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Brussels, 27 September 2005
How do aircraft affect the climate?
Aircraft typically operate at cruising altitudes of 8 to 13 km, where they release several gases and particles which alter the composition of the atmosphere and contribute to climate change.
Carbon dioxide (CO2) is the most important greenhouse gas because of the large quantities released and its long residence time in the atmosphere. Increasing concentrations have a well-known, direct effect which warms the Earth’s surface.
Nitrogen oxides (NOx) have two indirect effects on the climate. Nitrogen oxides produce ozone under the influence of sunlight, but they also reduce the atmospheric concentration of methane. Both ozone and methane are strong greenhouse gases. They have opposite effects but the net result is that the ozone dominates the methane effect, thus warming the Earth.
Water vapour released by aircraft has a direct greenhouse gas effect, but as it is quickly removed by precipitation the effect is small. However, water vapour emitted at high altitude often triggers the formation of condensation trails, which tend to warm the earth’s surface. Moreover, such “contrails” may develop into cirrus clouds (clouds of ice crystals). These are also suspected of having a significant warming effect, but this is still uncertain.
Sulphate and soot particles have a smaller direct effect compared with other aircraft emissions. Soot absorbs heat and has a warming effect; sulphate particles reflect radiation and have a small cooling effect. In addition, they can influence the formation and properties of clouds.
How big is EU aviation’s impact on climate change?
In the EU the direct greenhouse gas emissions from aviation correspond to about 3% of total greenhouse gas (GHG) emissions. The large majority of these are from international flights (flights between two Member States or between a Member State and a non-EU country).
This figure does not include indirect warming effects, such as those from NOx emissions, contrails and cirrus cloud effects. The overall impact is therefore higher than the share of GHG emissions indicates emissions, contrails and cirrus cloud effects. In 1999 the Intergovernmental Panel on Climate Change (IPCC) estimated that aviation’s total impact is about 2 to 4 times higher than the effect of its past CO2 emissions alone. Recent EU research results indicate that this ratio may be somewhat smaller (around 2 times). Again, none of these estimates take into account the uncertain but potentially very significant effects of cirrus clouds.
Greenhouse gas emissions from aviation are growing fast and could keep doing so. From 1990 to 2003, the EU’s GHG emissions from international aviation increased by 73%, or 4.3% per year. If growth continues at this rate, the increase since 1990 will reach 150% by 2012.
This growth would offset more than a quarter of the emission reductions the EU15 is required to make under the Kyoto Protocol on climate change.
What is the Communication proposing?
After having examined several types of market-based solutions (airline ticket or departure taxes, emissions charges) the Commission concluded that the most cost-efficient and environmentally effective option would be to include emissions from aviation in the EU Greenhouse Gas Emissions Trading Scheme
How does emissions trading work?
The EU Emissions Trading Scheme, which started on 1 January 2005, covers almost 11,500 industrial installations which together are responsible for nearly half of all EU CO2 emissions. Operators of these installations receive emission allowances giving them the right to emit a certain level of CO2 per year. The total of these allowances creates a ‘cap’ on overall emissions from these installations. After each year, operators must surrender the number of allowances equal to their actual emissions in that year. The existence of a market in which these allowances can be traded enables participating companies to manage their emissions cost-effectively. If they anticipate that their emissions will exceed their allowances, they can either take measures to reduce their emissions - for instance by installing more efficient technology - or they can buy additional emission allowances on the market, whichever is cheaper. Conversely, if their actual emissions are lower than their allowances, they can sell their surplus allowances on the market or else ‘bank’ them to cover future emissions.
Including the aviation sector in the Emissions Trading Scheme would expand the market covered by an overall emissions cap. Aircraft operators would be allocated emission allowances, thus giving them a permanent incentive to reduce their climate impact, but they would also have the flexibility to buy or sell allowances as necessary.
(For more information on the EU ETS – see MEMO/05/84).
What emissions reduction would trading bring?
The environmental benefit of including aviation in the EU emissions trading scheme will depend largely on the target (“cap”) yet to be agreed. The Commission is not taking a position on this question at this stage. For illustrative purposes, scenarios analysed in a feasibility study done for the Commission assume that aviation emissions in 2012 would be capped at their 2008 levels. This is equivalent to an emissions saving of around 17%.
Why is emissions trading a better solution than alternatives like taxes or charges?
Compared to a fuel tax or a charge, including aviation in the EU ETS can provide the same environmental benefit at a lower cost to society - or a higher environmental benefit for the same cost. In other words the impact on ticket prices, airline companies and the overall economy will be smaller for a given environmental improvement.
Moreover, emissions trading has been endorsed by the International Civil Aviation Organization (ICAO). The EU believes that emissions charges would also be compatible with the international legal framework for aviation, but they are contentious within ICAO and would anyway be less efficient than emissions trading.
How can airlines reduce their emissions in practice?
Airlines can reduce their emissions in several ways, notably by investing in more efficient aircraft and engines and in optimising operations. Although the biggest improvements would typically arise from accelerated fleet renewal, many aircraft in the current fleets also hold potential for improvements. For instance some aircraft can be retrofitted with technical devices at the tip of the wings (“winglets”), new surface treatments that reduce drag (air resistance) and even new engines. Airlines can also optimise their timetables, route network and flight frequencies to minimise the number of empty seats flown. ICAO, the international body responsible for aviation matters, has published a catalogue of “Operational Opportunities to Minimize Fuel Use and Reduce Emissions.” In the longer term, research into more efficient technologies and alternative fuels may provide additional opportunities.
