Twenty-third Report of Session 2013-14 - European Scrutiny Committee Contents


2   Aviation and the EU Emissions Trading System

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COM(13) 722

Draft Directive amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in view of the implementation by 2020 of an international agreement applying a single global market-based measure to international aviation emissions

Legal baseArticle 192(1) TFEU; co-decision; QMV
Document originated16 October 2013
Deposited in Parliament22 October 2013
DepartmentEnergy and Climate Change
Basis of considerationEM of 5 November 2012
Previous Committee ReportNone, but see footnotes
Discussion in CouncilSee para 2.10 below
Committee's assessmentPolitically important
Committee's decisionFor debate in European Committee A

Background

2.1  The EU's main market-based measure for limiting emissions of carbon dioxide is its Emissions Trading System (ETS), which was established by Directive 2003/87/EC, and came into operation on 1 January 2005. However, this does not apply to undertakings in all areas, and the question of extending it to include aviation was addressed in a Commission Communication[3] in September 2005, against a background where that sector's 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.

2.2  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) were 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 had to surrender the corresponding number of carbon allowances and project credits to their regulator, to account for their annual verified emissions.

2.3  However, it was also recognised that the best outcome still lay in an international agreement on the global regulation of aviation emissions within the ICAO, and, in order to reinforce the significant progress which had been made towards this, and to enhance the chances of a successful outcome in October 2013, the Commission put forward in November 2012 a draft Decision[4] to "stop the clock". In particular, the Decision adopted (377/2013/EU) suspends for one year the enforcement of the obligations of aircraft operators operating flights to or from aerodromes located in the EEA[5] and third-party countries under the ETS, on the condition that they returned any free allowances which had already been allocated for 2012 in respect of their international flights.

2.4  The effect of the measure has been that only flights between EAA aerodromes face enforcement for failing to submit emissions reports and surrender allowances and project credits for their 2012 emissions, but the Commission said that, if progress was made within the ICAO in developing a global market-based measure and adopting a framework to facilitate its application, it would propose further legislative action. However, if no "clear and sufficient" progress was made, obligations on international flights would once again apply from the end of March 2014.

The current document

2.5  The Commission recalls that the EU has had two main objectives for aviation emissions within the ICAO — to seek agreement on a framework for national and regional Market Based Measures (MBMs) and a roadmap for a global MBM, to be agreed by 2016 for implementation in 2020, thus superseding the Aviation EU ETS. It says that, following very challenging negotiations, a strong text on a global MBM has been agreed, but that the EU lost a number of key votes in relation to the framework for national and regional MBMs. This has resulted in the adoption of a text which specified that the inclusion of foreign carriers in national and regional MBMs for international aviation, such as the Aviation EU ETS, should be subject to the agreement ("mutual consent") of other States, and that exemptions should be granted to routes to and from developing States with less than a 1% share of international aviation activity.

2.6  The Commission says that, if the concept of 'mutual consent' were to be applied, it could create significant competitive distortions, thus contradicting the EU position, which firmly asserts that states have sovereignty over their airspace (as set out in Article 1 of the Chicago Convention[6] on International Civil Aviation, which, unlike the ICAO Resolution, is legally binding). In the light of these developments, it has proposed an amendment to the scope of the Aviation EU ETS, which seeks to respond to some of the concerns raised by reducing its scope to cover only the portion of a flight which takes place in the European Economic Area (EEA) from 2014, following a further year similar to that in 2013 under the "Stop the Clock" proposal. More specifically, Directive 2003/87/EC would be amended to include a partial derogation from compliance obligations in respect of aviation emissions from 2013 until 2020 (when the global MBM as agreed at ICAO is due to be implemented) by moving the Aviation EU ETS from an approach based on intra-EEA flight routes in 2013 to one based on both intra-EEA routes and EEA Airspace from 2014 until 2020.

