Select Committee on European Scrutiny Ninth Report

1 Emissions Trading Scheme: inclusion of aviation



COM(06) 818

Draft Directive amending Directive 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community

Legal baseArticle 175EC; co-decision; QMV
Document originated20 December 2006
Deposited in Parliament12 January 2007
DepartmentTransport and Environment, Food and Rural Affairs
Basis of considerationEM of 26 January 2007
Previous Committee ReportNone, but see footnotes 2 and 3
To be discussed in CouncilJune 2007
Committee's assessmentPolitically important
Committee's decisionFor debate in European Standing Committee


1.1 Following the adoption of Directive 2003/87/EC,[1] the Community's Emissions Trading Scheme[2] came into operation on 1 January 2005. This requires Member States to grant to undertakings in certain areas — notably energy, metal production and minerals — a permit covering emissions of carbon dioxide, and to establish for each of two trading periods (2005-07 and 2008-12) a national plan dealing with the total quantity of allowances and their allocation. Those undertakings with a permit are then able to emit quantities of carbon dioxide up to the permitted limits, and would have to surrender an allowance equal to their actual emissions; however, if an undertaking fails to surrender sufficient allowances, it would be subject to a financial penalty (though any unused balance may be sold to another undertaking).

1.2 The question of extending the Scheme to include aviation was addressed in a Communication[3] put forward by the Commission in September 2005 about reducing that sector's impact on climate change, against a background where its relative contribution to the Community's greenhouse gas emissions was still small, but increasing at a rapid rate. This Communication also noted that, although the Kyoto Protocol covered only domestic flights, it does place upon the parties concerned an obligation to pursue a wider limitation on emissions through the International Civil Aviation Organisation (ICAO). Moreover, although ICAO had not been able to agree on regulatory standards for carbon dioxide emissions, it has endorsed the concept of international open emissions trading.

1.3 After considering a number of other options,[4] the Communication concluded that including aviation within the Emissions Trading Scheme appeared to be the most promising way forward, and suggested that the technical aspects should be examined further in a new group set up under the European Climate Change Programme. In the meantime, it identified four issues which it regarded as central to any decision — the type of entity to be made responsible (where it suggested that this should be the aircraft operators); the extent to which the full impact is addressed (where it said that, notwithstanding the uncertainties, both the carbon dioxide and non-carbon dioxide impacts should be addressed as far as possible); the types of flight covered (where its preference was to include all flights departing from Community airports); and the way in which the sector's overall emissions limit should be calculated and apportioned (where it suggested that the rules already in place under the Emissions Trading Scheme are not necessarily suitable for aviation, and that special arrangements would be needed to ensure that the accounting system linking that scheme to the Kyoto Protocol was not adversely affected).

The current proposal

1.4 In the light of its further examination of the practical implications, and of the conclusions of the Environment Council in December 2005 that the inclusion of the aviation sector within the Emissions Trading Scheme appeared to be the best way forward, the Commission has now produced this proposal. Its key provisions are:

  • that aircraft operators, rather than (say) airports, should be the entities responsible for complying with the obligations imposed by the Scheme, as they have direct control over operational matters;
  • that they should be able to buy allowances from other sectors in the Scheme for use to cover their emissions;
  • that, as from 1 January 2012, the Scheme should cover all flights arriving at, or departing from, an airport in the Community, with flights between airports within the Community being covered from 1 January 2011;
  • that, in order to cover gases other than carbon dioxide, the Commission should, after a thorough impact assessment, put forward by the end of 2008 a proposal regarding nitrogen oxide emissions from aircraft;
  • that each aircraft operator, including those from third countries, should be administered by one Member State only;
  • that the allocation of allowances (each representing a tonne of carbon dioxide) should be harmonised across the Community, with the total number of allowances being determined at Community (rather than national) level by reference to the average emissions from aviation in the years 2004-06;
  • that a fixed percentage of allowances should be allocated free of charge, based on a benchmark linked to operational efficiency, and a small percentage of allocations auctioned;
  • that aircraft operators should also be able to use project credits from the Joint Implementation or Clean Development Mechanism provided for under the Kyoto Protocol; and
  • that domestic aviation should be included in the Scheme, and treated the same way as international aviation.

