EU takes half-hearted step towards taxing international flights
Extension of ETS to some international flights, private jets and to smaller ships are steps forward, but overall weakening of the ETS undermines European climate action and energy security
The revision of the EU’s Emissions Trading System (ETS) for aviation falls short of driving the robust climate action needed for the sector, says T&E . For the first time, the Commission has put a carbon price on flights departing the EU, but only within a radius of 5,000km and only from 2029 onwards. This means a flight from Paris to Dubai would be covered by the carbon market, while a flight from Paris to New York would not.
This still leaves 47% of European aviation exempt from carbon pricing and can only be considered a first step, says T&E. The EU will miss out on approximately €4.2 billion in additional revenues it would have raised had all departing flights been included in the scope of the carbon market.
Alongside the EU ETS proposal, the Commission also published an assessment of CORSIA - the international offsetting scheme that serves as the alternative to the EU ETS for long-haul flights. The assessment concludes that CORSIA is not a credible alternative to the EU ETS and requires significant reinforcement. But the compromise option put forward today does not reflect this assessment. Instead, it extends the “stop the clock” exemption on departing flights until at least 2032 under the guise of “encouraging CORSIA”. This compromise falls short of the Commission’s own science-based recommendations, T&E says.
Diane Vitry, T&E aviation director said: “For the first time ever, international flights are regulated by the EU. But due to industry pressure, only a proportion of journeys will be covered and the longest, most polluting flights will remain exempt. This must only be a starting point. The ball is now in the member states’ court. They must, at the very least, support this commitment while pushing to gradually expand the coverage before the next review. Aviation must pay for all its emissions, just like any other sector of the economy.”
The revision includes other key measures to curb aviation emissions, notably putting a price on the climate impact of private jets for the first time. Despite their disproportionate impact, private jets have largely been left exempt from the EU ETS until now.
The non-CO2 impact of aviation is also finally receiving serious consideration. The Commission proposal published today introduces free allowances for airlines that successfully avoid creating warming contrails, making it a significant milestone in the race to reduce aviation’s full climate impact.
Shipping
T&E welcomes the Commission’s proposal to allocate 110 million ETS allowances to support clean shipping fuels and propulsion technologies. This provides funds for the European shipping industry to invest in green, scalable e-fuels and battery-powered ships. But without clearer rules it will lead shipping companies to continue investing more in biofuels, warns T&E.
To address concerns over carbon leakage, the Commission has proposed an expansion of the non-EU transhipment ports list. This means more neighbouring non-EU ports like Tangier and Port Said will be brought into the ETS, to further limit the incentive for ships to evade EU ports. The Commission also added ‘ETS-as-a-service’, allowing third countries to get a share of ETS revenues if they decide to use the EU ETS system to price their GHG emissions.
However, the Commission also offers lower ETS costs to large containerships (10,000+ TEU) that stop in the EU in an attempt to reduce evasion risk. This would create dangerous loopholes and distorts competition, says T&E.
Overall ETS revision
Overall, the proposal slows the pace of emissions reductions. Lowering the Linear Reduction Factor (LRF) to 3.7% for 2031–2035 and 1.7% from 2036 will supply excess allowances which depresses the long-term price signal and weakens the business case for clean-tech frontrunners. To protect the system's core investment signal, the LRF should remain untouched until 2036, says T&E.
The Commission's proposal to allow up to 250 Mt of carbon removal (CDR) credits into the ETS by the late 2030s asks the market to go from essentially zero permanent removals deployed today to a quarter of a billion tonnes within little more than a decade. This is an unprecedented scale up, with no certified project yet to prove it is even possible.
The Commission has no credible path to closing that gap through permanent removals at the assumed volumes and prices. It is likely this will lead to pressure to lower the bar by allowing cheaper, less sustainable carbon removal credits to substitute for the permanent removals the target was supposedly built on. Treating removals as equivalent to emissions reductions would allow polluters to buy removal certificates instead of cutting emissions at source, warns T&E. The inclusion of up to 2% international credits for the 2036–2040 period could also threaten the EU’s domestic climate ambition and international credibility.
Kädi Ristkok, director of energy and climate, said: “Europe has an energy dependency problem not an ETS one. The watering down of the ETS will make it near impossible to meet the EU’s 2040 target. If ETS does less work in bringing emissions down, other sectors like agriculture will have to do more. The proposal will keep Europe hooked on volatile and insecure fossil fuels for longer and will deprive governments and industry of the revenues needed to boost the innovative technologies of the future."
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