Documents considered by the Committee on 8 March 2017 Contents

3Aviation Emissions

Committee’s assessment	Politically important
Committee’s decision	Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy and the Transport Committee
Document details	Proposal for a European Parliament and Council Regulation amending Directive 2003/87/EC to continue current limitations of scope for aviation activities and to prepare to implement a global market-based measure from 2021
Legal base	Article 192(1), TFEU; QMV; Ordinary Legislative Procedure
Department	Business, Energy and Industrial Strategy
Document Number	(38508), 5968/17 + ADDs 1–2, COM(17) 54

Summary and Committee’s conclusions

3.1Greenhouse gas emissions from aviation activities are increasing significantly. In the absence of further measures, carbon dioxide (CO2) emissions from international aviation are estimated to almost quadruple by 2050 compared to 2010.9

3.2In 2008 the EU decided to include flights between aerodromes within the European Economic Area (“intra-EEA flights”) and flights between aerodromes in the EEA and aerodromes in third countries (“extra-EEA flights”) in the EU’s main measure to reduce emissions—the Emissions Trading System (EU ETS)—from 2012.

3.3Introduction of the new system provoked international opposition, in response to which the EU reduced the scope to intra-EEA flights only. This was intended as a temporary measure in order to facilitate progress towards reaching an international consensus through the International Civil Aviation Organisation (ICAO).

3.4On 6 October 2016 the ICAO Assembly agreed to implement a Global Market–Based Measure (GMBM) from 2021 to 2035. Details are set out below. Following this development, the Commission has proposed to make permanent the previously temporary reduction in scope of the Aviation EU ETS to intra-EEA flights.

3.5The Minister of State (Mr Nick Hurd) views the ICAO agreement as notable and supports continuing action, in the interim, through the EU ETS to control aviation emissions. He observes that agreement by March 2018 is necessary in order to avoid reversion back to “full scope”, and the potential for a repeat of the earlier international opposition.

3.6The Minister notes that the UK’s future relationship with the Aviation EU ETS will form part of the negotiations on the UK’s withdrawal from the EU. While the UK remains in the EU, the Government will continue to engage constructively on new and existing climate legislation and regulation.

3.7The document is particularly relevant in the context of the UK’s withdrawal from the European Union, particularly as the outcome of the withdrawal negotiations may not be clear for some time.

Can the Minister confirm that any non-participation by the UK in the Aviation EU ETS would leave UK non-domestic flights out of any form of aviation market based emissions reduction measures between EU withdrawal and entry into force of the ICAO mechanism in 2021?
If that is the case, what would be the implications for a) the UK airline and travel industries and b) UK climate change policy?
On what basis should the aviation industry plan for the period mid-2019 until the end of 2020?
As the UK will be a third country once it has withdrawn from the EU, the ICAO agreement is timely. What effort is the UK making to work out the details of the ICAO scheme in order to ensure that it enters into force in 2021 as scheduled?

3.8We retain the proposal under scrutiny and draw it to the attention of the Business, Energy and Industrial Strategy Committee and the Transport Committee.

Full details of the documents

Proposal for a European Parliament and Council Regulation amending Directive 2003/87/EC to continue current limitations of scope for aviation activities and to prepare to implement a global market-based measure from 2021: (38508), 5968/17 + ADDs 1–2, COM(17) 54.

Background

3.9The EU Emissions Trading System (EU ETS) is currently in its third phase (2013–2020). Negotiations on the rules for the fourth phase (2021–2030) are on-going. Aviation was included from 2012. Aircraft operators were required to monitor and report emissions from all flights to, from and between airports in the European Economic Area (EEA), then subsequently surrender the corresponding number of EU ETS allowances before 30th April in the year after which the emissions occurred. The inclusion of all flights to and from EEA airports in the EU ETS is known as “full scope”.

3.10The introduction of the full scope Aviation EU ETS in 2012 provoked widespread international opposition, which resulted in a number of retaliatory actions against the EU and EU-based aviation and aerospace organisations. In response to this opposition, the EU legislated to temporarily reduce the scope of the Aviation EU ETS to intra-EEA flights only for the 2012 compliance year.

3.11In October 2013, the ICAO Assembly agreed to develop a GMBM proposal and to take a decision at the 2016 ICAO Assembly on its implementation from 2021. This prompted the EU to legislate to maintain the reduced intra-EEA scope for the period 2013 to 2016, at which point progress in ICAO towards agreeing a GMBM could be assessed, and the Commission could then put forward a further legislative proposal. The temporary derogation to reduce the scope expired on 31 December 2016 and, without a further amendment, aircraft operators would be required to comply, for the first time, with a full scope Aviation EU ETS in March 2018.

