Europe’s aviation decarbonisation agenda is under threat.
The policies designed to deliver aviation fuels with lower carbon footprints are now in force. But there are forces working to weaken them. How the next twelve months unfold will determine whether Europe’s net-zero aviation ambition holds, or quietly unravels.
Why is 2026 different?
For the first time, the consequences of inaction are financial and immediate. As of 1 January 2026, aviation fuel suppliers can be fined for failing to meet ReFuelEU mandated targets to supply Europe with alternative fuels.
These fines will increase over time.
Fuel supplies – most large oil and gas companies – have responded by announcing new charges, essentially passing the costs of this to airlines, and ultimately customers.
At the same time, free allowances under the EU Emissions Trading System (ETS) have been phased out for aviation, exposing airlines to the full cost of their carbon for the first time. And, a major ETS review this summer could significantly affect how much European aviation pays for its emissions.
These are not distant policy milestones.
They are active pressure points, converging in the same year. And the incumbent interests that have most to lose should be paying close attention.
Two policy fronts that matter most
EU ETS: The carbon pricing moment
The phaseout of free ETS allowances should provide a clear incentive for airlines to turn towards alternatives to fossil kerosene.
But the upcoming ETS review introduces real uncertainty. On the positive side, it creates an opening to bring international aviation within scope of EU carbon pricing, a long-overdue move. On the other hand, the current political climate around “simplification” poses a risk of backsliding on previous targets.
The review is an opportunity. But opportunities can be squandered easily. Civil society and forward-thinking investors need to be vocal about what an ambitious outcome looks like and clear about what a weakened one would cost.
ReFuelEU: Mandates under strain
The ReFuelEU mandates have already generated significant dynamism around bio-based aviation fuels. But these fuels come with their own environmental challenges and the future of aviation must move beyond bio-based fuels to real solutions, such as e-kerosene.
But these high integrity fuels – which could cut emissions up to 98 per cent compared to fossil-based jet fuel – are not yet present in Europe at a commercial scale.
None of the 40-plus e-fuel projects under development in the EU have reached Final Investment Decision (FID). Plants typically take four or more years to build. This means meeting the 2030 ReFuelEU subtarget for e-kerosene (set at 0.7 per cent by 2030) is looking increasingly difficult.
The EU’s Sustainable Transport Investment Plan (STIP), launched last November aims to overcome this barrier. It is piloting a market intermediary to connect producers and buyers through long-term contracts.
But questions remain over whether it will move fast enough and prioritise the right fuels.
The eSAF Early Movers Coalition will meet in April in Brussels to advance the implementation of a pilot Double Sided Auction (DSA) announced back in December 2025.
Meanwhile, the UK keeps progressing with its SAF Revenue Certainty Mechanism. It will use long-term government-backed contracts to top up producer revenues when market prices fall below an agreed strike price. This will be funded via a levy on fuel suppliers.
But there is a long way to go, and whether action happens at speed and in the right places could end up being made, not by policymakers, but by a small group of powerful incumbents – oil and gas companies – that control the fuels market today.
Who’s blocking progress and why
We’ve tracked an interesting pattern over the past year: Big Oil is happy to talk about net-zero aviation, as long as it doesn’t have to change its business-as-usual, pumping oil out of the ground.
Europe’s largest oil and gas firms have published ambitious alternative fuel plans, but have also continued to pour the bulk of their capital expenditure into fossil extraction and refining to meet increasing demand from rising air traffic.
The alternative fuel capacity they are building, largely bio-based HVO (Hydrotreated Vegetable Oil, or renewable diesel), is not scalable due to land use competition with crops and deforestation risks.
They lobby for broad eligibility of “advanced” biofuels that keeps the door open to questionable feedstocks and delays meaningful investment in e-kerosene. Flexibility, in this context, is a strategy to avoid accountability.
Airlines present a more mixed picture. Some are committed to advancing the transition at the pace European society demands. Others, however, are working to slow the policy ratchet and actively lobby against public policies driving aviation decarbonisation.
Finance is similarly misaligned. Capital continues to flow into incremental HVO and co-processing projects rather than high-integrity fuels. Engaged investors require transition plans from major fuel suppliers and airlines. But these often lack concrete near-term e-kerosene investment milestones and continue to attract sustainability-branded finance. This is not passive delay. It is an active misallocation.
These actors are not simply moving slowly. They are shaping the rules to keep cheap options available for as long as possible to push back the moment when e-kerosene and genuine demand-side measures become unavoidable.
Where the momentum lies
The blockers are loud. But they are not the whole story.
Across the EU and UK, developers of e-kerosene are already positioned to deliver on the ReFuelEU and the UK SAF Mandate.
They are natural allies in calling for tighter ETS rules, robust sustainability criteria and well-designed revenue certainty mechanisms. What they need most is faster, better-targeted public support and a policy environment that doesn’t keep shifting beneath them. Private equity and institutional investors supporting these projects play a vital role.
Within the public sector, there are genuine efforts to hold the line to protect RED III (the Renewable Energy Directive III) safeguards, maintain ambitious ReFuelEU trajectories and design funding tools that genuinely prioritise e-kerosene.
In September 2025, the Commission allocated the first tranche of 20 million allowances for alternative fuels, worth around €1.5–1.6 billion for the period 2024–2030. They aim to help bridge the price gap between conventional jet fuel and alternatives. A possible extension to 2034 is under discussion, with a review due in January 2028.
Critically, very little of this money will actually support e-kerosene, as it supports current fuel purchases and e-kerosene is not yet commercially available, and that needs to change.
A small but growing group of first-mover airlines, corporations and fuel traders is also signing multi-year offtake agreements that favour high-integrity fuels, including e-kerosene and alcohol-to-jet fuel produced from non-crop biomass residues. Volumes remain small relative to total jet demand. But these deals are essential for bankability and they are beginning to set a new bar for what credible demand looks like.
And across civil society, environmental organisations are converging on a shared message: no fuels that degrade food, farmland and forests and instead, flights powered by wind, water and the sun with strong labour and justice safeguards throughout.
This is a coalition that is forming. It needs to continue to grow and deepen collaborations.
What this means and what we’re doing about it
2026 will not be won by good policy design alone. It will be won by making the stakes visible, holding the blockers accountable and showcasing the credibility of the alternatives.
That is where we are focusing our energy this year. We are working to deepen investor understanding of the financial and regulatory risks facing incumbent fuel suppliers under ReFuelEU to call the oil and gas status quo into question.
We want to build broad-based support for market and policy measures that protect the integrity of the mandates and accelerate e-kerosene production at scale. We are continuing to develop the oil and gas narrative by tracing the gap between what the majors say and what they invest in and connecting the actors best placed to turn that analysis into campaign pressure.
The transition is not inevitable. But neither is backsliding. Together, we can make sure 2026 is the year the market starts moving at the right speed and in the right direction.
About the Author
Juan
Juan has spent most of his career working at the intersection of finance, sustainability, and policymaking, primarily from non-profit and philanthropic perspectives. He brings an in-depth understanding of EU policies and institutions. He focuses on the net-zero transition of aviation in Europe with a keen interest in scaling Electro-Sustainable Aviation Fuels (e-SAF) and other decarbonization levers.
