EXPANDING THE EU EMISSIONS TRADING SCHEME
(EU ETS) (11863/03, 12790/05)
Letter from Karen Buck MP, Minister for
Aviation, Department for Transport and Elliot Morley MP, Minister
for Climate Change and Environment, Department for Environment,
Food and Rural Affairs to the Chairman
We are writing to update you on progress on
our work relating to the above document, particularly in reference
to the potential impact on allowance prices.
The Commission's Aviation Working Group (AWG)
has met twice and we are continuing to input into this work on
technical issues, taking account of the views expressed by your
Committee. The minutes of the AWG are available on the Commission's
We recognise the concerns raised by your Committee
and other stakeholders that the inclusion of aviation into the
EU ETS may impact on allowance prices and feel that it is important
to base any assessment of this complex issue on solid analytical
work. We have therefore commissioned ICF Consulting to assess
the potential impact of the inclusion of aviation into the EU
ETS on the allowance price.
ICF Consulting have now completed their report
and a copy is attached for your reference. While forecasting the
carbon price is inherently uncertain, ICF Consulting's findings
suggest that adding the aviation sector to the EU ETS will not
have a discernable impact on average annual prices of carbon instruments.
Forecasting allowance prices is complicated
and uncertain but we consider that an understanding of the likely
impact of the inclusion of the aviation on the allowance price
should form part of the impact assessment of any legislative proposal.
This report provides a starting point for the development of an
evidence base on that impact. We would welcome stakeholders views
on the report and its conclusions.
Received 15 February 2006
Letter from Rt Hon Alistair Darling MP,
Secretary of State, Department for Transport to the Chairman
Today I announced that on 22 February Margaret
Beckett, Alan Johnson and I wrote to Vice-President Jacques Barrot,
Vice-President Gunter Verhuegen and Commissioner Stavros Dimas
of the European Commission expressing the UK's support for the
Commission review of the EU Emissions Trading Scheme (EU ETS)
and to draw early attention to the potential expansion of the
EU ETS to the surface transport sector.
The letter asked that the inclusion of emissions
from surface transport be given serious consideration as part
of the review and offered our active contribution to work in this
area. A copy of the letter dated 22 February is enclosed.
28 February 2006
We would like to express the UK's support for
the Commission review of the EU Emissions Trading Scheme (EU ETS),
which provides a welcome opportunity to improve the functioning
of the trading scheme and consider its expansion to other sectors.
As we set out in our questionnaire response last summer, the UK
considers that the review should be focussed on how best to increase
certainty about the long term future of the scheme and thereby
maximise the potential of the EU ETS to stimulate necessary investments
in low-carbon technology. Our officials will be writing to you
shortly setting out our priorities for the review in more detail.
We are writing to you now to draw early attention
to the potential expansion of the EU ETS to the surface transport
sector and to ask that the inclusion of emissions from surface
transport be given serious consideration as part of the review.
You will be aware that the EU ETS directive
lists transport as one of the sectors that should be considered
when assessing whether to expand the scheme. Emissions trading
could potentially provide a cost-effective way for the transport
sector to reduce its climate change impact.
The UK looks forward to working closely with
the Commission and would be happy to make an active contribution
to work in this area, such as sharing our analysis and hosting
an event to open up an informed debate of the options.
Given the timescale for the review of EU ETS,
to this end, we ask the Commission to consider the possibility
of including this topic as an AOB item in a future Environment
Letter from the Chairman to Rt Hon Alistair
Thank you for your letter of 28 February 2006,
and for the enclosed copy letter dated 22 February 2006 from Margaret
Beckett, Alan Johnson and yourself to the European Commission
endorsing the Commission's review of the EU Emission's Trading
Sub-Committee B considered these letters at
its meeting on 13 March 2006.
We thank you for this information and trust
you will keep us up-to-date on any new developments in this important
15 March 2006
Letter from the Chairman to Karen Buck
MP and Elliot Morley MP
Thank you for your undated letter which was
received on 15 February 2006 and considered by Sub-Committee B
at its meeting on 6 March 2006.
Sub-Committee B remain most interested in this
area and will consider ICF Consulting's report carefully, together
with the Government's response to our recent report, Including
the Aviation Sector in the European Union Emissions Trading Scheme,
when it arrives and write further to you on any issues which arise.
We note that you would welcome stakeholders' views on the report
and its conclusions. To which stakeholders have you sent the report?
Sub-Committee B would be grateful for a copy of any responses
8 March 2006
Letter from Derek Twigg MP, Parliamentary
Under-Secretary of State, Department for Transport and Elliot
Morley MP to the Chairman
Thank you for your letter of 8 March 2006 regarding
the ICF Consulting report, Including Aviation into the EU ETS:
Impact on EU allowance prices.
You were particularly interested to know which
stakeholders we had sent this report to and whether we had had
any responses. So far we have presented the paper to:
The Emissions Trading Group (Working
The Aviation Working Group (set up
by the Commission under the European Climate Change Programme).
The Ad hoc Energy Taxation Steering
The Association for the Conservation
Our own Stakeholder Working Group
(comprised of airline operators, NGOs, the Confederation of British
Industry, and others).
We have sent copies of the report to the Devolved
Administrations, the Environment Agency, the European Commission
and to Point Carbon. It has also been made available on the Defra
We have not yet had any formal written responses
to the ICF Consulting report. However, we have discussed the report
in detail with stakeholders, following our presentations. The
report was welcomed as a useful contribution to the debate and
a focal point for analysis. Comments were focused around four
Are the assumptions regarding the
availability of JI/CDM credits feasible?
Will there be sufficient low cost
power sector abatement options available, as suggested in the
Are ICF Consulting's forecast carbon
prices for Phase II credible?
What will be the impacts of aviation
in the EU ETS in the long term, ie beyond 2012?
We are considering further work on broader carbon
price modelling in conjunction with the DTI and are considering
the above issues in evaluating what further work is required.
Received 18 April 2006
Letter from the Chairman to Derek Twigg
MP and Elliot Morley MP
Thank you for your undated letter received on
18 April replying to my letter of 8 March 2006 and considered
by Sub-Committee B at its meeting on 24 April 2006.
We were grateful for your detailing the stakeholders
to whom the ICF report was sent, and for your summary of the areas
of discussion which the report provoked. We do have some significant
concerns over the report and, in particular, the interpretation
which Ministers may have put on the conclusions.
As you may be aware, the Government Response
to our report, Including the Aviation Sector in the European
Union Emissions Trading Scheme, was due on 18 April. To date
we have still received no response. We would be grateful for an
explanation of the delay and a date when we might expect the response.
We will be considering the ICF report more fully
and respond after consideration of the response to our report.
25 April 2006