Explanatory Memorandum to COM(2006)818 - Amendment of Directive 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the EC

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dossier COM(2006)818 - Amendment of Directive 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance ...
source COM(2006)818 EN
date 20-12-2006
1. Context of the Proposal

· Grounds for and objectives of the proposal

Air transport has become an integral part of society in the 21st century, enabling both passengers and freight to travel long distances at an unprecedented speed and contributing to European and global integration. Unfortunately, aviation also contributes to climate change. In 2004 greenhouse gas emissions from the Community's share of international aviation increased by a further 7.5% compared with 2003, resulting in a cumulative growth of 87% since 1990. If this continues, there is a risk that growth in the Community's share of international aviation emissions could by 2012 offset more than a quarter of the environmental benefits of the reductions required by the Community's target under the Kyoto Protocol. Since international aviation is not yet covered by the Kyoto Protocol, this growth currently has no legal implications. Nonetheless, this does not lessen its environmental implications which will have to be addressed as part of any effective forward-looking climate policy.

The objective of this proposal is to address the growing climate change impact attributable to aviation by including aviation in the Community emissions trading scheme (the 'Community scheme').

· General context

On 27 September 2005 the Commission adopted a Communication on Reducing the Climate Change Impact of Aviation. The key conclusion drawn in the Communication was that, in view of the likely future growth in air traffic, further policies and measures are needed to address the climate impact of aviation. Having analysed a number of options, the Commission decided to pursue a new market-based instrument at Community level in preference to other financial measures such as tax and charges and considered that "…the best way forward from an economic and environmental point of view, lies in including the climate impact of the aviation sector in the [Community] scheme". On the basis of this conclusion, the Commission announced that it intended to present a legislative proposal to this effect and invited the other Community institutions to consider the policy and design recommendations made in the Communication. The present proposal aims at implementing this key pillar of the strategy without affecting its other means of addressing climate change through a comprehensive approach based on improved technology and utilisation of aircraft (including improvements in air traffic management, research etc.) i.

On 2 December 2005 the Council of Environment Ministers adopted conclusions recognising that the inclusion of the aviation sector in the Community scheme seems to be the best way forward and urged the Commission to bring forward a legislative proposal by the end of 2006. The European Council confirmed the key conclusions reached by the Environment Council. On 21 April 2006 the European Economic and Social Committee adopted an opinion on the Communication expressing its view that inclusion of aviation in the Community scheme could be a very feasible option. On 4 July 2006 the European Parliament adopted a Resolution welcoming the Commission's Communication and recognising that emissions trading has the potential to play a role as part of a comprehensive package of measures to address the climate impact of aviation, provided it is appropriately designed.

The ultimate objective of the United Nations Framework Convention on Climate Change is to stabilise greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. The Community has repeatedly stated that the overall global annual mean surface temperature increase should not exceed 2°C above pre-industrial levels. All sectors of the Community economy should be subject to policies and measures designed to generate the substantial reductions in greenhouse gas emissions compared with 1990 levels which are needed to meet this target.

The limitation and reduction targets adopted under the Kyoto Protocol include emissions from domestic aviation but not emissions from international flights. Instead the Kyoto Protocol places an obligation on the parties to "pursue limitation or reduction of emissions of greenhouse gases…from aviation…bunker fuels, working through the International Civil Aviation Organization…". At the sixth meeting of the ICAO Committee on Aviation Environmental Protection in 2004, it was agreed that an aviation-specific emissions trading system based on a new legal instrument under ICAO auspices "…seemed sufficiently unattractive that it should not be pursued further". However, Resolution 35-5 of the ICAO Assembly instead endorsed open emissions trading and requested the development of non-binding guidance for use by states, as appropriate, to incorporate emissions from international aviation into their emissions trading schemes. The Commission and Member States are participating in and supporting this work which is scheduled for finalisation by ICAO in 2007. The ICAO Assembly in September 2007 will discuss this issue. In any case, this proposal is not expected to enter into force before that date. The final ICAO guidance will be taken into account, as appropriate, during the co-decision procedure. The objective of this proposal is to provide a model for aviation emissions trading that can be a point of reference in the EU's contacts with key international partners and to promote the development of similar systems worldwide. The Commission also supports the objective of a global agreement aimed at effectively tackling aviation emissions at global level.

· Existing provisions in the area of the proposal

Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (as amended). This proposal aims to amend Directive 2003/87/EC to include aviation in the Community scheme.

· Consistency with other policies and objectives of the Union

The proposal aims to protect, preserve and improve the quality of the environment by reducing the climate impact of aviation. It is consistent with the common transport policy as it encourages the sustainable development of air transport.

3.

2. Consultation of Interested Parties and Impact Assessment


· Consultation of interested parties

4.

Consultation methods, main sectors targeted and general profile of respondents


The September 2005 Communication was informed by an open public conference on aviation and climate change during Green Week 2005.