What will the impact be on the European economy and competitiveness? Will jobs be lost?
The impact assessment carried out by the Commission concludes that the overall effect on the European economy and competitiveness is likely to be very small both in terms of overall GDP growth and employment. For the aviation sector the main impact is likely to be a small reduction in the rate at which demand grows. According to the different scenarios analysed, the reduced growth in demand over the timescale used (2008-2012) would vary from 0.1 to 2.1 %, assuming CO2 allowance prices of €10-€30.
However, for the impact assessment of the legislative proposal that will follow the Communication, the Commission intends to study the potential effects further in the light of different, more detailed assumptions about the design and environmental objective of the scheme.
Will ticket prices rise?
Including aviation in the EU emissions trading scheme will not directly affect or regulate air transport tickets. However, aircraft operators may have to invest in more efficient planes or buy additional emission allowances in the market beyond those allocated to them. The associated costs are likely to be modest, varying between €0 and €9 per return flight depending on the strictness of the cap on airlines’ emissions chosen and on how the scheme is implemented. The extent of the environmental benefits will depend on the same parameters. In any event, including aviation in the EU emissions trading scheme will have a smaller impact on prices than if the same environmental improvement were to be achieved through other measures such as a fuel tax or an emissions charge.
Which airlines and routes will be affected?
From an environmental point of view, the Commission considers that the scheme should apply to all carriers without regard to nationality. The 1944 Chicago Convention on civil aviation provides that laws and regulations relating to international flights shall be applied to aircraft without distinction as to nationality, and that all aircraft must comply with such rules. The EU strategy needs to be consistent with the Convention and to avoid discrimination or distortion of competition. To the extent that they operate from airports in the EU, foreign airlines would thus be affected in the same way as EU airlines.
In the same logic, emissions from any flight departing from an EU airport, whether to another EU destination or a third country, should be covered by emissions trading. Narrowing the scope only to flights within the EU would cover less than 40% of the emissions from flights departing from the EU. It would also favour long-haul over short-haul flights, thus contradicting the strategy’s environmental objectives.
Will implementing the strategy harm the competitiveness of European airlines?
As the scheme should apply to all carriers operating from EU airports without regard to nationality, there would be no discrimination and no significant impact on the competitive position of any airlines. However, operating costs would increase for those airlines using planes with high emissions.
Aviation is an international business – why not conduct emissions trading at global level?
While a global, uniform system would ideally be preferable, this is not a realistic option at the present time. ICAO has recognised this by deciding against the idea of a global system based on setting up a new legal instrument under ICAO auspices. In contrast, ICAO has endorsed the idea of incorporating international aviation emissions into states’ existing trading schemes. The approach proposed in the Communication is therefore fully in line with ICAO policy. In addition, the EU continues to cooperate with partners in ICAO to promote emissions trading and other actions to combat aviation’s contribution to climate change.
Aren't high oil prices a strong enough incentive for airlines to be efficient?
Higher oil prices certainly provide a stronger incentive to reduce fuel consumption. However, the airline industry starts from a comparatively low fuel cost because aviation fuel is not taxed. The recent increase in the fuel price is only a fraction of the minimum tax that would have applied if aircraft fuels were taxed like other motor fuels. Oil prices would have to increase much more before the cost of aircraft fuels reach the level they would have been at if they had not been exempt from taxes.
How would emissions trading fit with the idea of a contribution levied on airline tickets to fund aid for development?
These are two completely different issues. The purpose of a “solidarity contribution” levied on airline tickets to help fund development aid, as recently discussed in the ECOFIN Council of Ministers (IP/05/1082), would be to generate revenues, while the aim of emissions trading is to put a lid on emissions. The “solidarity contribution” would have little or no effect on the climate impact of aircraft.
Has the Commission consulted stakeholders and taken their comments into account?
The Commission conducted a public consultation in early 2005 on the problem
of aviation’s impact on climate change. Almost 200 organisations and 5,600
individual citizens responded. In preparing the Communication, the Commission
has carefully considered the views and opinions expressed and published an
overview of the results in a separate report (see IP/05/1024)
What is the timetable for future action? When would aviation become part of the ETS?
The Commission is inviting the Council and the European Parliament to consider the policy recommendations set out in the Communication and give detailed responses.
In parallel, the Commission will invite experts from Member States and stakeholders to participate in a working group under the European Climate Change Programme to consider certain aspects of the future system in further detail. The group will report to the Commission in the first half of 2006 so that the report can be used in the context of the general review of the EU ETS, which the Commission will carry out by the end of June 2006.
After this, the Commission will present a legislative proposal to bring aviation into the ETS that will be coordinated with the general review of the ETS. This proposal will have to be adopted by the European Parliament and the Council in co-decision before it can enter into force, a process which typically takes two to three years. It is therefore not likely that aviation can be brought into the ETS when the scheme’s next phase starts in 2008. However, this does not necessarily imply that aviation’s inclusion in the scheme will have to wait until the third phase of the ETS begins in 2013 - the timing will mainly depend on how quickly the legislative process is completed.
Where can I find further information?
 Giving wings to emissions trading: Inclusion of aviation under the European emission trading system (ETS): design and impacts. CE Delft et al. Available at http://ec.europa.eu/environment/climat/pdf/aviation_et_study.pdf