State of the aviation ETS

Figures for aviation emissions released on 1 April 2019 show a sector with a climate impact that continues to spiral out of control. Not only are its emissions continuing to grow, but this growth is present across the sector and shows no signs of abating. Much stronger action is required by European governments if this is to be reversed, starting with ending its kerosene tax exemption.

The figures below reflect emissions from flights within Europe, which is the current scope of the emissions trading system (ETS). A broader scope, for example, covering all flights from Europe, would produce different figures.

Overall increase

Aviation emissions grew 4.9% in 2018 to 67.5 million tonnes of CO2 – a 26.3% increase in five years. This emissions cover only flights within Europe (Bucharest-Helsinki) and not extra-EU (Warsaw-New York) and so represent only an estimated 40% of total European aviation emissions. Despite this reduced scope, the total of 67.5 million tonnes almost equals the total annual emissions of Portugal (72.5 million tonnes in 2016).

The growth in 2018 exceeds the growth forecast issued by the European Aviation Safety Authority (EASA) environment report, published only in January of this year. That report predicted an increase of 3.3% in emissions, when in fact emissions grew 4.9%. This calls into question whether regulators are able to come to grips with this runaway growth.

Ryanair is a top 10 EU emitter

Ryanair’s entry into the top 10 of ETS emitters came as no surprise. In 2017 Ryanair was the 12th largest emitter, and in 2016 it was 17th. Its emissions have been growing steadily, while at the same time emissions from other sectors covered by the ETS have been declining. In 2013, Ryanair’s emissions were 6.6 Mt CO2. Last year, they soared to 9.9 Mt CO2, representing an increase of 49%.

Ryanair will continue to climb in the rankings unless action is taken to rein in its emissions. But nearly all airlines are seeing their emissions grow, and so this is a league table which will be increasingly dominated by airlines until governments get serious about addressing the sector’s significant climate impact.

And airlines are a top 10 emitter in 16 European countries

EU-wide, Ryanair figures as a top 10 emitter. However, in the majority of European states, airlines feature as top 10 emitters, and in four states they register as the largest emitter.

Austria: Austrian Airways (4th)

Cyprus: Cobalt Air (4th) and TUS Airways (6th)

Finland: Finnair (4th)

France: Air France (7th)

Hungary: Wizz Air (2nd)

Iceland: Icelandair (3rd) and WOW Air (6th)

Ireland: Ryanair (1st), Aer Lingus (7th)

Latvia: AirBaltic (4th) and Primera Air Nordic (6th)

Lithuania: Small Planet Airlines (6th)

Luxembourg: Luxair (2ns) and Cargolux (8th)

Malta: Air Malta (2nd) and four other airlines

Norway: Norwegian (1st)

Portugal: TAP (5th)

Slovenia: Adria Airways (8th)

Sweden: SAS (1st)

UK: Easyjet (1st)

Emissions growth is endemic across the sector

Ryanair grabbed headlines. However, emissions growth was endemic across the sector, with nearly all airlines seeing their emissions increase in 2018. This was true of other low-cost carriers (Easyjet and WizzAir both saw their emissions grow 11% in 2018) but also of national carriers such as TAP (+12%) and Lufthansa (+9.6%) which saw serious emissions growth. Whether it’s for sun holidays, weekend breaks or business trips, aviation emissions growth is out of control. Of the major airlines, only Air France and SAS registered small dips (-1.1% and -0.8%, respectively).

The ETS is delivering only a minimal price impact – kerosene taxation is needed

The ETS operates by requiring airlines to surrender allowances (emission permits) equal to their total emissions. The more an airline emits, the more it has to surrender. The idea is to provide an incentive for airlines to reduce their emissions. Allowances under the ETS, in 2018, cost on average €20. And airlines received a large portion of its emission permits (32 million, almost half) for free.

As a result, the total cost of compliance for airlines in 2018 was an estimated €700 million. This is higher than in previous years when airlines emitted less and when the price of allowances was as low as €5.

However, the current ETS price is short of what is required in order to drive emission reductions within the sector. And, in contrast, a kerosene tax set at the EU minimum of 33 cents/litre could make a far greater contribution to covering aviation’s external costs and cutting emissions. In total it would raise €9.2bn a year.

Kerosene remains tax-free across Europe except for domestic flights in the Netherlands and Norway, an exemption which is further driving emissions growth in the sector.  

The price impact on a flight-by-flight basis is minimal

An Oslo-Rome economy class return flight would emit an estimated 375kg of CO2 per passenger. But with airlines receiving on average of 47% of their pollution permits (allowances) for free, and with allowances costing only €20 in 2018, this results in a total ETS cost of just under €4 (€3.97) for the flight. Whether the airline absorbs that cost, or passes it on to the flier, such cost has a minimal impact on flying.

Increase v stationary increase 

The 4.9% increase from aviation compares with a 3.9% decrease from all other sectors covered by ETS (the stationary installations such as coal, steel and concrete plants) indicating that aviation will continue growing its share of overall EU emissions. Between 1990 and 2016 total EU aviation emissions grew from 1.5% of EU emissions to 3.6%.

The majority of Europe’s aviation emissions remain exempt from this

Europe’s ETS only covers a portion of Europe’s aviation emissions – flights within Europe, roughly equal to 40% of emissions from the sector. The coverage was limited following intense industry and international pressure to exclude flights to and from Europe from the scheme, ostensibly to give the UN aviation agency ICAO time to develop a global measure – a solution which will not deliver an effective price on aviation emissions.