Aviation ETS – gaining altitude

This report analyses the performance of the EU emissions trading system (EU ETS) for aviation for the stop-the-clock years 2013-2015 and concludes that the measure shows the potential to achieve emissions reductions at lower cost through trading allowances with stationary ETS sectors, but only if Europe addresses the oversupply of allowances within the overall ETS.

The inclusion of aviation in Europe’s ETS should be judged a success for several reasons;

1.    The EU ETS has served as a model for other jurisdictions. Not only has the aviation ETS disproved sceptics both within and beyond Europe, but Europe’s resolve has inspired and spurred moves to act at the global level and in other aviation markets;

2.    On several counts the EU ETS provides greater certainty and environmental integrity than what is contained in the outline of a global deal to address aviation emissions that ICAO published early September;

3.    The measure is fully functioning – it enjoys a very high degree of compliance, including aircraft operators from third countries who opposed even the inclusion of flights within Europe in the ETS.

While the emission reductions from aviation’s inclusion in the ETS cannot be quantified at this stage, all CO2 emitted by ETS sectors (aviation and stationary installations) remains under the overall ETS cap. Since this cap declines and measures have been taken to reduce the surplus, aviation’s inclusion in the ETS will eventually lead to emission reductions in other sectors and at a lower cost than could have been achieved within the aviation sector.