JOINT POLICY BRIEF

Transitioning the EU Transportation Sector: Aviation and Shipping – Policy levers to support viability and increase sustainable finance

Brussels, 29 May 2026  –  The European Banking Federation (EBF) and UNEP FI have released a new policy brief focusing on transition pathways for the aviation and shipping subsectors. The brief highlights how these hard-to-abate subsectors of the transport sector are positioned within the EU’s sustainability transition. It also outlines practical policy levers and action pathways to unlock financing at scale.

Aviation and shipping are central to the EU’s economy and enable many other sectors to function, yet they remain almost entirely dependent on fossil fuels – with corresponding implications for other sectors’ supply chain (Scope 3) emissions. Decarbonising these subsectors is essential to achieving the EU’s climate neutrality objective by 2050 and reducing transport emissions by 90% over the same period.

Building on insights from a recent workshop that EBF and UNEP FI convened on the EU Sustainable Transport Investment Plan (STIP), the brief reflects insights gained from discussions among policymakers, industry representatives, and financial institutions – translating this input into concrete recommendations to support implementation.

Policy momentum meets financing realities in a critical transition phase

• The EU policy landscape for transport is evolving rapidly. Anchored in the European Green Deal, initiatives such as the Sustainable and Smart Mobility Strategy, the “Fit for 55” package (including ReFuelEU Aviation and FuelEU Maritime), and the Clean Industrial Deal are shaping the direction of travel for aviation and shipping.
• A central development is the Sustainable Transport Investment Plan (STIP), which aims to mobilize initial funding and de-risk investments to scale up sustainable fuels. However, as highlighted during stakeholder discussions, the scale of investment required far exceeds currently mobilized resources. Stronger incentives, clearer demand signals, and targeted de-risking mechanisms are needed to make projects bankable.
• At the same time, the aviation and shipping subsectors face structural challenges: high capital intensity, long asset lifetimes, fragmented value chains, and uncertainty around technology pathways and future demand. These factors complicate investment decisions and limit the pipeline of bankable projects.
• Against this backdrop, the coming years represent a critical window for aligning policy ambition with financial viability – ensuring regulatory frameworks and financing tools support large-scale deployment.

Key policy levers to deploy private capital at scale

Building on the workshop and other exchanges with industry and financial stakeholders, the brief identifies a set of policy levers aimed at improving the investment environment and mobilizing private capital. Three key areas stand out:

1. Ensuring a coherent and horizontal policy approach

• A key barrier to investment is policy uncertainty, including unclear long-term regulatory trajectories, inconsistent carbon pricing signals and fragmented frameworks across jurisdictions. These factors can weaken investor confidence and delay capital deployment.
• The brief highlights the need for coherent, predictable, and aligned policy frameworks across EU and national levels. Stable mandates, coordinated industrial policies and clearer long-term signals can reduce risk, improve investment planning, and strengthen the overall bankability of aviation and shipping transition projects. In aviation, this includes maintaining stable sustainable aviation fuel (SAF) mandates and allocation mechanisms to underpin long-term offtake agreements. In shipping, stronger alignment between the European emissions trading system (ETS) and Renewable Energy Directive (RED III) signals is needed to support fuel switching and investment planning.

2. Strengthening the enabling environment for transition

• Aviation and shipping face business case challenges for low-carbon solutions, driven by high-cost differentials, limited scale, and coordination issues across fragmented value chains. Policy can help by clarifying demand signals, supporting innovation and deployment at scale, and fostering coordination among stakeholders. Reducing administrative burdens, improving infrastructure planning, and enabling ecosystem approaches – such as green corridors – can help align supply and demand while lowering costs and risks for market participants.

3. Combining targeted financing instruments to improve bankability

• High upfront costs, technology risks, and uncertain revenues can deter private finance. Limited risk-sharing mechanisms and insufficient funding tools constrain the development of bankable projects, particularly for early-stage and capital-intensive investments.
• The brief points to the importance of blended finance approaches, guarantees, and market-based instruments such as contracts for difference or auctions to bridge cost gaps and stabilize revenues. Scaling these tools and tailoring instruments to subsector-specific needs is essential to mobilize private investment at the scale required. In practice, this is particularly critical for first-of-a-kind SAF production facilities in aviation and for capital-intensive vessel retrofits and alternative fuel infrastructure in shipping.

Action pathways for banks

• In parallel to policy development, the brief outlines action pathways for banks to support the transition of the aviation and shipping subsectors in the EU. These include developing innovative financing structures tailored to sector-specific needs and supporting clients in developing credible transition strategies.
• Financial institutions also have a key role to play in fostering collaboration – participating in partnerships and engaging in dialogue with policymakers to ensure financing considerations are reflected in policy design.

Next steps

• As EU initiatives such as the upcoming Industrial Decarbonisation Bank, ongoing ETS developments, and the implementation of ReFuelEU Aviation and FuelEU Maritime continue to take shape, stakeholders have a critical opportunity to engage with upcoming consultations and funding mechanisms.
• UNEP FI and EBF will continue to facilitate dialogue between financial institutions, industry, and policymakers. This EU sectoral policy brief series and related initiatives aim to advance practical solutions that make Europe’s industrial transition—across aviation, shipping, and beyond—financeable, competitive, and aligned with sustainability goals.

For more information:

Denisa Avermaete, Head of Sustainable Finance Team,d.avermaete@ebf.eu

Jānis Priekulis,Senior Policy Adviser – Sustainable Finance, j.priekulis@ebf.eu

The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The federation is committed to a thriving European economy that is underpinned by a stable, secure, and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.