Concern over concessions on aviation in ETS

December 21, 2006

The European Commission has confirmed that aviation is to be included in the EU’s Emissions Trading Scheme, but some late concessions are threatening to severely limit the step’s effectiveness.

[mailchimp_signup][/mailchimp_signup]The announcement this month marks the first attempt involving more than one country to force air transport to pay some of its environmental costs. From 2011, EU airlines will need permits to fly, with a greater number of permits needed for less fuel-efficient aircraft.

But environmental groups are worried on two fronts. Firstly that including aviation in the ETS will be seen as the solution to the environmental problems of air transport rather than as one element in an overall strategy. Secondly that too many concessions have been made to the Commission’s original ideas.

Last month, the environment commissioner Stavros Dimas said all flights entering and leaving the EU would be liable for emissions trading, a change from the original proposal, which envisaged only flights taking off from EU airports in the ETS. With America and Asian countries protesting strongly, and the US threatening legal action, the published proposals envisage a one-year derogation for flights that start or land at non-EU airports; they will enter the scheme in 2012.

T&E said the plans were “too weak to substantially reduce the climate impact of the aviation sector”. It calculates that the proposed system will reduce aviation emissions by just 3%, equivalent to less than one year’s growth, and stresses the need for additional measures such as a tax on fuel and value-added tax on tickets.

One of the controversial areas in the Commission’s proposals is how permits will be distributed. Around 97% will be go free to airlines, with the rest auctioned.

If airlines follow the example of the power companies already in the ETS and pass on the “cost” to consumers (even though they received the permits free), it will bring in €3.5 billion of additional profits for the airlines, according to estimates by WWF-Europe.

T&E’s director Jos Dings said: “It looks like the Commission has simply ticked off several items on the industry’s wish list: free permits, no firm commitment to introduce fuel taxes or deal with non-CO2 impacts, and 75% fewer emissions covered in the first year. Rather than a plan to reduce emissions from aviation, this looks like business as usual with the likelihood of massive windfall profits.”

“It is stunning that the aviation industry can talk about ‘fairness’ with a straight face. Not only does the industry stand to get double the permits of other sectors, the fuel tax exemption enjoyed by the sector is worth another €35 billion alone, not to mention the lack of VAT on tickets and the €20 billion EU taxpayers have paid out in rescue aid to airlines.”

The last-minute changes to the proposals follow not just lobbying by the USA and non-EU countries, but also by Europe’s aviation industry. The International Association of Airlines said the profits of European airlines would be wiped out by the cost of permits, while British Airways said the scheme would be self-defeating if non-EU flights were involved.

• Great Britain is doubling its air passenger duty, the tax imposed 10 years ago to help charge for aviation’s costs. On 1 February the charge on intra-EU flights will go up from €7.50 to €15, and for long-haul flights it will rise from €30 to €60 (economy class – business and first class passengers pay twice these figures).

This news story is taken from the December 2006 edition of T&E Bulletin.