By Kate Abnett
BRUSSELS (Reuters) -The European Union reached a deal in the early hours of Wednesday on a law to increase the price that airlines have to pay when they emit planet-heating carbon dioxide emissions, adding pressure to the sector to shift away from fossil fuels.
Airlines running flights within Europe currently have to submit permits from the EU's carbon market to cover their carbon dioxide emissions, but the EU gives them most of those permits for free.
That is set to change under the law agreed by negotiators from EU countries and the European Parliament, which would phase out those free permits by 2026. Free permits would be cut by 25% in 2024 and 50% in 2025.
That will mean airlines will have to pay for their CO2 permits, providing a financial incentive for them to pollute less.
A smaller amount of free CO2 permits - 20 million - will be made available from 2024-2030 to airlines that use sustainable aviation fuels (SAF) to partly compensate them for the price difference between SAFs and far cheaper fossil fuel kerosene.
"We stand with the sector through the process of the green transition," EU parliament's lead negotiator Suncana Glavak said.
Industry group Airlines for Europe said it was "extremely disappointed" with the plan to phase out free permits by 2026.
"This is well before truly effective decarbonisation solutions will be available at the scale needed for them to be effective," the group said in a statement.
The EU has so far limited its carbon market to covering emissions from flights within the EU, but negotiators agreed to assess in 2026 whether the U.N. aviation agency ICAO's scheme to offset international flights' CO2 emissions is on track to deliver net zero emissions by 2050 - and if it is not, the EU will propose extending its carbon market to cover emissions from all departing flights.
Climate campaigners lamented that international flights would not be added to the carbon market sooner.
"Average European families will continue to pay much more for their CO2 emissions than frequent long-haul flyers," said Jo Dardenne, aviation director at non-profit group Transport and Environment.
Airlines will also have to start reporting other pollutants including nitrogen oxides and soot particles from 2025, with the EU planning in 2028 to propose adding those emissions to the carbon market.
EU countries and the bloc's parliament will now formally approve the law before it takes effect.