Provisional agreement reached to continue limiting EU ETS scope to intra-EEA flights until end of 2023
Trilogue meets to discuss Aviation EU ETS derogation extension
Thu 19 Oct 2017 – The EU Council Presidency and the European Parliament have reached a provisional compromise agreement that will extend the EU ETS derogation of international flights to and from Europe until the end of 2023. The Council had supported a European Commission proposal for an indefinite exemption of such flights pending a future review of ICAO’s CORSIA carbon offsetting scheme, whereas Parliament had voted for the derogation to finish at the end of 2020. The derogation extension will align with the end of the initial three-year pilot phase of CORSIA. The two sides also agreed to a future review to consider a declining year-on-year cap, the so-called linear reduction factor, on aviation emissions under the EU ETS from 2021 onwards. Earlier today, a Commission official briefed Environment Committee (ENVI) MEPs on CORSIA progress.
The derogation on international flights from the EU ETS, known as ‘Stop the clock’, lapsed in December 2016 and a new regulation is needed to avoid an automatic snap-back to the full scope of the scheme, which would have required all aircraft operators with flights to and from, as well as within, European Economic Area (EEA) countries to surrender permits to cover their carbon emissions from the beginning of 2017. ‘Stop the clock’ was introduced to allow ICAO States to reach an agreement on implementing a global scheme for international aviation CO2 emissions.
While the EU and its Member States have formally backed the CORSIA scheme finally approved at the ICAO Assembly in October 2016 and have agreed to join its voluntary phases from the beginning in 2021, MEPs have been doubtful over the still to be determined rules on the scheme’s environmental effectiveness. By extending the derogation only until the end of 2020, before CORSIA starts, they hoped this would persuade ICAO to take a more ambitious approach with the scheme’s design.
“We are not very convinced that the ICAO agreement will deliver enough benefits for the climate, but we want to both support the process and put pressure on international partners rather than give in too early,” said MEP Dr Peter Liese, the Parliament’s former rapporteur on the Aviation EU ETS file, after the trilogue meeting.
The Commission, on the other hand and backed by the Council, argued that such a move would create international friction and the scope of the EU ETS should remain restricted to intra-EEA flights indefinitely. The scope should be reviewed at a later date when clarity over the ICAO scheme, how it was working and which countries were participating was better known, it proposed.
The compromise reached in the trilogue negotiations yesterday would enable the adoption of the new regulation extending the derogation before the end of the year, said a Council statement. The dates for reporting and surrendering allowances from emissions in 2017 would be 31 March and 30 April 2018 respectively, it confirmed.
Provisions will also be established for a review once ICAO decisions on CORSIA have been finalised and how to incorporate the scheme into the EU ETS directive. This review will also consider whether to apply from 2021 the 2.2% linear reduction factor that applies to other industrial sectors in which the quantity of allowances linearly decreases each year, so tightening the overall emissions cap. Under present rules, the aviation sector cap remains the same in each year up to 2020, the end of the current trading period. The cap is 5% below the average annual level of aviation emissions in the 2004-2006 base year.
Parliament had also voted for the number of aviation allowances auctioned be increased from the current 15% to 50% from 2021, also to bring the sector into line with other industries, but a decision on this appears to have been put off pending the future review.
A Parliament proposal to exempt diverted flights from the EU ETS is believed to have been dropped.
The provisional agreement reached with the Parliament by the current Estonian Presidency will now be submitted to EU ambassadors for approval by the States. The two institutions will then be called on to formally adopt the regulation before entering into force.
“The EU believes all flights must contribute to cutting greenhouse gas emissions. We fully support ongoing ICAO negotiations for the development of comprehensive and unified international rules to turn this into a reality,” commented Siim Kiisler, Estonia’s Minister for the Environment, after the trilogue meeting. “In the meantime, adopting this regulation is crucial. We will provide legal certainty to aircraft operators and make sure European flights keep cutting emissions beyond 2016.”
Endorsing the provisional agreement as “the right step for a transition to a global offsetting scheme to address international aviation carbon emissions,” Thomas Reynaert, Managing Director of Airlines for Europe (A4E), said it was crucial the new regulation was adopted by the end of 2017.
“We welcome that policy-makers took into account the industry’s concern that there can be no double burden for European airlines which would put them at a competitive disadvantage,” he added. “A4E also supports the decision to stay away from a hasty change to the auctioning percentage without any comprehensive analysis of the market or assessment of CORSIA’s impact.”
A4E said it expected the ICAO scheme to be the only measure applicable to international carbon emissions from flights within the EEA as of 2021.
Environmental groups found little enthusiasm for the agreement to prolong the derogation by three years longer than originally called for by Parliament.
“Stalling European climate action in the aviation sector because of a weak international deal doesn’t do justice to the climate,” said Kelsey Perlman, Aviation Policy Officer at Carbon Market Watch. “To address the soaring emissions from flying, we urgently need other policies, including an end to subsidies, tax breaks and generous state aid.”
Brussels-based Transport & Environment (T&E) welcomed though improvements to the original Commission proposal to permanently remove international flights from the EU ETS and to ensure greater scrutiny of the CORSIA scheme.
T&E Aviation Manager Andrew Murphy said the provisional deal ensured there was no blank cheque for ICAO and recognised the need for aviation to remain inside a reformed EU ETS after 2020. However, he said, “A reformed EU ETS is also only part of the puzzle and the EU must continue to promote complementary measures such as ending tax exemptions and phasing out state aid to the sector. The Commission must also follow through on the commitment to address non-CO2 emissions.”
In his briefing to ENVI MEPs this morning, Peter Vis, Senior Adviser at the Commission’s transport directorate (DG MOVE), said the trilogue agreement would help facilitate the ongoing CORSIA discussions at ICAO.
“Europe has wanted a global market-based mechanism for longer than other States and has worked strenuously to maintain the environmental integrity of CORSIA,” he said. “CORSIA represents the best chance we have of a mechanism to complement other measures being undertaken by the international civil aviation sector to attenuate and eventually reduce its emissions.”
He reported an ICAO CAEP steering group had agreed last month on a draft CORSIA package to be recommended for adoption by the governing ICAO Council at its next meeting that runs October 30 to November 17. The package consists of draft Standards and Recommended Practices (SARPs), supporting information and documentation, and an environmental technical manual. The package was also under consideration by the Council’s Advisory Group on CORSIA and ICAO’s Air Navigation Commission. If agreed by the Council, the package would then be sent to States for comment and a final adoption is planned for June 2018, taking effect from the beginning of 2019.
He said some development work outside the package was still in progress and technical experts would be meeting in Brasilia next week on practical details such as registry functions, a simplified monitoring and reporting tool for small emitters and further work on sustainable aviation fuels.
“The focus will now be on implementation rather than the design of the instrument itself,” he said. “The basic design is settled but further refinement of some elements is still needed. It should be mentioned that CORSIA will evolve over time in the light of reviews – the first in 2022 – that will be informed by experience and new information.”
He reminded MEPs the EU was an observer and not a full member of ICAO but European negotiators had paid particular attention to ensuring the environmental integrity of the emissions unit criteria and the sustainability criteria for alternative aviation fuels under CORSIA.
Vis noted that aircraft operators will have to submit monitoring plans to their national authorities for approval during 2018. For 2019 and 2020 all States engaged in international civil aviation activity will have to ensure that airline operators monitor and report their emissions from international aviation.
“This is a very tight deadline and will require considerable effort both by States and by airlines, even those States that have not opted in to the voluntary phase,” he said.