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EU 'Stops The Clock' On ETS

by Ulrika Lomas, Tax-News.com, Brussels

15 November 2012


The European Union's (EU) Commissioner for Climate Action, Connie Hedegaard, has announced a landmark decision to defer the international aspects of the Emissions Trading Scheme (ETS) for aviation for one year to allow the International Civil Aviation Organization (ICAO) to develop a globally-agreed market-based mechanism (MBM) to tax the emissions of the aviation sector.

Hedegaard told a press conference that the decision had been made following substantial progress on the agenda at the ICAO Council's latest meeting on November 9, 2012.

The ETS was extended to aviation activities from or to European soil on January 1, 2012, to provide a solution to taxing aviation emissions, which were excluded from the Kyoto Protocol. Under the ETS, airlines operating into and out of the EU, regardless of how long that flight is in EU airspace, are required to surrender varying emission allowances, and are required to purchase any additional permits outside of their free allowance.

The European Union's decision will mean that airlines not complying with the scheme will not be subject to penalties of up to EUR100 per tonne of carbon dioxide emitted without the payment of a permit, until April 2014. The decision will not impact flights inside Europe, where the ETS requirements will continue to apply. The Commission explained the decision would allow time, until the ICAO's 2013 Assembly in September/October, for substantive progress to be made towards a global deal on taxing aviation sector carbon emissions.

A total of 17 non-EU countries have opposed the ETS, and the United States had called on Europe to avert the roll out of the scheme until at least 2020, to allow for a resolution at ICAO-level, and to avert a potential trade war.

Despite significant opposition, the European Commission said in May that 99% of airlines had complied with the requirements. Ten aircraft, from India and China, were boycotting the scheme it said. Legislation in the US Congress backs airlines that choose not to comply with the regulations. China has taken a step further by banning its airlines from taking part in the scheme.

Confirming its decision, the Commission stated: "Based on the encouraging results of the ICAO Council meeting, and the constructive engagement of our international partners in the relevant discussions, the EU is convinced that a global solution for addressing the fast growing aviation emissions from international aviation is within reach at the upcoming ICAO Assembly in 2013."

The Commission added: "As a gesture of good faith the EU will 'stop the clock' on the implementation of the international aspects of its ETS aviation by deferring the obligation to surrender emissions allowances from air traffic to and from the EU by one year. This means that the EU would not require allowances to be surrendered in April 2013 for emissions from such flights during the whole of 2012. The monitoring and reporting obligations will also be deferred for such flights. [However], the obligations relating to all operators' activities within EU will remain intact and compliance with the EU law will be enforced in this respect."

Hedegaard stated: "The EU has always been very clear: nobody wants an international framework tackling CO2-emissions from aviation more than we do. Our EU legislation is not standing in the way of this. On the contrary, our regulatory scheme was adopted after having waited many years for ICAO to progress. Now it seems that because of some countries' dislike of our scheme many countries are prepared to move in ICAO, and even to move towards a MBM at global level."

However, she added: "Let me be very clear: if this exercise does not deliver - and I hope it does, then needless to say we are back to where we are today with the EU ETS. Automatically".

"So we are creating this window of opportunity, this great chance," Hedegaard explained. "I can only recommend to all parties to engage urgently in taking this issue forward. Now it is the time for paving the way for strong decisions to be taken by the next ICAO General Assembly. The European Union will engage fully and will work closely with the ICAO leadership. We are convinced others will do as well."

Welcoming the European Union's announcement, the head of the International Air Transport Association, Tony Tyler, stated: “Commissioner Connie Hedegaard’s announcement that she has 'stopped the clock' on the imposition of the EU ETS on flights to and from non-EU countries represents a significant step in the right direction and creates an opportunity for the international community. The Commission’s pragmatic decision clearly recognizes the progress that has been made towards a global solution for managing aviation’s carbon emissions by the International Civil Aviation Organization."

“The flexibility shown by the European Commission demonstrates that the ICAO process is working, and we look forward to seeing all parties working together to present positive proposals to the ICAO Assembly in September 2013,” he concluded.

TAGS: environment | compliance | tax | European Commission | India | law | aviation | China | legislation | carbon tax | United States | regulation | penalties | trade | Europe

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