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EU Communication On Emissions Trading System (ETS)

In Dec 2006 the European Commission (EC) unveiled its proposals to include aviation in the European Emissions Trading System (ETS) for greenhouse gases. The press release and more detailed documents can be obtained from the EC web site at the end of this article.

Key points of the proposal:

  • Aviation will be added to the existing system which already includes energy and major industrial processes. It will thus be an ‘open’ system, as opposed to a ‘closed’ system which includes only aviation.
  • The scheme will cover only carbon dioxide (CO2). Nitrogen oxides (NOx) and water vapour emitted by aircraft at altitude also act as greenhouse gases. The EC has said that NOx will be addressed by a separate proposal. (No proposal for water vapour.)
  • CO2 permits will be needed by airlines for all arriving and departing flights in the EU.
  • The system will start in 2011 when allocations will be added to the pool for all the sectors. However, the allowance for aircraft will be based on their emissions around 2005. Because of the growth in aviation’s emissions from 2005 to 2011, airlines will have to buy a proportion of the permits they need, estimated at 30 to 40%.
  • The allocated permits will be given free to airlines, except for a small proportion which will be auctioned. The net effect is that airlines will have to pay for about 40% of the permits they need (allocated but auctioned plus ones not allocated). As aircraft emissions continue to grow after 2011, the proportion that have to purchased will grow.

The impacts on prices of flights and the rate of growth are forecast by the EC to be small. The net reduction in total CO2 emissions is nonetheless forecast to be considerable, representing some 36% of aviation’s ‘business as usual’ emissions at 2015 and 46% at 2020, most of this reduction coming from other sectors who sell their permits to airlines because they are able to reduce their emissions more easily.

There is much debate about whether this level of reduction will really come about and it seems likely that aviation will continue to get a ‘free ride’. The AEF is disappointed by the proposal, which has been watered from the EC’s original proposal under pressure from the aviation industry. The result will, we fear, be a weak scheme that will barely constrain aviation emissions. See AEF press release – link below.

    Ets Eu Comm Aef Press Rel

    ETS proposals (EC web site)