Aircraft Financiers, Airlines Warn Talks Could Exclude Aviation From EU Taxonomy

DUBLIN/PARIS–Aircraft financiers have sounded the alarm over talks in Brussels that could see the aviation sector excluded from the European Union taxonomy, a move they say would limit their ability to drive emissions reductions through investments incentivizing airlines’ shift toward greener fleets.  

The EU taxonomy sets out to establish a list of environmentally sustainable economic activities, providing clarity for companies, investors, and policymakers on which economic activities are considered environmentally sustainable. 

If aviation was not included, the ramifications could be global: European banks and lessors would find it all but impossible to finance aviation assets, while lack of competition from European financiers would likely make leasing and loans more expensive for non-European customers, too.

Airlines, banks, and leasing companies have spent much of the week trying to persuade their governments that aviation should be included in the taxonomy and have highlighted the consequences if they were not. Ireland, home to most lessors globally, is playing a particularly crucial role in the process. However, there is deep skepticism that regulators can be convinced to change course.

The EU’s aim is to limit greenwashing, encourage companies’ sustainability efforts and guide investment. The taxonomy is expected to take on an increasingly important role as sustainable investment grows as part of EU efforts to reach its net zero by 2050 target under the European Green Deal.  

The European Commission (EC) had discussed conditions for including aviation over more than two years. Among others, criteria should ensure that the taxonomy does not contribute to growing aircraft fleets. Efficiency standards were to define best-in-class aircraft, which would then be financeable. Any aircraft would have to be certified for 100% use of sustainable aviation fuels by 2028. 

Airlines that have committed to their own industry-wide 2050 net zero goal also want the sector to be included in the taxonomy, allowing for aircraft financing and leasing players to incentivize a shift toward fleet renewal and therefore a reduction in emissions.  

An EC source told Aviation Daily that talks are ongoing at an EC level on what the next Delegated Act on Taxonomy should include, with no decisions yet made. The source said there was no fixed timeline as yet on when a proposal would be made. 

The talks follow on from work carried out by the Platform of Sustainable Finance, which presented its recommendations last year, the source said.   

The EU taxonomy has already caused controversy. Austria has filed a lawsuit over the Commission’s proposal, approved by a European Parliament vote in July 2022, to include natural gas and nuclear in the classification as environmentally sustainable energy sources.