation emissions policy.