1 Emissions Trading Scheme:
inclusion of aviation
| (28240)
5154/07
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
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| Legal base | Article 175EC; co-decision; QMV
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| Document originated | 20 December 2006
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| Deposited in Parliament | 12 January 2007
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| Department | Transport and Environment, Food and Rural Affairs
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| Basis of consideration | EM of 26 January 2007
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| Previous Committee Report | None, but see footnotes 2 and 3
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| To be discussed in Council | June 2007
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Standing Committee
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Background
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).
Conclusion
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
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