There would, however, be exemptions for State aircraft,[5] flights under visual rules, circular flights with no intermediate stops, flights for testing navigation equipment or for training purposes, rescue flights and (in order to avoid a disproportionate administrative burden) flights by aircraft with a maximum take-off weight of less than 5,700 kilograms. In addition, special consideration would be given to the treatment of air services to remote or isolated regions which are particularly dependent on air services.

1.5 The Commission has also provided a comprehensive Impact Assessment to accompany its proposal, which examines the environmental, economic and social effect of the proposal and its different design options. This suggests that, compared with business-as-usual, the imposition of the proposed cap on emissions would by 2020 lead to an annual reduction in carbon dioxide emissions of 44 million tonnes in the case of intra-Community flights, of 115 million tonnes if applied to all flights departing from the Community, and of 183 million tonnes if all arriving and departing flights were to be covered. It also concludes that, since every airline on each route covered by the Scheme would be treated equally, they can be expected to pass on, to a large extent or in full, compliance costs to consumers.

1.6 The Commission estimates that, if the allowance price were to be €30 per tonne and the average load factor 70%, this would by 2020 lead to increases of between €4.6 and €39.6[6] in the cost of a return journey, depending on its length, and that, because of the relative inelasticity of demand, there would be only a small effect on forecasted growth, reducing this from 142% to 135%. It also suggests that competition between airlines would not be significantly affected, the main differences arising from the length of journeys undertaken, the age of the aircraft used, and the payload carried, with airlines travelling shorter distances, using older aircraft, or carrying fewer passengers or less freight being affected to the greatest extent. Likewise, the Commission concludes that the impact on sectors already covered by the Scheme is likely, at most, to be limited, as would be the administrative burden of the airlines and the Member States.

The Government's view

1.7 In their joint Explanatory Memorandum of 26 January 2007, the Parliamentary Under-Secretary of state for Transport at the Department of Transport (Gillian Merron) and the Minister for Climate Change and Environment at the Department of Environment, Food and Rural Affairs (Mr Ian Pearson) say that the Government welcomes the proposal, which enables the market to determine the best way to make a reduction in emissions which contribute to climate change. A Regulatory Impact Assessment is being prepared, and will be submitted shortly. In the meantime, the Ministers point out that the proposal is in line with the UK White Paper "The Future of Air Transport", and that the UK will press for this extension to the Scheme to come into operation as soon as possible. At the same time, whilst supporting a Scheme which covers at least all departing flights, they note that the earlier Commission Communication did not consider covering all departing and arriving flights, and say that the Government will consider whether to support this, following further analysis. It will also consider the proposed aircraft take-off weight threshold for exclusion from the Scheme (which the Ministers point out would, as it stands, bring in lifeline air services, such as those currently supported by Public Service Obligations and Aid of a Social Character).


1.8 Although there was a useful debate in European Standing Committee on 24 November 2005 on the principle of including aviation within the Community's Emissions Trading Scheme in order to reduce its impact on climate change, that debate was held on the basis of a Commission Communication, whereas the current document sets out more specific legislative proposals. Moreover, the more general debate on climate change has moved on in the last 18 months, as evidenced by the recent report of the Intergovernmental Panel on Climate Change. For that reason, and notwithstanding the earlier debate, we are recommending this latest document for debate, in advance of receiving the Government's own Regulatory Impact Assessment. In particular, to the extent they are not dealt with in that Assessment, we believe that the debate should address such issues as the relationship within the Emissions Trading Scheme between aviation and the other sectors covered by it; the inclusion of both departing and arriving flights; the application of the proposal to operators from third countries, such as the United States; the level of the cap proposed on emissions, and the way in which allowances would be allocated; and the proposed exemptions.

1   OJ No. L 275, 25.10.03, p.32. Back

2   (22992) 14394/01; see HC 152-xviii (2001-02), para 1 (6 February 2002), HC 152-xxxvii (2001-02), para 1 (17 July 2002), and HC 152-xli (2001-02), para 1 (6 November 2002). Official Report, European Standing Committee A (21 November 2002). Back

3   (26885) 12790/05: see HC 34-viii (2005-06), para 1 (2 November 2005), and Stg Co Deb, European Standing Committee, 24 November 2005. Back

4   Such as airline ticket or departure taxes and emissions charges. Back

5   This would include military aircraft, customs and police flights, and flights exclusively for official missions, Heads of State and Government, and Ministers. Back

6   If the allowance price were €6 per tonne, the equivalent range would be €0.9 - €7.9. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2007
Prepared 15 February 2007