1Aviation emissions
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Committee’s assessment |
Politically important |
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Not cleared from scrutiny; drawn to the attention of the Business, Energy and Industrial Strategy Committee |
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Document details |
Proposal for a Regulation of the European Parliament and of the Council 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 |
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Legal base |
Article 192(1) TFEU; QMV; Ordinary Legislative Procedure |
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Department |
Business, Energy and Industrial Strategy |
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Document Number |
(38508), 5968/17 + ADDs 1–2, COM(17) 54 |
Summary and Committee’s conclusions
1.1International agreement on reducing aviation emissions was eventually reached in October 2016, when the International Civil Aviation Organisation (ICAO) Assembly agreed to implement a Global Market–Based Measure (GMBM) from 2021 to 2035.
1.2The EU had previously taken its own action to reduce emissions by including 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.
1.3The scope of the EU’s measure was temporarily reduced to intra-EEU flights in response to international opposition. In the light of the recent international agreement, the Commission proposed to make that reduction in scope permanent.
1.4The predecessor Committee last considered the proposal at its meeting of 25 April, when it granted a scrutiny waiver in advance of possible adoption of a General Approach. It was decided to retain the proposal under scrutiny while the position of the European Parliament developed.
1.5Since then, the Minister of State for Climate Change and Industry (Claire Perry) has written to confirm that the Council adopted its position on 21 June as expected and that the agreement did not differ significantly from the original Commission proposal. She wrote again on 14 November, setting out the agreement reached in “trilogue” negotiations with the European Parliament.
1.6She notes that one amendment agreed in the European Parliament and in the subsequent negotiations aims to protect the environmental integrity of the EU ETS in case of an abrupt UK exit from the EU in March 2019. The issue has arisen because permits for emissions in the previous calendar year are surrendered on 30 April. This would mean that, in the event of an abrupt exit, UK companies would not need to surrender their allowances for emissions in 2018. Instead, they could sell their allowances, possibly flooding the market and thus potentially distorting the carbon price. To overcome this issue, it has been agreed that allowances issued by the UK from 2018 would be marked as such and would be invalid where the obligations for operators are “lapsing” due, for example, to the UK’s exit from the System.
1.7While the Government supports most of the agreement, it has indicated its intention to oppose the text due to the Brexit amendment and an amendment on the use of auctioning revenues which, it argues, goes against fiscal sovereignty by not making clear that it is for Member States to decide how to use their revenues.
1.8The agreement is likely to be signed off by the Council on 19 December.
1.9We note the measures taken by the EU to protect the environmental integrity of the EU ETS and we address this aspect in our separate chapter on wider reform of the System.
1.10We note the Government’s intention to oppose the text, but we would welcome confirmation of the Government’s final approach and its reasons. The proposal remains under scrutiny.
Full details of the documents
Proposal for a Regulation of the European Parliament and of the Council 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
1.11The introduction of the “full scope” Aviation EU ETS in 2012 (i.e. all flights to and from EEA airports) provoked widespread international opposition, in response to which the EU legislated to temporarily reduce the scope of the Aviation EU ETS to intra-EEA flights only. Full information on the background and content of the proposal were set out in the previous Committee’s Report of 8 March.1
1.12At its meeting of 8 March, the previous Committee raised a number of Brexit-related queries. In response, the then Minister of State for Climate Change and Industry (Nick Hurd) noted that the UK’s future involvement in the EU ETS would be dealt with separately as part of the wider Brexit negotiations. As for the post-Brexit application of any market based emissions reduction measures to UK non-domestic flights, the Minister set out the various elements of uncertainty. The Minister concluded that it was not yet clear whether the UK could feasibly take separate action on UK flights to and from the EEA after EU Exit, to avoid a situation where these flights are not covered by a market based measure.
1.13Despite the uncertainty, the Government’s guiding principle in making decisions and participating in negotiations would be ensuring the best possible outcome for the UK aviation industry and continuing to take action to address aviation emissions as cost effectively as possible. The Minister also set out the UK’s strong engagement in the development of the international mechanism.
1.14At its meeting of 25 April, the previous Committee waived the proposal from scrutiny in advance of a possible General Approach and requested an update on discussions in both the Council and the European Parliament.
The Minister’s letter of 12 July 2017
1.15The Minister confirmed that the Council adopted its position on 21 June as expected and noted that the agreement did not differ significantly from the Commission proposal published on 3 February 2017.
The Minister’s letter of 14 November 2017
1.16The Minister explains that the European Parliament agreed its position on 13 July, including a series of more stringent approaches than adopted by the Council. There was also a last-minute amendment to invalidate allowances, issued from 2018, which are issued by a Member State where the obligations for aviation operators and other operators are “lapsing”. This, explains the Minister, would make the allowances issued by the UK from 2018 invalid for compliance in the EU ETS, due to the UK’s withdrawal from the EU before the compliance deadline for 2018 emissions (30 April 2019). The objective of this amendment was to protect the environmental integrity of the EU ETS in the event of an abrupt UK departure from the System in March 2019.
1.17Political agreement between the Council, the European Parliament and the Commission was reached on 18 October. The Minister summarises the main elements of the deal as follows:
- the end date for the derogation reducing the scope to intra-EEA flights is set at 31 December 2023;
- an annual reduction (the Linear Reduction Factor) will be applied to the Aviation EU ETS cap from 2021;
- the exemption for non-commercial operators emitting less than 1,000 tonnes carbon dioxide per annum will continue to the end of 2030 (it would otherwise have ended in 2020);
- aircraft operators with emissions of less than 3,000 tonnes carbon dioxide per annum will benefit from simplified verification procedures;
- the European Commission will undertake a review on the implementation of Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and the future of the Aviation EU ETS within 12 months of the rules on the CORSIA being adopted in ICAO;
- deletion of the text: “It shall be for Member States to determine the use to be made of revenues generated from the auctioning of allowances”, which does not go as far as the European Parliament’s position that it should be mandatory to spend such revenues on tackling climate change; and
- agreement to the proposed amendment to invalidate allowances issued from 2018, which are issued by a Member State where obligations are lapsing (see above).
1.18Following political agreement, the text was presented to Member State representatives at the COREPER meeting on 27 October. The UK supported the main elements of the agreement, says the Minister, but stated its intention to vote against the deal for the following reasons:
- “The UK opposes the amendment to invalidate allowances from 2018, which could have negative impacts on the EU ETS carbon market in general and specifically on the UK.
- “The compromise text on revenues from the auctioning of aviation allowances goes against fiscal sovereignty by not making clear that it is for Member States to decide how to use their revenues.”
1.19On the amendment designed to protect the EU ETS from an abrupt UK departure from the System in March 2019, the Minister notes that the Commission has proposed a draft regulation to amend the EU ETS Registry Regulation to implement the amendment. She adds:
“We will continue to work closely with our European counterparts. The UK Government is working closely with the EU Institutions to explore alternative solutions that would be better for the EU and the UK, and to this end published a consultation on bringing forward the 2018 compliance deadline for UK EU ETS operators to before the date of EU Exit on 6 November.”
1.20It is expected that the final compromise will be signed off by the Environment Council at its meeting on 19 December. The Minister seeks scrutiny clearance in order to vote against the package, but emphasises that the text is likely to be agreed in any case.
Previous Committee Reports
Fortieth Report HC 71–xxxvii (2016–17), chapter 8 (25 April 2017); Thirty-fourth Report HC 71–xxxii (2016–17), chapter 3 (8 March 2017).
1 Thirty-fourth Report HC 71–xxxii (2016–17), chapter 3 (8 March 2017).
11 December 2017