Design of the EU ETS for aviation Aviation

Design of the EU ETS for aviation

Aviation and EU ETS legislation § Directive 2008/101/EC – entered into force on 2 February 2009 § Each Member State transposes the Directive into national law § Aviation included in EU ETS from 1 January 2012

Aviation activities covered by EU ETS: § Flights arriving at and departing from EU airports § EU ETS covers 30 European States (the EEA) § Exemptions: § Small aircraft - of less than 5 700 kg § State, military, rescue, emergency, VFR, training flights § Commercial air transport operators with: – less than 2 flights per day, or – less than 10 000 tonnes of CO 2 per year

Aviation emissions cap § Emissions cap – Baseline: 219. 6 Mt CO 2 (average annual emissions of 2004 -2006) – 2012: cap = 97% of baseline – 2013 -2020: cap = 95% of baseline § Aviation expands the total EU ETS cap by approximately 10%

Allocation of allowances § 82% allocated to operators free of charge, based on a benchmark § 15% allocated by auction § 3% held in reserve for new entrants and fast growing operators – distributed in middle of 2013 -2020 trading period based on tkm activity in 2014

Trading § Allowances can be freely traded § Aircraft operators can buy and use allowances from other sectors § Aircraft operators can use CERs/ERUs: – 50% of their reduction effort can be met through credits – Will not be below 1. 5% of verified emissions

Use of auctioning revenues § Auctioning proceeds should be spent on tackling climate change in the EU and third countries: – – – Reduce emissions Adaptation Administration of scheme Global Energy Efficiency and Renewable Energy Fund Avoiding deforestation in DC Research and development (mitigation and adaptation in aeronautics and air transport) – Low emission transport § Member States must report how they spend revenues to the Commission

Timetable for inclusion of aviation in the EU ETS § 2011 – 31 March: Submission by aircraft operators to States of: – – 2010 verified emissions report; and Optional 2010 verified tkm (benchmarking) report – 30 June: Submission of tkm data by States to the COM – 30 September: COM decision on the benchmarks for 2012 and 2013 -2020 – 30 December: States publish allocations of free allowances to aircraft operators

Timetable for inclusion of aviation in the EU ETS § 2012 – 28 February Issuing of free allowances for 2012 – 31 March: Submission by aircraft operators to States of 2011 verified emissions report § 2013 – 28 February: Issuing of free allowances for 2013 – 31 March Submission by aircraft operators to States of 2012 verified emissions report – 30 April: Surrender of allowances equal to the 2012 emissions

Impacts of the EU ETS on aviation

Analysis of the impacts § The Commission extensively analysed the impacts of the EU ETS on aviation when developing the legislation § A comprehensive impact assessment is available on our website http: //ec. europa. eu/clima/documentation/transport/aviation/index_en. htm § This considers a range of impacts including environmental and economic

Environmental impacts § Total CO 2 emissions from aviation will continue to increase § The emissions cap means that this growth will be offset by reductions in other sectors or from projects in other countries § Compared to a business as usual scenario, by 2020 the EU ETS will result in a annual emissions reduction of over 190 million tonnes CO 2 § Total global aviation CO 2 emissions in 2006 were approximately 750 million tonnes, so this is a significant saving

Economic impacts § We examined impacts in 2020 of € 30 per tonne carbon price § Our modelling showed that: – Air traffic will continue to grow substantially – The EU ETS will reduce demand for aviation by a small amount in 2020 relative to business as usual forecasts

EU ETS will have a small impact on demand Change in aviation demand (revenue tkm) 300 135% 250 142% 2005 = 100 200 150 100 50 0 2005 2020 - with EU ETS 2020 - no EU ETS

Impacts on airlines § Since all airlines will be treated equally, competition between airlines would not be significantly affected § Airlines costs should be passed on to consumers § Our modelling showed that by 2020 airline tickets could increase by € 4. 6 to € 39. 6 depending on the journey length and allowance price

Example of impact on ticket prices § Madrid to Mexico City = 9, 060 Km § Flying one way in economy generates 712 Kg of CO 2 (ICAO carbon calculator) § At current carbon prices (€ 17 per tonne), this is € 12. § Munich to Cancun = 8, 869 Km § Flying one way in economy generates 620 Kg of CO 2 (ICAO carbon calculator) § At current carbon prices (€ 17 per tonne), this is € 10. 50 § These examples assumes full pass through of value of emissions allowance § Lower cost to airlines as 82% of allowances allocated for free

Conclusions on the impacts of the EU ETS § EU ETS brings significant environmental benefits in reducing the net CO 2 emissions from aviation § Economic modelling suggests that the system will have little impact on the demand for aviation § Based on current and forecast carbon prices the EU ETS is likely to have limited impact on the price of air tickets

Measures taken by other countries

Climate measures taken by other States § EU ETS legislation recognises that other States may decide to implement their own climate change measures relating to aviation § Recital 17 and Article 25 a of Directive 2008/101/EC are the key provisions

In summary § Where 3 rd country adopts measures to reduce climate change impact of flights to the EU: – EU will consider options to provide for optimal interaction – The Commission may recommend negotiating an agreement with 3 rd country – The Commission able to adopt amendments to exempt arriving flights from the scope of the EU ETS § In case of agreement on global measures, EU will consider amending Directive as appropriate

Further information Aviation and climate change website: http: //ec. europa. eu/clima/policies/transport/av iation/index_en. htm

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