Iceland’s Free Emissions Allowances Extended Until 2026 Skip to content

Iceland’s Free Emissions Allowances Extended Until 2026

By Ragnar Tómas

Ursula von der Leyen
Photo: Ministry of Foreign Affairs (MFA Iceland).

At a press conference yesterday, PM Katrín Jakobsdóttir and President of the European Commission Ursula von der Leyen announced that the European Union and the Icelandic government had reached a preliminary agreement on Iceland’s emissions; Iceland will continue to receive free emissions allowances up to and including the year 2026, Vísir reports.

New and tougher emissions regulation

The Icelandic authorities have sought exemptions from new and tougher European regulations (the so-called “Fit for 55” package, in reference to the bloc’s new climate target of a 55% emissions reduction by 2030.) intended to reduce the emission of greenhouse gases from air transport. An agreement was reached on this legislation within the EU last December and is due to enter into force at the end of next year. It will then subsequently be included in the EEA Agreement.

As noted by Vísir, the rules include, among other things, changes to the European Emissions Trading System (EU ETS), which would now require airlines to pay for emission allowances in a progressive measure (airlines have, until now, received them mostly for free). “The EU’s intention is that free emission allowances for airlines will decrease by a quarter by 2024 and by half by 2025. They will be completely eliminated after 2026,” Vísir notes.

The Icelandic government has been open about its belief that the rules harm the competitive position of Icelandic airlines and fail to take into account Iceland’s geographical location, which makes its citizens more dependent on air transport than other residents of the mainland.

Subject to approval

Prior to the Council of Europe summit yesterday, Icelandic Prime Minister Katrín Jakobsdóttir met bilaterally with President of the European Commission Ursula von der Leyen. At a press conference after their meeting, both leaders stated that a special solution to Iceland’s emissions allowances had been reached, which was compatible with the EU’s goals for the aviation sector.

Von der Leyen stated that the Icelandic government would be invited to receive free emissions allowances that they can distribute to airlines in both 2025 and 2026, noting that it was important that the country could give the allowances to all airlines in order to ensure fairness.

“I am pleased that we have found a solution that fits your circumstances and is consistent with our integrity in relation to the single market. First and foremost, this agreement also respects our long-term climate protection goals,” Von der Leyen remarked.

“The EU and Ursula have shown a great understanding for our views and our geographical situation. So our common view is that a solution to this should take into account Iceland’s specific geographical situation but also address the fact that green solutions in aviation have not emerged. But I would like to make it completely clear that Iceland wants to contribute to the common goal of reducing emissions.”

As noted by Vísir, the agreement is subject to the approval of the member states of the European Union, the Icelandic government, and Parliament.

Minister of Foreign Affairs Þórdís Kolbrún Reykfjörð Gylfadóttir told in March that the proposed EU legislation on aviation allowances was Iceland’s biggest interest since the EEA Agreement’s incorporation. “The Ministry of Foreign Affairs has embarked on an unprecedented effort to try to influence EU legislation,” the outlet reported.

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