Government new consultation on the development of the UK Emissions Trading Scheme

Date added: 26 March, 2022

The government has opened a technical consultation (aimed at companies, experts – not individuals) on Developing the UK Emissions Trading Scheme.  It runs till 17th June.  It is asking for stakeholder views on proposals to develop the UK ETS  – which operates across England, Scotland, Wales and Northern Ireland. It includes the aviation sector.  On aviation it sets out the scope of the review into UK ETS aviation policy, including the future of aviation free allocation, considering responses to the 2019 consultation on carbon pricing, and future use of allegedly “Sustainable Aviation Fuels” (SAFs) and how that could be incentivised under the UK ETS  with “options for expanding the coverage of the scheme within the aviation sector.” There is a new paper, produced for the DfT and BEIS by Frontier Economics, on the impact of carbon pricing etc on UK aviation causing “carbon leakage” to Europe. ie. people choosing to fly from European airports to long haul destinations, rather than from UK airports. The report does not consider this will be a problem.  The issue of airlines being given free allocations of carbon permits, based on past usage, will have to be addressed.
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Developing the UK Emissions Trading Scheme (UK ETS)

25.3.2022

BEIS (Department for Business, Energy and Industrial Strategy)

Main document is:

Developing the UK Emissions Trading Scheme (UK ETS)

PDF, 1.96 MB, 157 pages

Aviation is Pages 63 to 83

Chapter 5 sets out the scope of the review into UK ETS aviation policy. This includes proposals on the future of aviation free allocation, considering responses to the 2019 consultation on carbon pricing, the 2021 call for evidence, and UK government commissioned economic research. It also considers how the use of Sustainable Aviation Fuels (SAFs) could be incentivised under the UK ETS and options for expanding the coverage of the scheme within the aviation sector.

Aviation study: Impacts of carbon pricing on the UK aviation sector

Frontier Economics have published a study – Impacts of carbon pricing on the UK aviation sector – commissioned by the Department for Transport and Department for Business, Energy and Industrial Strategy.

Economic research on the impacts of carbon pricing on the UK aviation sector

https://www.frontier-economics.com/uk/en/news-and-articles/news/news-article-i9172-new-report-investigates-the-impact-of-uk-carbon-pricing-on-uk-aviation/

https://www.gov.uk/government/consultations/developing-the-uk-emissions-trading-scheme-uk-ets

 

The gist of what they are saying in the report: (P171 of https://www.frontier-economics.com/media/5109/economic-research-on-the-impacts-of-carbon-pricing-on-the-uk-aviation-sector.pdf )

“The analysis finds that there is minimal risk of a trade-off between strengthening abatement incentives and reducing carbon leakage, under the current scope of the UK ETS due to the symmetric nature of aviation itineraries. This result draws on the findings of the quantitative modelling in this study: in general a reduction in emissions within the policy area is associated with a reduction in emissions outside the policy area. This finding is specific to aviation and the current UK ETS scope, as other sectors that do not have the same  symmetries can face a trade-off between achieving decarbonisation within the policy area and mitigating carbon leakage. 
“Free allowances have the potential to create competitive distortions between airlines within the UK aviation market. For example, particular airlines may receive a proportionately larger or smaller share of free allowances relative to the scale of their current operations, as the UK ETS free allocation is currently predominantly based on 2010 activity data. However, these distortions can be reduced by combining design features such as reserve permits to support market competition (e.g. reserves for new entrants or fast growers) or by updating activity data baseline years to reflect current market conditions.”
Probably what that means is the UK ETS and higher charges for carbon emissions on flights leaving UK airports will not lead to more people choosing to fly (on their longer trips) from European airports, as they have the EU ETS too.  ie. “carbon leakage”.  And people make return trips, so the return trip will be subject to the EU ETS too.

 

The UK ETS is not intending to look at the non-CO2 impacts of aviation, but just the CO2.  The document states:

“Scope expansion: non-CO2 impacts

The UK ETS applies to some additional greenhouse gases other than carbon dioxide (CO2) for certain sectors. For the aviation sector, the UK ETS currently only covers CO2 emissions, though aviation also affects the climate through non-CO2 impacts. This consultation:

Poses high-level questions to gather evidence on the feasibility and appropriateness of expanding the scope of the UK ETS to incorporate non-CO2 impacts of aviation.

We do not propose making any long-term changes to UK ETS policy regarding aviation nonCO2 impacts by January 2024. Responses to this section will help inform future policy development and our approach will continue to be driven by the latest scientific understanding of aviation non-CO2 impacts. We are also considering whether there may be short-term measures to account for non-CO2 impacts in the interim.”

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Posted: Saturday, March 26th, 2022. Filed in Climate Change News, General News, Recent News.