European Commission Proposes Continued Exclusion of International Aviation from EU ETS

A draft regulation from the European Commission published on 3 February 2017, proposes to amend the EU ETS Directive (2003/87/EC) to extend the exclusion of international flights from the EU ETS beyond 2016. In 2008, the EU ETS Directive was amended to limit the scope of aviation coverage to flights within the European Economic Area (EEA) until 2016. This comes in the light of recent the agreement at the International Civil Aviation Organization (ICAO) to introduce a voluntary Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) that is expected to start from 2021. 

CORSIA is a voluntary, global market-based measure aimed at stabilizing emissions from international aviation. It requires the sector to offset any growth in emissions beyond 2020 levels, using the average level of CO2 emissions from 2019-2020 from flights between participating states as a baseline. ICAO is expected to release detailed rules for CORSIA in 2017 and approve the scheme in 2018. Once there is greater clarity on CORSIA, the Commission will present a further assessment of its own scheme.

Until 2020, the aviation cap of the EU ETS is set at 5% below average aviation emissions from 2004-2008. Allowances are largely distributed for free (82%) to airlines operating in Europe, with 15% of the allowances distributed via auctioning and 3% held in a special reserve. According to the Commission’s proposal, that share would be maintained beyond 2020 and from 2021, the cap for the aviation sector would decrease by the same reduction factor that would apply to other sectors covered under the ETS in phase 4. 

Next, the European Parliament and the Council will review the proposal and find a position before it enters the first readings, which still have to be scheduled. Ultimately, both institutions need to find an agreement for the proposal to be adopted.