Five noteworthy aviation sustainability developments in the past seven days curated by the Ishka Airfinance SAVi team.
Here are the new developments to keep in mind:
1. Steer report charts a path to strengthen European aviation competitiveness
EU Aviation Strategy: Consultancy Steer published a report on the EU’s Aviation Sector Strategic Action Plan, assessing the current and future competitiveness of the EU aviation sector across its value chain. Requested by the Parliament’s transport committee and presented to MEPs last week, the report is intended to provide recommendations for a strategic action plan for EU aviation as the EU Commission prepares to update the EU Aviation Strategy, which was last set in 2015 – a call for evidence on the strategy’s revision closed in May 2025. Read Ishka Airfinance SAVi’s summary of responses here. Previous Steer reports commissioned by the EU have been influential, including their recommendations for EU Taxonomy aviation technical screening criteria. At this stage, this report should be treated as an independent assessment for the Parliament.
The 156-page report finds that EU aviation decarbonisation policy has a “high level of ambition” but “increases costs for air carriers”, with EU airlines more exposed to those cost increases than third-country carriers. It recommends actions to maintain or improve the sector’s competitiveness. Key sustainability recommendations from the report, mostly covered in pages 70 to 100, include:
- ReFuelEU Aviation: to mitigate SAF mandate cost disadvantages for EU carriers, the report says the “most feasible options” are: extending free SAF allowances in the EU ETS beyond 2030, introducing a UK-style revenue certainty mechanism for SAF production to support advanced SAF projects reaching FID, and using a book-and-claim system within the SAF mandate to drive competition and lower prices. On the latter, however, it concedes that such a book-and-claim system may benefit large fuel suppliers with wider airport networks more than smaller producers. Its formal recommendation is that these measures “should be actively considered” to boost EU aviation competitiveness.
- SAF-BAM: The report lists a SAF border adjustment mechanism (SAF-BAM) and levies on flights via non-EU hubs as options to level the playing field between EU-based carriers and others. It acknowledges, however, that the “legal feasibility” of either option is not clear under the Chicago Convention. In its conclusions, it says these options are “less feasible” due to possible incoherence with international obligations.
- SAF surcharges: Steer addresses IATA’s concerns that recent SAF surcharges by fuel suppliers in Europe may be “around twice the current market premium, and though it proposes no concrete measures, it insists the EU should “remove the possibility” for fuel suppliers to levy surcharges on customers (airlines) to cover possible ReFuelEU non-compliance fines, and increase national/EU scrutiny and enforcement.
- SAF feedstocks: Concerning the debate on whether or not to expand the block’s ReFuelEU Aviation list of compliant feedstocks to include more locally available ones – such as, potentially, some cover crops – the report says the trade-off between feedstock security and environmental integrity “should be recognised.” Its recommendation is nevertheless to consider expanding the RED-compliant SAF feedstock list, while ensuring environmental effectiveness remains high.
- e-SAF: The report recommends public financial support for commercial-scale e-SAF projects, including co-financing, revenue certainty mechanisms, and double-sided auctions, highlighting that the EU could gain a competitive advantage in this area.
- Non-CO2 MRV: Steer finds that the EU ETS’ recently introduced non-CO2 monitoring, reporting and verification (MRV) system requirements are “not onerous” for carriers and are “not considered to impact competitiveness materially”.
- Hydrogen aircraft: Steer says hydrogen propulsion for larger passenger aircraft is “feasible in the longer term”, but that the technology is only likely to develop in the 2050s and 2060s if technically feasible and commercially viable. It concludes there is “no immediate requirement” to deploy hydrogen aviation infrastructure because the technology is “many years away from being a commercial reality”.
- Aircraft leasing: The report does not address aircraft leasing’s role in fleet renewal or aviation finance, something that Aircraft Leasing Ireland (ALI) called for in its submission.
Besides the European Commission and the European Parliament, the third key institution responsible for the EU Aviation Strategy's eventual deliberation and approval is the Council of the EU. On 1st July, Ireland assumed the Presidency of the Council. The Irish Presidency's programme lists the commencement of revisions of the Air Services Regulation, the EU ETS revision for aviation and maritime, as well as its role in "supporting discussions" on a new EU Aviation Strategy as its aviation priorities for the next six months.
2. Court ruling forces Norwegian to pay pandemic reconstruction EU ETS dues
EU ETS: A ruling by a Norwegian court earlier this year forcing low-cost carrier Norwegian Air Shuttle to pay $74.3 million for 2020 EU ETS obligations – when the carrier was under a reconstruction process – has become final following a Supreme Court decision at the end of June not to admit an appeal. Norwegian CFO Hans-Jørgen Wibstad said in a statement on 25th June that the airline is “disappointed and surprised” that the Supreme Court declined to hear its appeal, built on favourable earlier rulings by the Oslo District Court and the Irish High Court (Norwegian’s reconstruction process was undertaken in Ireland). Following this decision, Norwegian expects to record a non-recurring loss of approximately NOK 730 million ($72.3 million) during Q2 2026, primarily related to the previously imposed penalty of approximately NOK 400 million ($40.7 million) and 372,818 outstanding EU ETS emission allowances for 2020 to be surrendered. The expected cash outlay is expected to be approximately NOK 330 million ($33.6 million) as the imposed penalty was settled in 2023.
