KEY TAKEAWAYS
From 1 January 2029 the EU ETS extends to EEA departures on routes up to 5,000 km from Frankfurt. Two questions sort every leg in your network; a seven-step checklist prices it. Worked through on Lisbon to Dubai: one daily rotation costs about USD 4.60 million per year, the CORSIA deduction refunds USD 113,924, and the deduction only exists if you cancel your units on time. The airlines running this calculation now are contracting credits below the reference price. That spread is the cheapest money in your compliance budget.
Your CFO will ask two questions about 2029: what does it cost, and what can we do about it. Both have precise answers in the proposal text. Here they are, with a real route calculated to the dollar.
Two questions sort every leg
Does the flight depart the EEA, and is the destination inside 5,000 km great-circle distance from the aerodrome of Frankfurt (Art. 28a(1)(e))? That decides the treatment of any leg from 2029.
Frankfurt is the fixed reference point for every operator; your departure airport is irrelevant to the scope test. Dubai: 4,844 km, inside the band, so every EEA departure to Dubai carries the ETS layer, whether it leaves Lisbon, Helsinki or Athens. Bangkok: 8,999 km, outside, CORSIA only. But note the two-distance logic: the band test runs from Frankfurt, emissions follow the actual flight, gate to gate.
The four route types and every exemption
Intra-EEA: EU ETS, unchanged since 2012. EEA departures up to 5,000 km: ETS plus CORSIA from 2029, costs deducted. Departures beyond 5,000 km and all arrivals: CORSIA alone until at least the 2032 review.
The shields, each with a condition worth reading twice: destination airports receiving less than 15,000 t of annual EEA-inbound CO2 are exempt (Art. 28a(1)(e)). LDCs and SIDS are exempt unless GDP per capita reaches the EU average (Art. 28a(1)(c)). Outermost-region departures are exempt 2029 to 2032 (Art. 28a(1)(a)). Operators below 10,000 t between two states are exempt from the extension, but the proposal lowers the general de-minimis thresholds, deletes the 243-flights criterion and defines business flights in a new Art. 3(ao): business aviation faces the ETS on extra-EEA flights from 2027, and beyond 5,000 km from 2029. Below 25,000 t total emissions you may verify via the Eurocontrol Small Emitters Tool (Art. 28a(4)).
The deduction, straight from the legal text
You surrender allowances “reduced … to deduct costs incurred from CORSIA offsetting, and thereby avoid double charging” (Art. 12(3)(b)). The reduction equals your offsetting requirement, in proportion to route coverage, multiplied by the ratio between the average allowance price and the average eligible credit price (Art. 12(3-f)), using indices from the Commission’s Carbon Market Report.
What that means for you, in three sentences. The deduction refunds costs, not tonnes: every covered tonne still needs a full-price allowance. It is valued at the published reference price, never your purchase price, so every dollar you contract below the reference is pure margin. And it is scaled by route coverage: CORSIA covers both directions of the state pair, the ETS only the departing leg, roughly 50 percent for a symmetric rotation.
Lisbon to Dubai: the full-year calculation
Result up front: 15,064 eligible units (USD 227,768 at the USD 15.12 reference price), 48,910 gross allowances, 1,241 deducted, 47,669 net, total annual position USD 4,603,782 instead of USD 4,717,706 without the deduction.
Assumptions (illustrative): average EUA USD 91.80, reference credit price USD 15.12, ICAO Sector Growth Factor 15.4 percent (the latest published value; no 2029 value exists yet). The seven steps:
- EEA departure to non-EEA destination? Lisbon yes, Dubai outside. Only departures carry the ETS layer. YES.
- Within 5,000 km of Frankfurt? Dubai: 4,844 km. YES.
- Actual flight distance? 6,138 km, and emissions follow the actual flight even beyond 5,000 km.
- Flights per year? 365 + 365, about 134 t CO2 per leg: 48,910 t outbound, 97,820 t across the pair.
