Now boarding for better climate action under EU ETS aviation rules
It’s a major year of reform for many aspects of the EU ETS, and aviation is no exception. The European Commission will soon decide how its key climate policy will interact with international attempts to tackle greenhouse gas emissions from air travel. As the public consultation on the future of aviation in the EU ETS closes, we take a look at the current situation and the options for change that are on the table.
Aviation in the EU ETS today
Aviation is a highly polluting activity, producing both CO2 and other greenhouse gases which have significant warming effects on the climate. Air travel contributed 3.8% of the EU’s CO2 emissions in 2017, and aviation emissions are increasing much more rapidly than in other sectors. In an attempt to tackle these emissions and to apply the polluter pays principle to air travel, aviation was included in the EU ETS in 2012.
Under the EU ETS, specific aviation allowances (EUAAs) are issued: 85% of these are allocated for free to airlines, while 15% are auctioned. As the aviation allowances do not match total emissions from air travel, airlines also purchase ordinary allowances (EUAs). According to the European Aviation Safety Agency, the cost of ETS compliance is very low for airlines, representing about 0.3% of their operating costs for flights covered by the EU ETS.
Stop the clock!
Indeed, not all flights to and from Europe are currently covered under the EU ETS. This was the original intention, but was met with fierce opposition from non-EU countries. Under international pressure, the Commission implemented the ‘stop the clock‘ measure; the EU ETS would only cover flights within the EU and the European Economic Area, while flights between an EU Member State and a non-EU country would be exempt from ETS obligations until 2023. In the meantime, the International Civil Aviation Organisation (ICAO) should develop an international mechanism to tackle the climate impact of air travel.
CORSIA: offsetting climate action?
ICAO developed a market-based mechanism called CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) in 2016. However, CORSIA is a very ineffective climate policy. Firstly, it doesn’t propose to actually reduce emissions from aviation, but simply to compensate for any emission increases after 2020 through the purchase of carbon offsets. Offsetting is a controversial and unproven means of tackling carbon emissions, as calculating the savings in carbon emissions generated by offsets is a very uncertain science. There is also the risk of double-counting, whereby the emission savings of a project are claimed by both the offsetting airline and the country where the project is based. In this way, the emission-saving impact of a project is over-estimated and real emission levels are not adequately reflected.
Not only is offsetting ineffective as an emissions reductions tool, but offsetting projects can also have negative consequences for biodiversity and human rights. In addition, CORSIA has no real compliance mechanism and is highly untransparent, with a large level of industry influence.
Future of aviation in the EU ETS
As the ‘stop the clock’ derogation will end in 2023, the EU institutions now need to decide whether EU aviation emissions will be covered under CORSIA, the EU ETS or a mixture of both. For Sandbag, the answer is clear: only full coverage of aviation under the EU ETS can provide any meaningful climate action. A mixture of the two systems, for example with inter-EU trips covered under the ETS and international trips covered under CORSIA, would not be any improvement on the current situation, as CORSIA will not produce any real emission reductions. Covering all flights under CORSIA and abandoning the ETS for aviation would be the worst-case scenario and must be avoided.
While the ETS is a much better option than CORSIA, it is far from what it needs to be to generate the rapid decarbonisation needed, in aviation and in other sectors. One key improvement that can be made immediately is an end to free allocation of aviation allowances. A 2017 study by the European Commission found that there is little risk of carbon leakage in the aviation sector, meaning that airlines are able to shoulder and pass on the price increase of full auctioning. This change must be accompanied by wider reforms to the EU ETS this year, such as a new 2030 trajectory for the EU ETS cap, the elimination of the EUA surplus and the replacement of free allocation with a carbon border adjustment mechanism. (See this blog post for our full list of recommendations on the EU ETS reform.)
Beyond the EU ETS
As is the case in many sectors, carbon pricing alone will not decarbonise aviation. Alongside full coverage of all EU flights under the EU ETS, other policy measures are crucial for reducing greenhouse gas emissions. A first step should be to reform the Energy Taxation Directive by placing a tax on kerosene (aviation fuel). The current tax exemption on aviation fuel is equal to a public subsidy for airlines of EUR 27 billion.
Non-CO2 greenhouse gas emissions are another major source of pollution from airlines that are only beginning to be understood. These emissions can already be addressed through air traffic management practices, while the effectiveness of other policies such as a climate charge or including nitrous oxide under the EU ETS are researched.
Finally, decreasing aviation emissions will require a decrease in air travel. EU policies can support the development of alternative, high-quality, affordable mobility options (such as long-distance electrified rail). Revenues from the auctioning of aviation allowances could be used directly to fund sustainable, people-centred public transport systems.