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EU MEPs Back New Direction For Taxing Aviation's Emissions

by Ulrika Lomas, Tax-News.com, Brussels

20 October 2017


Members of the European Parliament have preliminarily agreed to continue with the aviation industry's current treatment under the EU's emissions trading scheme to allow for the development of a new industry-specific carbon tax arrangement.

The EU's emissions trading scheme (ETS) was launched in 2005 to promote the reduction of greenhouse gas emissions at EU level. It is a "cap and trade" system with a cap or limit on the amount of certain greenhouse gases that can be emitted, with carbon emission permits traded between participants for emissions above this cap, to provide a method of taxing carbon emissions to encourage energy efficiency.

The aviation sector is part of the existing ETS regulation. Emissions from aviation also form part of the EU's goal of cutting greenhouse gas emissions by 20 percent by 2020 compared to 1990 levels.

In 2014, the EU decided to reduce the scope of the ETS scheme to apply only to intra-European Economic Area (EEA) flights, in order to facilitate progress in the negotiations within the International Civil Aviation Organization, and in the hope of achieving clarity regarding emissions from international flights connecting the EEA and third countries. It was then decided that the derogation for non-intra EEA flights would apply only until the end of 2016.

In October 2016, the International Civil Aviation Organization (ICAO) and countries agreed on a Resolution for a global market-based measure to address CO2 emissions from international aviation as of 2021. The agreed Resolution sets out the objective and key design elements of the global scheme, as well as a roadmap for the completion of the work on implementing modalities. It was agreed on the basis of this Resolution that the EU would extend the derogation for non-intra EEA flights.

On October 18, 2017, the Estonian Presidency reached a provisional agreement with European Parliament representatives on a regulation to achieve this. The EU Council said: "This new regulation is the follow up to the decision reached in October 2016 by the ICAO to introduce a global market-based measure from 2021 in order to regulate international aviation emissions through an offsetting system, also referred to as CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation). The EU supports this measure and aims to join the 'pilot' phase of the scheme in 2021 on a voluntary basis."

"In the meantime, the adoption of this new regulation before the end of the year is an indispensable requirement to avoid any legal gap as regards compliance with the current ETS regulation in 2017. Today's agreement enables this adoption to happen on time. The dates for reporting and surrendering allowances from emissions in 2017 would be March 31 and April 30, 2018, respectively.

The Provisional Agreement provides that the EU will:

  • Maintain current limitations within the scope of the EU ETS, particularly by prolonging the derogation for non-intra European Economic Area (EEA) flights until December 31, 2023, when the "first" phase of CORSIA will begin;
  • Establish provisions for a review aimed at implementing the global market-based measure within the EU, particularly in the ETS directive, once all ICAO decisions have been taken; and
  • Subject to this review, foresee the application of the Linear Reduction Factor, as set out in the ETS directive, to the aviation sector from 2021 onwards.

TAGS: compliance | tax | energy | aviation | Estonia | carbon tax | regulation | trade | European Union (EU) | Europe

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