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Airlines Included In EU Emissions Trading Scheme

by Ulrika Lomas, Tax-News.com, Brussels

09 July 2008


The European Commission has welcomed the European Parliament's second reading vote on Tuesday in favour of including aviation in the EU Emissions Trading System (EU ETS).

The vote confirms the agreement reached between the Parliament and the Council last month.

Under the new directive greenhouse gas emissions from flights to, from and within the EU will be included in the EU ETS from 2012. All airlines will be covered whatever their nationality. Like the industrial companies already covered by the EU ETS, airlines will be able to sell surplus allowances if they reduce their emissions and will need to buy additional allowances if their emissions grow.

Environment Commissioner Stavros Dimas commented:

"Greenhouse gas emissions from international air transport are increasing faster than from any other sector in the EU, and this growth threatens to undermine our overall progress in cutting emissions. This agreement will enable the aviation sector to make a fair contribution to Europe's climate change targets as many other sectors are already doing.

"It is a significant step forward which underlines to our partners once again the EU's commitment to implementing the concrete measures needed to reduce emissions. It also augurs well for agreement later this year on the Commission's January 2008 climate and energy package."

The directive is part of a comprehensive approach by the EU to addressing aviation emissions, which also includes more research into greener technologies and improvements in air traffic management through the creation of a 'Single European Sky'. A proposal to reduce nitrogen oxide emissions from aircraft is included in the Commission's work programme for this year.

The agreement reached between the Parliament and the Council endorses the key elements of the Commission's original proposal from December 2006. However, there are some changes from the original proposals, such as the dropping of a one-year introductory phase for intra-EU flights starting in 2011.

Under the agreement, emissions from aviation will be capped at 97% of their average 2004-2006 level in 2012. This will decrease to 95% from 2013, although this percentage may be reviewed as part of the general review of the Emissions Trading Directive. Also, airlines will receive 85% of their emission allowances for free in 2012, although this percentage may be reduced from 2013 as part of the general review of the Emissions Trading Directive.

An exemption has been introduced into the agreement for commercial air operators with very low traffic levels on routes to, from or within the EU or with low annual emissions (less than 10 000 tonnes CO2 a year). This means many operators from developing countries with only limited air traffic links with the EU will be exempt. The Commission said that this will not have a significant effect on the emissions covered by the EU ETS.

A special reserve of free allowances has been added into the agreement for new entrants or very fast-growing airlines. The reserve does not increase the overall cap on allowances and therefore does not affect the environmental impact of the system. Airlines that are growing will be able to benefit from the reserve up to a limit of one million allowances.

In addition, a new mechanism has been introduced to ensure "consistent and robust enforcement throughout the EU." As a last resort, member states could ask for an operator to be banned from operating in the EU if it persistently fails to comply with the system and other enforcement measures have proven ineffective.

The Council is expected to give formal approval to the directive at one of its next meetings. Once formally adopted, the directive will be published in the Official Journal and will enter into force the same day. Member states will then have 12 months to transpose it into national legislation.


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