2.7  The proposal would take effect in a phased manner, effectively extending 'Stop the Clock' for an additional year, before putting in place the following provisions:

  • flights arriving and departing in the EEA — including the outermost regions of the EU — remain fully covered, as under the original Aviation EU ETS and the 'Stop the Clock' measure;
  • from 2014, the proportion of international flights departing or arriving at an EEA airport which occur in EEA airspace[7] are included;
  • however, emissions over Switzerland, Kaliningrad, Serbia, Bosnia, Montenegro and Albania will be exempt, as will emissions over sea areas greater than 400 nautical miles from another EEA State;
  • in order to allow time to implement new provisions, there will be an extraordinary two-year compliance cycle for aviation emissions for 2013 and 2014, with data for both years being reported by 30 March 2015 and allowances surrendered by 30 April 2015;
  • flights arriving from and departing to third countries classed as 'developing' for the purposes of the proposal,[8] and which have less than 1% share of international aviation emissions, will be exempt;
  • over-flights of EEA countries (e.g. Dubai-New York) will be exempt under the proposal, as will flights to and from third countries and territories and dependencies of EEA countries, flights arriving and departing at airports in overseas territories and crown dependencies, and emissions over the sea areas between mainland Europe and dependencies and territories and over the landmass of those areas (e.g. Greenland and the seas between Greenland and mainland Europe);
  • non-commercial operators emitting less than 1000 tonnes of carbon dioxide per annum will also be exempt, reducing the number of aircraft operators regulated by Member States by around 2200 but only representing 0.2% of emissions.

2.8  There will be a review in 2016 following the ICAO General Assembly, where the Commission will report on progress towards a global MBM and consider any appropriate proposals.

The Government's view

2.9  In his Explanatory Memorandum of 5 November 2013, the Minister of State for Energy and Climate Change (Gregory Barker) says that carbon dioxide emissions from aviation currently represent around 2% of the global total, but are projected to grow rapidly, by up to 500% by 2050. It is therefore essential that measures are put in place to limit these in order to meet UK and EU climate objectives, and he confirms that, as the aviation sector operates across international borders and serves global markets, action is best taken at international level. The UK and EU priority has therefore always been to obtain a global agreement towards addressing aviation emissions, and the Government welcomes the progress made at the ICAO Assembly towards this goal.

2.10  In the meantime, the Minister says that the UK firmly supports the inclusion of international aviation in the EU ETS, as a cost effective solution to tackling its emissions, adding that, importantly, the EU ETS allows the aviation industry to grow sustainably, whilst ensuring that it pays for commensurate emissions reductions elsewhere. At the same time, he stresses the crucial importance of understanding and taking into account third country reactions to the proposal, recalling the widespread international opposition to Directive 2008/141/EC, and the concerns which some key third countries and industry have already registered that the current proposal is in conflict with the agreement reached at the ICAO General Assembly.

2.11  The Minister also says that the Government's objective will be to ensure that agreement to amend aviation EU ETS is secured within the tight timescale before the system reverts to its full scope in spring 2014, on the expiry of "Stop the Clock".

Conclusion

2.12  Although the concept of extending the EU's Emissions Trading System to include aviation is in itself simple and logical, it is clear from the recent attempts to do this that there are very significant practical and political difficulties involved. In particular, this latest proposal appears to be technically complex and difficult to administer; although its environmental impact will be somewhat greater than the current "Stop the Clock" arrangement, the many exemptions suggest that it will still cover only a relatively small proportion of relevant traffic outside EEA airspace; but, despite this, the Government has said that it still contains elements which certain key third countries believe conflict with the agreement reached within the ICAO.

2.13  In view of this, we believe that the proposal gives rise to issues which should be considered by the House at an early opportunity, and we are therefore recommending it for debate in European Committee A.



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

4   See (34438) 16723/12: HC 86-xxv (2012-13), chapter 15 (19 December 2012). Back

5   Including for this purpose Croatia, Switzerland and the dependent territories of EEA States. Back

6   The Chicago Convention, which established the ICAO, establishes rules of airspace, aircraft registration, safety and details the rights of signatories in relation to air travel. Article 1 states that "Every State has complete and exclusive sovereignty over airspace above its territory". Back

7   Extending no further than 12 nautical miles beyond the furthest point of the EEA coastline and including adjacent sea areas between EEA countries. Back

8   Countries which are not classified in 2013 by the World Bank as high income or upper-middle income. Back


 
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