In a related development last May, Swedish financial publication EFN reported that regional carrier Braathens Regional Airlines (BRA) had been threatened with fines for failing to surrender outstanding EU ETS allowances. According to the publication, as of May, BRA had yet to surrender allowances covering around 58,000 tonnes of CO₂ emissions from 2024. While the airline included an outstanding SEK 83 million ($8.6 million) administrative penalty related to the non-compliance event in its latest restructuring (approved in April 2026), the Swedish Environmental Protection Agency argues it must still surrender the missing EU ETS allowances. The restructuring wrote off 95% of eligible debts, reducing the monetary penalty to around 5% of its original value, but did not extinguish the underlying compliance obligation.
The Ishka View: The two recent cases set a further precedent for how EU ETS compliance is enforced across participating states. They show that, unlike other financial liabilities, EU ETS obligations may not be written down through court-approved restructuring, making them a more stringent compliance requirement than conventional debts.
3. Research: SBTi aviation targets will still result in a growing share of emissions
Emissions targets: Corporate aviation decarbonisation targets validated by the Science-Based Targets initiative (SBTi) are, on an absolute emissions basis, up to 44 percentage points smaller than underlying pathways, putting SBTi aviation pathways on course for a growing global share of emissions by 2035, researchers argue. According to a new academic paper published on 26th June in the Environmental Research Letters journal, while aviation emissions made up around 3% of global emissions in 2019, SBTi’s aviation emission pathways will make up 5%-7% of global 2035 emissions in the ‘well-below’ 2°C and 1.5°C reference scenarios. The assessment is based on 19 airlines with validated targets approved by SBTi, which together represent around 27% of global revenue passenger kilometres (RPK). A complete table (Table 1) of the targets is available on Page 4 of the article, while Table 2 contains a detailed overview of the stated reduction measures listed by the 19 airlines. Other interesting findings include the ability of airlines to set 1.5°C-aligned targets until 2030 without requiring higher ambition than those aligned with a 2°C scenario, and the lack of disclosure around the anticipated contribution of emission reduction measures.
4. Blended wing aircraft progress as JetZero and Natilus mark new milestones
BWB aircraft: Two US start-ups betting on radical blended wing body (BWB) designs with step-change fuel efficiency announced significant milestones in recent days. California-based JetZero revealed in a media briefing last week that the FAA has moved the OEM into its Integrated Certificate Management Office (AIR-500), an advancement towards Part 25 certification. The company continues to target the first flight of its demonstrator, partly funded by the US Air Force, in late 2027, with fewer than 20 flights planned to validate the BWB design and unlock further investment. A further funding round is planned by the end of 2026, with a public listing (IPO) potentially to follow by 2028, JetZero CEO Tom O’Leary told Reuters. The OEM also announced on 15th June that it has broken ground on its first aircraft factory in Greensboro, North Carolina. A $1 billion state grant to support its construction was announced in the lead-up to last year’s Paris Air Show. Separately, start-up Natilus, which is working on an unmanned blended-wing-body cargo aircraft called the Kona, announced this week that it has formally initiated the aircraft's Part 23 certification program with the FAA.
5. British Columbia uses 3.9% SAF, Canada biofuel report calls for SAF investment incentive
North America SAF: Natural Resources Canada last week published a biofuel sector report calling for Canada to meet 60% of domestic biofuel demand through domestic production by 2030, up from around 48% in 2025. For aviation specifically, the report presents a number of policy options for Canada to “strengthen” its fuel security “through domestic SAF production.” They include a “domestic SAF investment incentive program” and “fuel-specific production incentives, contracts for difference and/or tax credits scoped to the desired level of growth.”
Canada currently has three final SAF policies in the SAVi SAF Policy Map: the federal Clean Fuel Regulations, Alberta’s Future Fuels Challenge, and British Columbia’s Low Carbon Fuel Standard. The latter mandates 1% SAF use in 2028, rising to 2% in 2029 and 3% in 2030. However, according to British Columbia’s Ministry of Energy and Climate Solutions, the supply of renewable content in jet fuel already reached “3.9% of total jet fuel supply [81ML] in 2025, exceeding the renewable fuel requirements for jet fuel in 2030,” up from 16.5ML, or 0.9% of supply in 2024.
Ishka Airfinance is proud to be a partner of Aviation Carbon 2026. Registrations for Aviation Carbon 2026 are now open.
