European Commission moves to Brexit-proof Emissions Trading System
The European Commission has agreed on a new measure to protect its Emissions Trading System (ETS) against a potential breakdown in Brexit negotiations. The EU ETS sets a cap on the total emissions from electricity generation and enables UK-based industries to purchase emissions reductions from overseas. Member States met on 18th October to agree in principle to change ETS regulations to nullify any permits to emit greenhouse gases under the scheme if they are issued by a country that leaves the EU from January 2018 onwards. The UK is the 2nd largest CO2 emitter in the EU, and research suggests that a UK departure from the EU ETS would tighten the supply-demand balance of the system by around 745 million tonnes. The new measure is intended to stop potential sell-offs of permits if UK businesses are ejected from the market because of Brexit. The Committee on Climate Change found that if the UK did leave the ETS, the 5th carbon budget should be extended to a 61% emissions reduction by 2030. The recently-announced Clean Growth Strategy outlines the trajectory towards the approved 57% reduction, but analysis suggests the strategy will fall short. Aviation is only partly included in the ETS, with just intra-European flights.
European Commission moves to Brexit-proof Emissions Trading System
The European Commission has agreed on a new measure to protect its Emissions Trading System (ETS) against a potential breakdown in Brexit negotiations.
Member States met on Wednesday (18 October) to agree in principle to change ETS regulations to nullify any permits to emit greenhouse gases under the scheme if they are issued by a country that leaves the bloc from January 2018 and onwards.
The UK is the second largest emitter in the European Union (EU), and research suggests that a UK departure from the EU ETS would tighten the supply-demand balance of the system by around 745 million tonnes.
As noted by Reuters, the new measure is intended to stop potential sell-offs of permits if UK businesses are ejected from the market because of Brexit. The measure still needs a final confirmation from Member States but most analysts claim that the UK will either remain in the system or gain access to it like Norway has.
Research from the Committee on Climate Change found that if the UK did leave the system, then the fifth carbon budget should be extended to a 61% emissions reduction by 2030. The recently-announced Clean Growth Strategy outlines the trajectory towards the approved 57% reduction, but analysis suggests the strategy will fall short.
The EU ETS sets a cap on the total emissions from electricity generation and enables UK-based industries to purchase emissions reductions from overseas, which is often a cheaper alternative than reducing operational emissions directly.
Energy-intensive industries, like aviation which was added to the market in 2012, benefit from the system. In fact, emissions from aviation account for around 3% of the EU’s total greenhouse gas emissions.
The aviation industry is struggling to implement measures to reduce emissions, and a global deal agreed by the 191 members of the International Civil Aviation Organisation (ICAO) has been greeted with lukewarm reactions.
The members agreed to a last-minute decision to drop plans of aligning ICAO policies with the Paris Agreement’s 1.5/2C pathway. The UK was a part of the Bratislava Declaration which announced in September 2016 that 44 members of the European Conference on Civil Aviation would implement the deal “from the start”. In total, more than a third of the 191 nations, including the UK, volunteered to join the offsetting scheme, but it won’t be introduced until 2021.
The ICAO is pushing towards a 2050 Vision of Sustainable Aviation Fuels, which included volume-based targets for biofuels to reduce sector emissions. The proposal would see 128 million tonnes of biofuel used each year by the sector through to 2040, before ratcheting up use to 285 million tonnes to account for 50% of all aviation fuel by 2050 – more than three times what is currently used for transportation fuel.
Campaigners such as Friends of the Earth (FoE) criticised the scheme, warning that it would “destroy rainforests”. Already, 25 countries convened by the ICAO have rejected the deal.
“We firmly oppose the promotion of biofuels for aviation,” FoE’s international forests campaigner Jeff Conant said. “The climate and human rights impacts of industrial demand for palm oil are already grave. Instead of driving greater demand, Governments must take urgent measures to reduce the climate impact of aviation by stemming and ultimately reversing its growth.”
Instead of burning forests and land for biofuel use, research highlights the benefits of restoring nature. Research published this week by the Nature Conservancy and 15 other institutions found that 37% of the required emissions reduction to prevent dangerous levels of global warming could be achieved through nature restoration.
The study, backed by companies such as Unilever, suggested that planting more trees, improving soil health and protecting peatlands could reduce global emissions by 11.3 billion tonnes annually by 2030. The UK could reduce its emissions by 9% by implementing restoration projects in areas such as the Highlands and the Peak District, the study found.
Commenting on the study, Unilever’s chief executive Paul Polman said: “Climate change threatens the production of food staples like corn, wheat, rice and soy by as much as a quarter – but a global population of nine billion by 2050 will need up to 50% more food. Fortunately, this research shows we have a huge opportunity to reshape our food and land use systems, putting them at the heart of delivering both the Paris Agreement on Climate Change and the Sustainable Development Goals.”
Extending current aviation rules in the EU emissions trading system – provisional deal reached
By Ana Crespo Parrondo (Concilium – Council of the European Parliament)
On 18 October, the Estonian Presidency reached a provisional agreement with European Parliament representatives on a regulation to extend existing provisions covering aviation activities in the EU emissions trading system (ETS) regulation beyond 2016 and to prepare for the implementation of the global market-based measure as of 2021. The provisional text will be submitted to the EU ambassadors for political endorsement.