- Destination a CORSIA state? The UAE is in CP1: offsetting accrues both directions. YES.
- Route coverage? 48,910 ÷ 97,820 ≈ 50 percent.
- Calculate: CORSIA book: 97,820 × 15.4 percent = 15,064 units; at USD 15.12: USD 227,768. ETS book: 48,910 gross; deduction 15,064 × 50 percent × 15.12 ÷ 91.80 = 1,241 allowances (USD 113,924); net surrender 47,669 EUAs. Total: USD 4,603,782 per year with the deduction, USD 4,717,706 without.
The lever buried in step 7: the deduction is valued at USD 15.12 no matter what you paid. Contract the same 15,064 units at a fixed USD 8.00 offtake and your credit bill drops to USD 120,512 while the deduction stays at 1,241 allowances. That spread, USD 107,000 per year on one route, is what early movers are locking in right now. It shrinks as the reference price rises toward the December 2027 scenarios of USD 15 to 53.
The clawback: cancel on time or pay twice
The deduction exists only if your units are cancelled by the Art. 12(9) deadlines: 31 January 2028, 2031, 2034, 2037. Miss one and the deducted allowances must be surrendered retroactively, by 30 September of the following year (Art. 12(3-f)).
Delivery reliability is now a quantifiable ETS cost. A counterparty that delivers late does not just embarrass you; it converts your discount into an allowance debt. Contract for guaranteed delivery and cancellation, not just for volume.
Your playbook to 2029
Through 2028: two clean books, EUAs intra-EEA and eligible credits extra-EEA, CP1 cancellation due 31 January 2028. From 2029: run the seven steps on every leg inside the band and secure credits below the reference price.
The allowance side only tightens: the aviation cap rises with the newly covered emissions, falls by the deductions, then shrinks at 3.7 percent per year 2031 to 2035 and 1.7 percent from 2036. SAF cuts both books at once: CORSIA eligible fuel reduces your offsetting requirement (3.16 × fuel tonnes × (1 − life-cycle value ÷ 89 gCO2e/MJ)), and the ETS reserve of up to 130 million allowances covers 50 to 100 percent of the fuel premium, open to all EEA departures from 2029 with multi-year reservations for supply contracts of three years or more. Every element rewards the operator who moves before the deadline, none reward waiting.
The CORSIA Guide contains the route map, the checklist, the complete Lisbon to Dubai case and five operator cases to run your own network leg by leg.
→ Download The CORSIA Guide and map your network route by route.
Frequently Asked Questions
How is the 5,000 km band measured?
Great-circle distance from the aerodrome of Frankfurt to the destination airport (Art. 28a(1)(e)). Departure airport irrelevant; emissions follow the actual flight.
Do arrivals into the EEA fall under the extension?
No. Departures only. Arrivals stay CORSIA-only until at least the 2032 review.
Does the deduction refund my actual purchase price?
No, the published reference price. Contracting below it is pure margin; in the worked example a USD 8.00 offtake saves USD 107,000 per year on one route.
What if I cancel units late?
Clawback: the deducted allowances must be surrendered by 30 September of the following year. Late delivery has a hard ETS price.
Are business jets exempt?
No longer. Lower de-minimis thresholds, the 243-flights test deleted, and sub-10,000 t operators carved out of the route exemptions: ETS on extra-EEA flights from 2027, beyond 5,000 km from 2029.
Sources: European Commission, COM(2026) 616 final, 17 July 2026, Arts. 28a(1), 28a(4), 28a(6), 12(3), 12(3-f), 12(9), 10(5), 3(ao), 3c(6), recital 66; The CORSIA Guide (Econetix, 17 July 2026), Section 01, Lisbon to Dubai case (illustrative); ICAO, SGF 2024 (15.4 percent); IATA CORSIA Handbook (fuels deduction).
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Martin Riegler
