European Parliament’s environment committee agrees to tighten screw on aviation under reformed EU ETS

European Parliament’s environment committee agrees to tighten screw on aviation under reformed EU ETS | ENVI,Redshaw Advisors,T&E

Fri 16 Dec 2016 – Members of the European Parliament’s environment committee (ENVI) have agreed a proposal to tighten the rules on aviation emissions under the EU Emissions Trading System (EU ETS) and bring the sector’s emissions cap more into line with other industries. The MEPs believe aviation must do more to reduce emissions and expect the sector to be on an equal footing by 2030. The EU is currently looking to reform the EU ETS, which has received criticism for a lack of teeth that has resulted in the price of allowances currently hovering at barely €5 ($5). However, the proposals would only take effect from the next post-2020 period by which time airlines will expect the new ICAO global CORSIA scheme to replace it. This week, a study commissioned by Brussels-based NGO Transport & Environment found that by keeping the EU ETS for flights within Europe, the ENVI proposals would cut nearly four times more emissions than under CORSIA.


The compromise package of proposals agreed by the various political groups within ENVI will now be taken for a vote by the full Parliament plenary in February before trilogue negotiations begin with the European Commission and the Council, which represents EU member states. A final agreement on the reforms is anticipated by the end of 2017.


In addition to action on aviation, the MEPs called for EU shipping emissions to be included in the EU ETS from 2023 if the UN’s International Maritime Organisation (IMO) fails to deliver a global deal by 2021.


ENVI proposes the total quantity of allowances for aviation activities in 2021 to be 10% lower than the present 2014-2016 average allocation and then decrease at the same annual rate as the total cap for the EU ETS so as to bring the cap for the aviation sector more in line with the other sectors included in the EU ETS by 2030.


An amendment to the EU ETS directive also proposes that “for aviation activities to and from aerodromes located in countries outside the EEA, the quantity of allowances from 2021 onwards may be adjusted taking into account the agreed establishment of a global market-based mechanism by ICAO. The Commission shall present a legislative proposal to the European Parliament and the Council concerning these activities by 2019 following the 40th assembly of ICAO.”


The present directive allows for 15% of allowances to be auctioned, which the MEPs want increased to 50% from 1 January 2021.


According to Louis Redshaw, CEO of carbon market consultancy Redshaw Advisors, aircraft operators are likely to be in for a shock come 2021 if the EU ETS Phase IV reform proposals are adopted, which are aimed at drying up the supply of allowances. “There will be a double-whammy of the price of allowances being significantly higher – over €20 by 2020 is now likely – together with the amount that they will have to buy,” he said. “Auctioning 50% is a big surprise, a decreasing allocation to the sector less so as it is an anomaly widely acknowledged.


“Overall, the bullish attitude of the ENVI committee suggests that despite the likely protests and possible legal challenges from the industry, EU-wide aviation will continue to be included in the EU ETS.”


However, he pointed out, there were still political obstacles to be overcome on the overall package of reforms and the outcome could be a watered-down version.


For campaigners Transport & Environment (T&E), the ENVI vote was a clear signal that strong action was needed on aviation and shipping emissions.


“When the choices were between sailing towards oblivion or having ships and planes account for at least some of their climate impact, environment committee MEPs chose the latter,” said Faig Abbasov, shipping and aviation officer at T&E. “With much uncertainty hanging over ICAO and IMO, the European Parliament has acted decisively to ensure these sectors will be subject to effective climate measures. Council should now follow the Parliament’s lead and ensure climate ambition is not entirely outsourced to two agencies with long records of inaction.”


The study carried out by CE Delft for T&E found that despite the substantial concerns over the environmental effectiveness of the current EU ETS and the reduced aviation coverage to flights only within the European Economic Area (EEA), the scheme was still functioning well. Over the period 2013-2015, it was responsible for mitigating 68.3 million tonnes of CO2 emissions. However, with reforms in place to reduce the huge surplus of allowances, aviation’s inclusion in the EU ETS will only achieve its full potential though during its 2021-2030 trading period, argues T&E.


The CE Delft study compares emission reductions that can be delivered through the ICAO CORSIA scheme and through regional measures such as the EU ETS. A return to full scope EU ETS – in which all flights to, from and within the EEA are included – would deliver the greatest emission reductions over the 2021-2035 period, some 3,885 million tonnes (Mt), finds the report. CE Delft analysis estimates CORSIA global reductions at 2,711 Mt, assuming 100% compliance and 100% of offsets have environmental integrity – which T&E believes is unlikely.


The reason for the anomaly is that while CORSIA covers more flights, its ambition of stabilising emissions at 2020, after which CE Delft estimates just over one-fifth of global aviation emissions will be offset between 2021-2035, is much less than the EU ETS ambition of stabilising emissions at 2004-2006 levels and then declining at an anticipated 2.2% per annum under the reform proposals. Louis Redshaw says the prospect of a 2.4% per annum so-called Linear Reduction Factor is now possible following yesterday’s ENVI vote.


A reformed EU ETS restricted to flights within Europe would deliver reductions of 956 Mt over the period, whereas if CORSIA was applied to the same flights, 271 Mt would be saved.


The greater ambition of the EU ETS, therefore, trumps the greater scope of CORSIA, argues T&E. It says the report debunks the myth that global action is always better than regional measures.


“This is because global measures, made to accommodate over 190 states, will only ever achieve lowest-common-denominator levels of ambition,” it says in a policy briefing. “An ambitious path would have minimum global action led by ICAO, but with developed regions such as the EU adopting more ambitious measures, including the EU ETS. This would also help drive innovation and efficiency savings in the sector, which are not currently unlocked and won’t be driven by the ICAO CORSIA.”


Added T&E’s Andrew Murphy: “This report shows that good regional action delivers more than weak global action. Cutting the cap in the EU ETS, as Parliament will be voting on, is the way to go. An ICAO-only approach, which has been the mantra of some in Europe for too long, won't do the job. ICAO is only the bare minimum and Europe needs to build on it.”


Noting that the European Commission is currently assessing the ICAO CORSIA outcome and preparing its own legislative proposal for release in early 2017 to amend the the Aviation EU ETS, trade association Airlines for Europe (A4E) has, unsurprisingly, a different view.


“During the review, the European legislator should ensure the competitiveness of European carriers, avoid adverse financial implications and send a positive signal to support the transition of the Aviation EU ETS towards the ICAO offsetting scheme,” it says in its latest policy briefing. “In the long-term, A4E’s expectation is that the ICAO scheme will replace the Aviation EU ETS in Europe gradually with the start of the monitoring phase in 2019.”


With fresh legislation required to avoid the EU scheme automatically snapping back to full scope coverage at the end of this month, A4E said operators urgently needed clarity about requirements for 2017 and beyond.




European Parliament ENVI committee EU ETS amendment proposals (click on ‘Miscellaneous – compromise amendments 1 -17)





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