This new regulation is the follow up to the decision reached in October 2016 by the International Civil Aviation Organisation (ICAO) to introduce a global market-based measure from 2021 in order to regulate international aviation emissions through an offsetting system, also referred to as CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation). The EU supports this measure and aims to join the ‘pilot’ phase of the scheme in 2021 on a voluntary basis.
In the meantime, the adoption of this new regulation before the end of the year is an indispensable requirement to avoid any legal gap as regards compliance with the current ETS regulation in 2017. Today’s agreement enables this adoption to happen on time. The dates for reporting and surrendering allowances from emissions in 2017 would be 31 March and 30 April 2018 respectively.
“The EU believes all flights must contribute to cutting greenhouse emissions. We fully support ongoing ICAO negotiations for the development of comprehensive and unified international rules to turn this into a reality. In the meantime adopting this regulation is crucial. We will provide legal certainty to aircraft operators and make sure European flights keep cutting emissions beyond 2016.”
Siim Kiisler, Minister for the Environment of the Republic of Estonia
The main elements of the provisional agreement are as follows:
- maintain current limitations within the scope of the EU ETS, particularly by prolonging the derogation for non-intra European Economic Area (EEA) flights until 31 December 2023, when the ‘first’ phase of CORSIA will begin;
- establish provisions for a review once all ICAO decisions have been taken on the implementation of the global market-based measure within the EU, particularly concerning how to incorporate this measure into the ETS directive;
- subject to this review, foresee the application of the Linear Reduction Factor, as set out in the ETS directive, to the aviation sector from 2021 onwards.
A statement was also issued emphasising the need for ICAO to act in full transparency and to reach out to all stakeholders to inform them about the progress and decisions in a timely manner.
In addition, the Parliament and the Council have agreed safeguard measures to preserve the integrity of the EU ETS in case that obligations of aviation operators and other operators from a member state cease.
Timeline and next steps
The Commission submitted its proposal on 3 February 2017 and presented it to the Environment Council on 28 February. On 21 June, EU ambassadors agreed on the Council mandate for negotiations with the European Parliament. The latter voted during the plenary of 13 September. Subsequently, both co-legislators attended a first trilogue meeting on 25 September.
Once the deal is approved by EU ambassadors, the Parliament and the Council will be called on to adopt the new regulation at first reading. Thereafter, it will enter into force on the day of its publication in the official journal.
ETS and ICAO – background
The emissions trading scheme (ETS) was launched in 2005 to promote the reduction of greenhouse gas emissions at EU level. The aviation sector is part of the existing ETS regulation. Emissions from aviation also form part of the EU’s goal of cutting greenhouse gas emissions by 20% by 2020 compared to 1990 levels.
In 2014, the EU decided to reduce the scope of the ETS scheme to apply only to intra-EEA flights, in order to facilitate progress in the negotiations within the ICAO, and in the hope of achieving clarity regarding emissions from international flights connecting the EEA and third countries. It was then decided that the derogation for non-intra EEA flights would apply only until the end of 2016.
The ETS reform is currently under negotiation for the 2021-2030 period. A review of the reform is planned for when ICAO legal obligations with regard to the implementation of the global market-based measure become clear. Consistency will also be ensured with the EU’s commitment under the Paris Agreement to reduce emissions by at least 40% by 2030 compared to 1990 levels.
The ICAO global market-based measure aims to slow the growth of greenhouse gas emissions in the aviation sector and keep emissions at the same level from 2020 onwards. The application of the measure will become compulsory for major aviation countries in 2027, but a voluntary ‘pilot’ phase will be launched in 2021.
European Parliament document:
Proposal for a regulation of the European Parliament and of the Council amending Directive 2003/87/EC to continue current limitations of scope for aviation activities and to prepare to implement a global market-based measure from 2021
Aviation accounts for approximately 2.1 % of global CO2 emissions – roughly equivalent to Germany’s total emissions. International flights account for around 1.3 % of emissions. With the anticipated growth in air traffic, emissions in 2050 are expected to be seven to ten times higher than 1990 levels, according to ICAO projections.3 In the EU, direct CO2 emissions from aviation account for about 3 % of total emissions. At the same time, the sector supports around 5 million jobs and contributes €110 billion per year to EU GDP.
Besides CO2 , aviation is responsible for other greenhouse gases (such as water vapour, aerosols and nitrogen oxides) that contribute to global warming. A 1999 special report on aviation, prepared by the International Panel on Climate Change (IPCC), estimated the impact of aviation on the climate to be two to four times higher than that of CO2 emissions alone. However, the contribution of non-CO2 emissions on warming can vary depending on the conditions (such as flight altitude, time of day or year) under which they are emitted, and understanding the mechanisms through which their impact is accomplished would require further research.
EU ETS: tightening regulations
Also in international news, the European Parliament has recently endorsed the views of its environment committee to agree that aviation’s inclusion in the EU emissions trading scheme should be subject to an annually declining emissions cap from 2021 with 50% of the allowances obtained through an auction rather than being distributed freely (with revenues earmarked for climate finance), and a request for the European Commission to come forward with proposals to address aviation’s non-CO2 effects by 2020. The parliament will now try to negotiate these changes with the Commission and European member states over the coming months.