European Commission proposes intra-European flights should remain covered by EU ETS pending ICAO progress
Fri 3 Feb 2017 – The European Commission has proposed that a continuation of the ‘stop the clock’ intra-EEA scope of the EU Emissions Trading System (EU ETS) for aviation would be the most suitable option to address the period 2017-2020. The ‘stop the clock’ legislation automatically ended on 31 December 2016 pending the outcome of ICAO negotiations on a global market-based measure, and revised legislation is now required. Since ICAO States agreed at their Assembly in October to implement the phased Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), debate has centred around what the EU should do with its own scheme both before and after CORSIA starts in 2021. The Commission says it would be premature to take a decision on the post-2020 regime at this stage while there were still outstanding uncertainties affecting the implementation of CORSIA.
In a press statement, the Commission says it played an instrumental role in securing the CORSIA agreement and a revision of the EU ETS is needed to maintain a contribution of the aviation sector to European climate objectives, while ensuring “the smooth implementation” of the ICAO measure. Continuing with the current geographic scope – covering flights between airports in the European Economic Area (EEA) – would ensure a level playing field and equal treatment of all airlines flying in Europe, it argues. Aviation is contributing around 17 million tonnes of CO2 emission reductions per year through the EU ETS, it points out.
The proposal also says this step would be welcomed by third countries and provide momentum for ICAO to finalise the outstanding rules for the implementation of CORSIA.
The Commission proposes to extend the current approach until there is sufficient clarity about the nature and content of the legal instruments adopted by ICAO for CORSIA to allow it to carry out further assessments and to review the EU ETS for the post-2020 period. Given that the scope from 2017 would remain as in 2016, the amount of free allocation received by aircraft operators would continue to be the same. The amount of allowances to be auctioned should also continue being the same as in 2016. The so-called Linear Reduction Factor that applies to all other sectors and effectively tightens the cap on free allowances would only apply from 2021 onwards if there is a future decision to continue with the inclusion of aviation in the EU ETS after 2020.
A new article to the EU ETS Directive would require the Commission to report to the European Parliament and Council on relevant international developments and actions taken by third countries to implement CORSIA. The Commission is also to consider ways to implement the relevant ICAO instruments in European Union law through a revision of the Directive. A further article has been proposed to provide for the appropriate monitoring, reporting and verification (MRV) of emissions applicable to aircraft operators for the purposes of CORSIA MRV rules currently being decided at ICAO.
The Commission also proposes to extend from 2020 until 2030 the exemption for non-commercial aircraft operators emitting less than 1,000 tonnes of CO2 per year.
The Commission accompanies the proposal with an Impact Assessment analysing different options both for the period pre-2020 and for the period from 2021, when CORSIA starts. It indicates the option to continue with the current intra-EEA scope is the most suitable for the period 2017-2020 but puts forward different options for post-2020, showing whether and how they would contribute to meeting the EU’s 2030 climate targets. One option considers that intra-EEA emissions are offset through CORSIA, while another keeps the EU ETS obligations for intra-EEA flights to either seek some alignment with CORSIA or to combine both systems (with the EU ETS covering emissions not addressed by the global measure).
In the absence of a revision to the regulations, the EU ETS reverts to its original – although so far never implemented – full scope from 2017, which includes flights to and from third countries as well as within Europe. The Commission therefore requires an agreement from the European Parliament and Council before the end of this year and for the revised regulations to enter into force no later than early 2018, so as to provide legal certainty and clarity for operators who would otherwise have to surrender allowances for their full emissions to and from third countries by the end of April 2018.
The Commission’s proposal has been largely favourably received by the European airline industry, but added they expected the EU ETS to make way for the global ICAO scheme when it starts in 2021.
“We welcome the proposal to continue the application of the aviation EU ETS only to flights within the EEA,” said Thomas Reynaert, Managing Director of Airlines for Europe (A4E), which includes many of Europe’s biggest carriers. “This is a step in the right direction as a transition to a global offsetting scheme to address aviation carbon emissions. This proposal provides certainty for European operators, enabling them to focus their efforts on the implementation of the global deal to effectively tackle climate change. We call upon the European Parliament and the Member States to swiftly adopt the legislation.”
The airline body said CORSIA would complement industry efforts to develop cleaner aircraft, switch to low-carbon fuels and operate more efficiently. “With an ICAO scheme in place, A4E expects this to be the only measure applicable to carbon emissions from flights within the EEA as per 2021,” it added.
The International Air Carrier Association (IACA), which represents leisure airlines, said it would now expect the EU to focus on a smooth transition from the current EU ETS towards the ICAO global scheme.
“We rely on the EU legislators to bring the EU within CORSIA. Airlines should not be burdened with two systems. It would penalise passengers and the EU economy. CORSIA is the right instrument, the right scope and it is agreed. It must replace the aviation EU ETS,” said Sylviane Lust, IACA’s Director General.
The European Regions Airline Association (ERA) went further by calling for the suspension of the EU ETS ahead of CORSIA starting, arguing the current reduced scope of the EU ETS had limited environmental effectiveness, yet imposed considerable administrative burdens on many of its members. However, the ERA welcomed the commitment by the Commission for a further review of the scheme prior to CORSIA coming into force.
“Our members now have clarity on what is expected, but we would like to see a further commitment that ultimately the EU ETS will be replaced by CORSIA,” said ERA Director General Simon McNamara. “As an industry we have already committed to addressing our climate impact and we are investing in technology and making operational improvements every day. It is time for EU States to make the same commitment and put a renewed effort into delivering major infrastructure projects such as the Single European Sky that have been gaining little headway recently. Arguably, these projects have much more potential to reduce aviation’s CO2 emissions and improve flight efficiency than economic instruments such as the EU ETS.”
Brussels-based NGO Transport & Environment (T&E) said the Commission’s proposals had let the aviation industry off the hook by not regulating flights to and from Europe.
“The Commission’s decision cuts across the conclusions of its own Impact Assessment that even if the recent UN global aviation deal gets off the ground, it will fall well short of the required ambition,” it said, although pointing out the proposal allows for the exemption of intercontinental flights to be reviewed if the CORSIA scheme failed deliver.
T&E welcomed as long overdue the proposal of a declining emissions cap should the sector continue to be included in the EU ETS after 2020.
“Reducing aviation’s emissions cap fixes a bizarre situation where we had a cap-and-trade system with no declining cap,” said T&E Aviation Director Bill Hemmings. “It needs to be backed up with a more comprehensive plan to cut the proliferation of subsidies and tax breaks enjoyed by the sector. Without concerted action, the sector will continue to be a deadweight on Europe’s efforts to cut emissions.”
Not so, said the EU’s Climate Commissioner, Miguel Arias Cañete. “With this proposal we are making sure that the aviation sector also contributes to our climate objectives,” he commented. “Now, we call on countries around the world to participate in the global scheme from the beginning and help us finalise and implement sound environmental criteria to deliver real emissions reductions in the aviation sector.”
Added Transport Commissioner Violeta Bulc: “Following ICAO’s landmark agreement, the European Union is now focused on getting the global scheme up and running. We are serious about achieving carbon-neutral growth for aviation, and we will provide technical and financial assistance to make it happen. Aviation is a global business and no country can be left behind.”