Why aviation must be included in the European Emissions Trading Scheme
Dr. Peter Liese, MEP
It was high time that the European Commission presented a legislative proposal to address the greenhouse gas emissions of aviation, which have doubled since 1990. Even though the European Emissions Trading Scheme (ETS) has been subject to enormous criticism because of the bad design of the EU scheme, the principle of the ETS is good. But it has to be changed to be more efficient and to be fairer.
The first positive step was taken by the European Commission when it proposed that for the aviation sector, allowances will not be distributed by the member states according to opaque and unfair criteria, but by a European harmonised allocation method. It means that unlike companies from steel, lime, cement and other sectors, an aviation company will be subject to the same criteria in all 27 member states.
It is also a big advantage that the Commission no longer proposed to allocate certificates according to historical emissions, but by benchmark and auctioning. But the Commission proposal has a lot of shortcomings. The most important failure is that the Commission proposed to introduce the scheme in the beginning only for flights inside Europe. Intercontinental flights starting and landing in Europe would be included only one year later. This would undermine the environmental credibility of the scheme as two thirds of the emissions are generated by intercontinental flights. A different starting date for intercontinental flights would put European airlines and European regions at a competitive disadvantage. That is why the European parliament voted, with big support from all political groups and all committees involved, for one starting date (1 January 2011).
The Commission proposal is the first legislative instrument that really addresses greenhouse gas emissions of aviation, but it is no breakthrough. According to a lot of studies, it will not really limit greenhouse gas emissions, and - what is even more regrettable - it will not significantly promote innovation in the airline industry. That is why the European Parliament voted for a lot of amendments to make the proposal much more ambitious. The cap was reduced from 100 to 90 percent with the possibility to reduce it further after 2012.
The Environment Committee also voted in favour of an efficiency criterion which means that airlines will only be allowed to buy permits if they already have invested in new engines according to an efficiency commitment by the industry itself. The auctioning should be increased from 5%, as proposed by the commission, to 25%. In addition, after 2012 a review clause for a higher degree of auctioning is foreseen if more auctioning is established in any other sector. The revenues generated by auctioning should be used to mitigate climate change in the EU and in third countries, especially developing countries. It should be used for research and development, mainly in the airline sector, and, importantly, to reduce taxes and charges for environmentally friendly transport modes like buses and railway.
Even though the vote of the plenary was much more moderate than the vote of the main committee (Environment Committee), it has been criticised by the industry with dramatic words. I think this criticism is extremely overstated.
Producers of steel, cement, lime and other products have already been subject to emission trading for years and the efforts the European Union asks of them will increase dramatically according to the new national allocation plans that will come into force from 1 January 2008. In theory, 100% of the demanded reduction can be moved to countries outside the European Union (carbon leakage).
If the Parliament’s proposal is implemented, there will be the same starting dates inside and outside the European Union. This means that a very significant part of the competition that airlines face is covered by the same scheme. This is a situation much fairer than for the producers of steel and cement as their competitors, for example in Ukraine or China, do not face any kind of caps or other limitations.
Anyhow, a lot of the services of the airlines can never be replaced, because no one would seriously argue that if a flight from London to Athens will be slightly more expensive - the Commission speaks about 10 euros - passengers would instead prefer flying from Moscow to Istanbul. This is the reason why I recommend the airlines to modify their strategy and try to deal constructively with the proposal instead of attacking it with exaggerated arguments.
I also appeal to the Council of the environment ministers. Their language on climate change and the necessity to reduce greenhouse gas emissions was very strong, but in fact the ministers are about to weaken the commission proposal instead of strengthening it as proposed by the Parliament.
Dr Peter Liese is a German Member of the European Parliament and, as rapporteur, played a significant role in the recent vote by MEPs to include aviation in the EU ETS.
This article first appeared in Carbon Market Europe, published by Point Carbon, a world-leading provider of independent news, analysis and consulting services for European and global power, gas and carbon markets. Read more at www.pointcarbon.com