3.12Under the ICAO deal reached in October 2016, a GMBM would be implemented from 2021 to 2035. This would include:

airlines to offset a proportion of their emissions (through the purchase of international carbon credits from other sectors), with the aim of delivering carbon neutral growth for the international aviation sector from 2020;
voluntary participation between 2021 and 2026 before mandatory participation for non-exempt states begins in 2027; and
regular reviews that can raise the ambition of the scheme and extend it beyond 2035.

Commission’s Proposal

3.13The European Commission has accordingly proposed to make permanent the previously temporary reduction in scope of the Aviation EU ETS to intra-EEA flights. It also proposes to undertake a review at a later date to determine the future of the Aviation EU ETS from 2021, taking account of:

progress made on the implementation of the GMBM, including the nature and content of the legal instruments and the actions taken by third countries to implement the scheme;
how to implement the GMBM through revising the EU ETS Directive; and
the contribution of aviation to the Union’s 2030 economy-wide greenhouse gas reduction commitment.

3.14Other key features of the proposal are as follows:

the Commission is to be empowered to adopt delegated legislation on monitoring, reporting and verification of emissions for the purpose of implementing the GMBM;
if it is agreed to continue the Aviation EU ETS after 2020 there will be an annual reduction in the number of aviation allowances from 2021 consistent with the rest of the sectors in the EU ETS; and
the exemption for non-commercial operators operating less than 1,000 tonnes of CO2 per annum, introduced in 2014, will be extended until 2030.

Minister’s Explanatory Memorandum of 20 February 2017

3.15The Minister considers that reducing greenhouse gas emissions from international aviation is an important part of the action that needs to be taken in order to meet the global objectives set out in the UN climate change agreement reached in Paris in December 2015. UK policy, he says, has long been that action is best taken at the global level, with regional measures such as the EU ETS filling the gap until such a time that sufficient global measures could be agreed:

“The Government views the agreement reached in ICAO last October to implement a GMBM as a notable achievement. It will be important for any decision on the future of aviation in the EU ETS to take into account the progress made in ICAO, and the need for a high level of political will among ICAO Member States in order for the GMBM agreement to be fully and robustly implemented.

“In the interim, before the GMBM is implemented, the Government supports continuing to take action through the EU ETS to control aviation emissions. In considering the appropriate scope of coverage of aviation by the EU ETS, there is a balance to be reached between ensuring that action is taken now, whilst not jeopardising the implementation of the GMBM from 2021. The EU ETS is a cost-effective measure to tackle international and domestic aviation emissions, allowing the aviation industry to grow sustainably. The EU ETS also plays a part in meeting the UK’s domestic carbon budgets by reducing emissions from UK domestic aviation and would continue to do so under the Commission’s proposal, as domestic aviation emissions would remain in scope of the EU ETS.”

3.16The Minister underlines the necessity for swift adoption:

“Agreement on the proposal needs to be reached by 31 March 2018 at the latest, in advance of the reporting and surrender compliance deadlines for the 2017 scheme year, and the European Commission has expressed a preference for agreement to be reached by the end of 2017. If no agreement is reached the scheme will revert back to full scope which would risk a repeat of the opposition from third countries and damaging the implementation of the GMBM.”

3.17He adds that the Government supports the proposal to extend the exemption for small aircraft operators who emit less than 1,000 tonnes of CO2 per year until 2030. This, he says, is consistent with Government policy to minimise administrative burdens for small operators.

3.18Regarding the UK’s withdrawal from the EU, the Minister says:

“The relationship between the UK and our EU partners after we exit the EU will be the subject of negotiations that will start after we trigger Article 50, which the Prime Minister has said will be no later than the end of March. This will include, amongst other things, our future relationship with the EU on Aviation EU ETS. While we remain in the EU we will continue to engage constructively on new and existing EU climate legislation and regulation.”

Previous Committee Reports

None.

9 The International Civil Aviation Organisation forecasts in its 2016 Environmental Report that, in comparison to 2010, when annual international aviation CO2 emissions stood at 448 million tonnes (Mt), international aviation emissions will increase by between 52% and 68% (estimated annual emissions of 682Mt to 755Mt) by 2020, between 169% and 185% (estimated annual emissions of 1205Mt to 1278Mt) by 2040 and up to 284% to 300% (estimated annual emissions of 1721Mt to 1794Mt) by 2050.

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10 March 2017