15 Aviation and the EU Emissions Trading
|Draft Decision derogating temporarily from Directive
2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community
|Legal base||Article 192(1) TFEU; co-decision; QMV
|Document originated||20 November 2012
|Deposited in Parliament||27 November 2012
|Department||Energy and Climate Change
|Basis of consideration||EM of 10 December 2012
|Previous Committee Report||None, but see footnotes
|Discussion in Council||Early 2013
|Committee's assessment||Politically important
15.1 Following the adoption of Directive 2003/87/EC, the EU's
Emissions Trading System (ETS) came into operation on 1 January
2005, and requires Member States to grant to undertakings in certain
areas a permit covering emissions of carbon dioxide, and to establish
a national plan dealing with the total quantity of allowances
and their allocation. 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, but an undertaking failing to surrender sufficient
allowances would be subject to a financial penalty (though any
unused balance may be sold to another undertaking).
15.2 The question of extending the System to include
aviation was addressed in a Commission Communication
in September 2005 about reducing that sector's impact on climate
change, against a background where its relative contribution to
the EU's greenhouse gas emissions was still small, but increasing
rapidly. The Communication also noted that, although the Kyoto
Protocol covered only domestic flights, it did place upon the
parties concerned an obligation to pursue a wider limitation on
emissions through the International Civil Aviation Organisation
(ICAO), and that, although the Organisation had not so far been
able to agree on regulatory standards for carbon dioxide emissions,
it had endorsed the concept of international open emissions trading.
15.3 The Communication concluded that including aviation
within the ETS appeared to be the most promising way forward,
and, in the light of its further examination of the practical
implications, the Commission put forward a proposal in December
2006, which was subsequently adopted as Directive 2008/101/EC,
and introduced appropriate amendments to Directive 2003/87/EC.
As a result, all aircraft operators who fly into or out of aerodromes
in the European Economic Area (EEA) are required to monitor their
carbon emissions each calendar year from 1 January 2010, and then
to submit an independently-verified report to their respective
regulator by 31 March of the following year. Also, as from 30
April 2013, aircraft operators must surrender the corresponding
number of carbon allowances and project credits to their regulator,
to account for their annual verified emissions.
The current proposal
15.4 This draft Decision would suspend for one year
the enforcement of the obligations of aircraft operators operating
flights to or from aerodromes located in the EEA
and third-party countries under the ETS, on the condition that
aircraft operators return any free allowances which have already
been allocated for 2012 in respect of their international flights.
The effect of the measure would be that only flights between
EAA aerodromes would face enforcement for failing to submit emissions
reports and surrender allowances and project credits for their
15.5 The Commission says that its proposal has been
made in response to the significant progress towards an international
agreement on the global regulation of aviation emissions within
the ICAO, and is intended to reinforce this positive momentum,
and to enhance the chances of a successful outcome within the
ICAO in October 2013. If no "clear and sufficient"
progress is made, obligations on international flights would once
again apply, but, if progress is made within the ICAO in developing
a global market-based measure and adopting a framework to facilitate
its application, the Commission has said it will propose further
legislative action, Directive 2008/101/EC allowing amendments
to be made to the scope of the aviation activities covered, when
equivalent measures are adopted by one or more third countries,
or by a global agreement.
The Government's view
15.6 In his Explanatory Memorandum of 10 December
2012, the Minister of State at the Department for Energy and Climate
Change (Mr John Hayes) says that the proposal respects the principles
of subsidiarity and proportionality, adding that, as aviation
is an international sector, it would be more effective to have
international measures to reduce emissions, and notes that the
Commission's justification for the proposal is to reinforce positive
momentum within the ICAO and enhance the chances of a successful
outcome in 2013.
15.7 The Minister says that the Government welcomes
this initiative, and believes it is right to give the ICAO time
to make progress on a global approach to tackling aviation emissions.
In the meantime, its initial views on the proposal are as follows.
Aviation emissions reductions
The suspension means that, for flights for which
the pertaining aircraft operator has returned the relevant free
carbon allowances, the carbon dioxide emitted on affected flights
between EEA aerodromes and destinations in non-EEA countries would
not be covered by the ETS during 2012, and preliminary analysis
suggests that, as compared with current legislation, total aviation
carbon dioxide emissions covered by the ETS in 2012 could be reduced
by around 63%. However, this analysis is subject to a number
of uncertainties, and will be refined going forward.
As aircraft operators with routes between two aerodromes
in the EEA (and those other specified non-EEA states) will still
have to comply with the ETS, and can benefit from zero-carbon
rating for flights powered by biofuels, the additional incentives
to develop emission-reducing technology and alternative fuels
will continue to some extent. Also, aircraft operators already
have a considerable cost incentive to reduce fuel consumption,
which directly reduces emissions.
By helping to facilitate a global agreement, the
temporary suspension of the international elements of the ETS
may result in an agreement to a measure with greater global coverage.
International agreement on reducing aviation emissions:
The UK's, and indeed the EU's, priority has always
been to obtain a global agreement, and this proposed Decision
will act as a gesture of goodwill to allow breathing space for
progress within the ICAO. The current timelines mean that the
deadline for compliance with the ETS in April 2013 will take place
before the ICAO General Assembly in October 2013, which is the
first opportunity for any global agreement on these matters.
The Government is firmly committed to achieving a
clear and ambitious outcome at the ICAO General Assembly, and
the UK's Civil Aviation Director has a seat on the High Level
Group which is addressing the key obstacles.
15.8 The Minister's Explanatory Memorandum is accompanied
by a preliminary Impact Assessment checklist, which simply notes
that the groups which could be affected by the proposal include
aircraft operators operating to and from the EEA, passengers on
these flights, other participants in the ETS and governments auctioning
ETS allowances, and that there could also be environmental impacts.
The impacts will depend upon how many aircraft operators decide
to take advantage of the proposal, with the financial implications
varying as between operators. The Government will be developing
its understanding of the impacts as the practical implications
of this proposal become clearer over the coming weeks, and will
publish an impact assessment accordingly.
15.9 The Minister also points out that receipts from
sales of ETS aviation allowances accrue to the Exchequer, with
those in 2013-14 estimated at around £80 million, but future
forecasts may change due to the impact of this proposal on scope
of the ETS and possible changes in the EU emissions allowance
price. He also notes that the Commission is currently in the
process of calculating a new emissions cap for 2012 based proportionally
on the likely number of intra-EU emissions, of which 85% will
be distributed to airlines for free and 15% reserved for auctioning
by Member States, and that estimates of impact on revenue for
the UK can be calculated once these figures are released.
15.10 The place of aviation within the EU's Emissions
Trading system is clearly a matter of some importance, as is the
conclusion of a wider agreement on the limitation of emissions
within the International Civil Aviation Organisation, and we therefore
think it right to draw to the attention of the House this document
which seeks to ease the way towards such an agreement. However,
the measure would be only temporary, has been welcomed by the
UK, and does not appear to us to give rise to any issues requiring
further consideration. We are therefore clearing it.
50 (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
Including for this purpose Croatia, Switzerland and the dependent
territories of EEA States. Back