Aviation in the EU Emissions Trading Scheme
The European Commission’s proposal of September 2005 to include the aviation sector in the EU Emissions Trading Scheme (EU-ETS) can be seen as a step forward in including the aviation sector in climate policy. The environmental impacts of including aviation in the EU-ETS will depend fully on the design of the trading system, especially on the total of CO2 emission allowances that will be determined. Kerosene tax and emission charges are instruments worthwhile consider as well.
In September 2005 the European Commission published a communication on Policy instruments to reduce the climate change impacts of aviation''. This MNP policy brief summarises the potential impacts of the proposal at EU and national Dutch levels.
Climate impact of aviation significant enough to be addressed
If aviation is not included in climate policy, it will be more difficult to meet the long-term EU, and Dutch, climate target. The number of flights in European airspace is expected to almost double in the next 25 years, and this will increase the share of national and international aviation in total CO2 emissions in the EU15 from a current 3.5% to 5% by 2030. In the same period, CO2 emissions from aviation in the Netherlands are projected to double, from 4% to 8% (i.e. from 8 to 17 Mton CO2). The overall climate impact of aviation is estimated at a factor of 2 to 4 higher than the impact from CO2 emissions alone. This is because NOx emissions and the formation of cirrus clouds, for example, also play a role.
Aviation in the EU Emissions Trading Scheme: A step forward in climate policy
The European Commission’s proposal to include the aviation sector in the EU Emissions Trading Scheme (EU-ETS) can be seen as a step forward in including the aviation sector in climate policy. It will be cheaper to reach the Kyoto target. The proposed instrument, EU-ETS, fits well into current EU and Dutch climate policies. In the longer term (after 2012), EU-ETS has the potential to develop into an incentive to improve environmental performance. Considering the long lifetimes of aircraft and the generally considered high costs of efficiency improvements, reductions in fuel consumption and emission improvements might take a while to materialise. In the shorter term, the aviation sector is therefore expected to account for carbon emission reductions by purchasing CO2 allowances from other sectors. This means that most of the emission reductions do not take place in the aviation sector itself but in other sectors.
Economic and environmental impacts could be limited
According to some scenario calculations based on certain assumptions with regard to design parameters, including aviation in the EU-ETS in the 2008-2012 period will somewhat increase both the demand (+1%) and price of CO2 allowances. Increases in ticket prices could range from €0 to €20 for an average round trip. In the longer term, the climate objectives would require large reductions and could significantly limit the CO2 emission allowances in the EU-ETS and lead to higher costs (irrespective of whether aviation is included in the EU-ETS or not). The environmental impacts of including aviation in the EU-ETS will depend fully on the design of the trading system, with particular emphasis on the total of CO2 emission allowances to be determined. Economic and environmental impacts for the Netherlands are expected not to differ fundamentally from other countries.
ETS design parameters and possible flanking measures will determine environmental impact
The design for including aviation in EU-ETS will be crucial for the environmental impact of the system. Design parameters include the geographical scope of the system, accounting for non-CO2 climate impacts, the methods to allocate emission allowances (e.g. grandfathering, auctioning) and the choice of trading entities, as well as the interplay with the Kyoto Protocol and the monitoring method. With regard to the geographical scope and the type of flights covered, inclusion of all flights departing from EU countries will lead to a higher environmental impact than including only flights between EU countries. To what extent the inclusion of all flights in ETS could affect future volumes and re-routing of trade passenger flows to and from the EU will require further research. Including only CO2 in the EU-ETS will result in a simpler butless environmentally effective system, compared to accounting for the full climate impact of aviation. Flanking measures are then needed to address the non-CO2 climate effects of aviation. An emission charge might then be practical and effective. Auctioning is the most cost-effective when it comes to chosing an allocation method.
Fuel tax and emissions charges worthwhile to consider as well, though politically sensitive
A kerosene tax and emission charging, with revenues earmarked for climate policy, are straightforward instruments for internalising external costs and for stimulating (fuel) efficiency improvements and CO2 emission reduction from the aviation sector. A tax is in line with Europe’s goal to reduce distortions in competition between different energy products. A charge could also be used to address the non-CO2 emissions, such as NOx emissions, possibly complementing fuel taxes and/or CO2 emissions trading.
|Author(s)||Tuinstra W ; Ridder W de ; Wesselink LG ; Hoen A ; Bollen JC ; Borsboom JAM - Tuinstra W (eds)|