## Europe Incorporates Aviation into EU Greenhouse Gas Trading System as of 2012

##### 26 October 2008

The European Council on Friday adopted a directive (doc. 3657/08) that includes aviation activities in the EU greenhouse gas emission allowance trading system (ETS). As of 1 January 2012, all flights arriving at or departing from an EU airport will be included in the scheme.

Operators from all states providing such flights will therefore be included, regardless of whether they are based in the EU. US-based carriers flying to and from Europe, for example, must participate in the ETS. In this context, the EU considers that the new directive is only a first step towards its final goal of a global sectoral agreement concerning the reduction of greenhouse gas emissions from aviation.

A special report in 1999 by the UN’s IPCC on aviation and climate change calculated that emissions of carbon dioxide by aircraft were 0.14 Gt C/year in 1992. This was about 2% of total anthropogenic carbon dioxide emissions in 1992 or about 13% of carbon dioxide emissions from all transportation sources then.

The range of scenarios considered here projects that aircraft emissions of carbon dioxide will continue to grow and by 2050 will be 0.23 to 1.45 Gt C/year. For the reference scenario (Fa1) this emission increases 3-fold by 2050 to 0.40 Gt C/year, or 3% of the projected total anthropogenic carbon dioxide emissions relative to the mid-range IPCC emission scenario (IS92a). For the range of scenarios, the range of increase in carbon dioxide emissions to 2050 would be 1.6 to 10 times the value in 1992.

—Aviation and the Global Atmosphere

The new legislation also contains provisions that allow for its adjustment in case third countries adopt similar measures to reduce greenhouse gas emissions from their aviation sectors.

The EU ETS works by allocating to operators a number of allowances, each giving them a right to emit one tonne of carbon dioxide per year. The total number of permits sets a limit on the overall emissions from participants in the scheme; operators must redeem allowances commensurate to the volume of their emissions and can trade permits.

In 2012, overall emissions from the aviation sector will be capped at 97% of the sector’s historical emissions—i.e. the annual average emissions in the years 2004-2006. From 2013 onwards, the annual cap will be reduced to 95% of these emissions. 85% of the allowances will be allocated free of charge, based on a simple benchmark. The remaining 15% will be auctioned. These percentages could be modified if different decisions are taken as part of the general review of the EU ETS.

The new directive creates a special reserve for new entrants or fast-growing aircraft operators (i.e. those that can demonstrate a growth rate of more than 18% annually)—a feature that was introduced by the Council. Accordingly, 3% of overall allowances will be set aside for eligible aircraft operators on the basis of a benchmark.

The Council said that this provision ensures that new aircraft operators or those in Member States with initially very low but increasing mobility rates are not penalized by the scheme.

In order to avoid market distortions, distribution of permits under this special reserve is a one-off and must not be greater than the annual allocation per tonne-kilometer to aircraft operators under the main allocation.

Each Member State will determine the use to be made of its revenues from the auctioning of allowances. These proceeds should be used to tackle climate change in the EU and in third countries as well as for the research in the field of low-emissions transport, particularly in aeronautics and aviation. Member States must report about the use of their revenues to the Commission.

The directive excludes from the system flights related to search and rescue, fire-fighting, humanitarian aid, emergency medical services and checking aircraft as well as flights performed under public service obligations (police, customs and military). In addition, operators with very low traffic levels will also be excluded from the scheme in order to avoid disproportionate administrative costs. This provision is aimed inter alia at operators from developing countries.

The new measures provide the possibility, as a last resort, to impose an operating ban at Community level on an aircraft operator that persistently fails to comply with the requirements of the directive, if this is requested by a Member State. Member States are required to transpose the new directive into national law within 12 months.

The International Air Transport Association (IATA) strongly objected to the decision, and pointed to what it said is the need to deliver an integrated air traffic management system across Europe (Single European Sky) to enable reductions in fuel consumption.

IATA does not oppose emissions trading. Positive economic measures are part of the industry’s four pillar strategy to address climate change. Along with economic measures, we need to improve efficiency with technology, operations and infrastructure. While Brussels has been fast to introduce its regional ETS scheme, it has been slow to improve efficiency. We need the same urgency to deliver an effective Single European Sky that would save billions of Euros in cost and 16 million tonnes of CO2 annually. That we have been waiting decades for this is Europe’s biggest environmental embarrassment.

—Giovanni Bisignani, IATA’s Director General and CEO

IATA (International Air Transport Association) represents some 230 airlines comprising 93% of scheduled international air traffic.

Resources

The IPCC aviation report is dated 1999.

"In 2012, overall emissions from the aviation sector will be capped at 97% of the sector’s annual average emissions in the years 2004-2006."

"Brussels has been fast to introduce its regional ETS scheme." —Giovanni Bisignani, IATA.

So the EU allowed let aviation GHG emissions grow uncontrolled from 1999 to 2012, then caps emissions at 3% below the 2004-2006 level. The EU has still not negotiated a global GHG emissions trading scheme.
IATA calls this fast.

During the same period the EU updated its fuel duty legislation and prevented EU member states from charging any aviation fuel duty even on flights within the EU.
Likewise the EU negotiated the open skies agreement with the USA without securing an amendment of the bi-lateral trade agreement on fuel duty.
Hence fossil aviation fuel is still subsidised in the sense that there is no fuel duty to cover the external cost of burning fossil fuel. This subsidy distorts the economy by to the disadvantage of rail travel and local recreation.

With this failure of international organisations to adapt fast, policy is changing at a pace slower than the retreat of the glaciers.
If scientists' concerns about global climate change prove well founded, action will eventually have to be taken.
At least the EU will have the GHG emissions trading legislation in place so it can adjust the cap in future as required.

The big advantage of cap and trade is that it is technology neutral and allows the market to find the least expensive way to meet a target.

The EU GHG cap might provide an early market for BTL if airlines can make a profit on extra flights by blending BTL into aviation fuel.

The real issue is type of aviation fuel. Transitioning to non-fossil synthetics or biofuel is already underway. The challenge is to accomplish the transition without crippling commercial aviation.

CO2-based cap and trade is a financial scheme relying on speculative climate models and the greed of global commodities traders. The speculation is that fear and panic will cause energy users to pay heavily for emissions of CO2. The estimates on Wall Street are the annual value of the schemes will be over $500 Billion. Al Gore and his London partners have set up a billion dollar investment company to capitalize on this and other energy schemes. If we discover that CO2 and AGW in particular has little to do with millennial climate or Earth's cyclical temperature change - the$\$ trillions of dollars taken by commodity traders - will have cost the human population jobs, liquidity and funding for poverty and food programs.

It would be wise to look very closely at any attempt to legislate climate by CO2 trading schemes. At best it lets profligate energy users claim guilt-free behavior by purchasing "offsets."

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