ETS calculator

Airplane icon in blue

At present, airlines covered by the EU emissions trading system (ETS) receive 85% of their allowances for free. They are also, unlike road transport, exempt from fuel taxation. The EU is currently reforming the aviation provisions in its ETS. The tool below allows you to calculate how much additional revenue member states would earn from a reformed aviation EU ETS, and compares it to revenue member states would earn if they ended the fuel tax exemption.

The proposed ETS reforms include cutting the amount of free allowances received. Along with ending the fuel tax exemptions, these reforms would earn much needed revenue for member states and ensure this most carbon-intensive mode of transport pays its fair share.

Countries' projected revenues from aviation under a reformed ETS, 2021-2030:

How the calculator works

Select options from the drop down menus on the left to see what revenues a reformed ETS and ending the fuel tax exemption could generate from 2021 to 2030.

Member State: All revenue raised from auctioning ETS allowances goes to member states. To date, member states have mostly used this revenue for climate and energy purpose. Selecting ‘EU28’ gives you the total revenue raised by all member states.

Linear Reduction Factor: Unlike the overall ETS, the cap for aviation emissions in the ETS does not decline. However the Commission has proposed that from 2021 this cap will decline at the same rate as the overall system. A declining cap will increase scarcity of allowances and may affect price. However under a 100% auctioning scenario, we forecast no change in total revenue raised under such a scenario, as airlines will have to buy all allowances under and over the cap.

Allowances to auction: At present, airlines receive 85% of allowances under the aviation cap for free. These below-the-cap allowances are called EUAAs (EU Aviation Allowances). When aviation emissions go above the cap, which they have done since the scheme was established, they must buy allowances from other sectors. These allowances are called EUAs (emissions unit allowances). They receive none of these ‘above the cap’ allowances for free.

The 85% free allowances provision was introduced when the EU ETS applied to all flights to and from Europe, and there was a potential risk of carbon leakage. With the ETS reduced to flights only within Europe, that risk is non-existent. Furthermore these free allowances give aviation an unfair advantage over other transport modes such as rail.

Auction price: The amount of revenue raised depends on the price of the allowances when they are auctioned. At present ETS allowances are trading at below €5 a unit, well below what is required to incentivise emission reductions. Future prices are hard to forecast, and will in part depend on reforms to the overall system which are yet to be agreed.

Fuel tax – price per litre: Aviation currently pays zero tax on fuel for flights. The Energy Taxation Directive permits member states to introduced such taxation, and suggests a minimum price of 33c a litre. However no member states have opted to introduce such a tax. Road users pay, on average, 48c a litre for their fuel.

Assumptions

We have used the historical average compound growth rate of the verified emissions from 2013 to 2016 as the basis for projected growth. With emissions growing from 53.5 Mt in 2013 to 61.4­­­­᠎­ Mt in 2016 in the EU, this is equivalent to 4.7% growth compounded annually, which is applied uniformly across all member states. To distribute projected emissions between member states, the distribution of EUAA and EUA auction earnings in 2015 are used as a proxy.