EU Environment ministers meeting on 2 December endorsed a suggestion to include the aviation sector in the EU Emissions Trading Scheme (EU-ETS) as “the best way forward” to reduce greenhouse gas emissions from aviation and urged the Commission to bring forward a legislative proposal by the end of 2006.
Aviation’s share of overall EU greenhouse gas emissions is still modest at about 3%, but its emissions are growing faster than any other sector and risk undermining progress achieved through emission cuts in other areas of the economy.
EU emissions from international flights grew by 73% from 1990 to 2003. This increase could widen to 150% by 2012 unless action is taken. Such growth would cancel out more than a quarter of the 8% reduction in total greenhouse gas emissions that the Kyoto Protocol requires the EU-15 to achieve between 1990 and 2012.
To minimize potential negative trade-offs between the different impacts and safeguard the environmental integrity of the overall scheme, both the CO2 and non-CO2 impacts of aviation are to be addressed to the extent possible.
The ministers prefer that the cap apply to air carriers and not to airports or aircraft manufacturers as some had suggested. The rules should apply for all flights departing from EU airports, whether internal or international. Limiting the scope to intra-EU flights would address less than 40% of the emissions from all flights departing from the EU.
Other guiding principles suggested by the ministers include:
The development of a working model for aviation within emissions trading in Europe that can be extended or replicated worldwide.
The methodology for distributing the total number of allowances allocated to the aviation sector within that sector should be harmonized at the EU level.
The inclusion of aviation should not adversely affect the accounting system established in Commission Regulation (EC) to ensure consistency between trading under the EU ETS and trading under the Kyoto Protocol.
The EU Emissions Trading Scheme, which started on 1 January 2005, covers almost 11,500 industrial installations which together are responsible for nearly half of all EU CO2 emissions. Operators of these installations receive emission allowances giving them the right to emit a certain level of CO2 per year. The total of these allowances creates a cap on overall emissions from these installations.
After each year, operators must surrender the number of allowances equal to their actual emissions in that year. The existence of a market in which these allowances can be traded enables participating companies to manage their emissions cost-effectively. If they anticipate that their emissions will exceed their allowances, they can either take measures to reduce their emissions—for instance by installing more efficient technology—or they can buy additional emission allowances on the market, whichever is cheaper.
Conversely, if their actual emissions are lower than their allowances, they can sell their surplus allowances on the market or else bank them to cover future emissions.
Including the aviation sector in the Emissions Trading Scheme would expand the market covered by an overall emissions cap. Aircraft operators would be allocated emission allowances, thus giving them a permanent incentive to reduce their climate impact, but they would also have the flexibility to buy or sell allowances as necessary.
The International Air Carriers Association and the US Federal Aviation Administration (FAA) are not enthusiastic about the prospect.
At its Annual General Meeting on 1 December 2005, IACA airlines urged the European Commission not to underestimate the financial impact of including aviation in an Emissions Trading Scheme. IACA carriers stressed that current fuel prices are already curbing demand and that the inclusion of aviation in the EU Emission Trading Scheme should be designed in order to preserve the viability of an industry operating on tight margins.
Speakers at the meeting agreed that a comprehensive approach should be adopted to reducing the environmental impact of aviation, with economic instruments such as emissions trading, forming just one element of this strategy. Improvements in technology, infrastructure and operational practices should precede economic measures, they argued.
For its part, the FAA says that US companies should be exempted from inclusion in the ETS, and aviation emissions should be addressed through the International Civil Aviation Organization (ICAO).
First of all, what is our concern about the emissions trading system? As I outlined earlier, we still think that there are very fundamental issues that need to be resolved when it comes especially to the discussion about CO2. As you know, we are not Kyoto signatories. We think there are fundamental issues of science that still remain unresolved. Certainly the issue of whether or not U.S. airlines can be included in any European trading scheme raises legal issues that we think must be resolved. We think that the potential for that would be very controversial, something on which we would hope to have agreement with our European counterparts before it moved forward. That’s pretty much the nub of it.
...When you think about how you actually work through the international system where aircraft are taking off every three seconds to go from one airport to another nation, that’s a very complex [matter] and that’s why I think that ICAO is the right forum to work through those issues and why it’s not a very simple thing where one region can make certain kinds of choices and decisions. This isn’t a U.S. and EU issue; this is really a world issue.—Sharon Pinkerton, FAA Assistant Administrator for Policy, Planning, and Environment