To follow-up the Communication, an Aviation Working Group was set up as part of the second phase of the European Climate Change Programme (ECCP II) to advise the Commission on ways of including aviation in the Community scheme. The Group consisted of experts from Member States and key stakeholders including industry, consumer and environmental organisations.

5.

Summary of responses and how they have been taken into account


The information gathered through stakeholder consultation has been taken into account in the design of the proposed scheme. Details of how this was done are set out in the impact assessment report.

An open consultation was conducted over the internet from 11 March 2005 to 06 May 2005. The Commission received 5 758 responses. The results are available on ec.europa.eu/environment/climat/aviation_en.

· Collection and use of expertise

6.

Scientific/expertise domains concerned


Climate change science; i expertise from the aviation industry including aircraft manufacturers, airport authorities and airlines; i modelling expertise; i emissions estimates and air traffic data.

7.

Methodology used


Modelling with formal mathematical models and calculations based on statistical data.

8.

Main organisations/ experts consulted


National, regional and local administrations, industry associations, trade organisations, environmental organisations, consumer organisations, science and research institutes and other Commission directorate-generals.

9.

Summary of advice received and used


There was unanimous agreement that aviation contributes to climate change and recognition that action needs to be taken to address this. In this respect, emissions trading was preferred to taxes or charges. As regards the design of the scheme, it was widely accepted that the obligations under the scheme should apply to aircraft operators. Although there was no consensus on the geographical scope of the scheme, there was broad consensus that the quantity of allowances and the process for their allocation should be harmonised. The majority of the parties consulted considered that the scheme should be an open trading scheme but should not adversely affect the accounting system used in the Community scheme.

10.

Means used to make the expert advice publicly available


The final report and the agendas, background papers and presentations from each meeting of the Aviation Working Group are publicly available on the internet at ec.europa.eu/environment/climat/aviation_en. Position papers submitted by stakeholders to complement the views recorded in the minutes are also available on the same website.

· Impact assessment

The September 2005 Communication was accompanied by an impact assessment which evaluated different policy options potentially available to reduce the climate impact of aviation. It concluded that emissions trading is the most efficient solution, both environmentally and economically.

A further impact assessment accompanies this proposal. It considers the specific design options and policy choices for including aviation in the Community scheme. It concludes that since every airline on each route covered by the scheme would be treated equally, airlines can be expected to pass on, to a large extent or even in full, compliance costs to customers. This would have only a small effect on forecasted demand growth: from business-as-usual levels of 142% to a minimum of 135% over the period 2005 to 2020 for all departing and arriving flights. Competition between airlines would not be significantly affected. The main difference between airlines is the length of journey undertaken, the age of the aircraft used and the payload carried. Therefore, carriers travelling shorter distances, using older aircraft or carrying fewer passengers or less freight would be affected to a greater extent than more fuel-efficient carriers. Competition between airports and tourism would not be significantly affected. However, any risk to the latter would likely be decreased by including all departing and arriving flights in the scheme.

The Commission carried out an impact assessment, as listed in its Work Programme: the report is available at ec.europa.eu/environment/climat/aviation_en.

Contents

1.

Legal Elements of the Proposal



· Summary of the proposed action

The proposed Directive would amend Directive 2003/87/EC to include aviation in the Community scheme.

The existing Community scheme works by allocating to operators a number of allowances each giving them a right to emit one tonne of carbon dioxide per year. The total number of allowances allocated sets a limit on the overall emissions from participants in the scheme. By 30 April each year operators must surrender allowances to cover their actual emissions. Operators can trade allowances so that emissions reductions can be made where they are most cost-effective.

The requirements to monitor and report emissions will take effect from 2010. From 2011 emissions from the aviation sector will be subject to a cap and aircraft operators will be required to surrender allowances to cover their emissions.

Key aspects are:

– Aircraft operators will be the entities responsible for complying with the obligations imposed by the scheme;

– The scheme will cover all flights arriving at or departing from an airport in the Community as of 1 January 2012. Flights between EU airports will be covered from 1 January 2011;

– Flights by State aircraft, flights under visual flight rules, circular flights, flights for testing navigation equipment or for training purposes, rescue flights and flights by aircraft with a maximum take-off weight of less than 5 700 kg will be excluded from the scheme;

– To address other gases, by the end of 2008, the Commission will put forward a proposal to address the nitrogen oxide emissions from aviation after a thorough impact assessment;

– In order to avoid duplication and an excessive administrative burden on aircraft operators, each aircraft operator, including operators from third countries, will be administered by one Member State only;

– In contrast to the existing scheme, the method of allocating allowances will be harmonised across the Community;

– The total number of allowances to be allocated to the aviation sector will be determined at Community level by reference to average emissions from aviation in the years 2004-2006;

– A fixed percentage of the total quantity of allowances will be allocated free of charge on the basis of a benchmark to aircraft operators which submit an application (the earliest application relating to 2008 data). For the period 2011-2012 this percentage will correspond to the average percentage proposed by the Member States including auctioning in their national allocation plans. Thereafter this will be reviewed in the light of the results of the general review of the emissions trading scheme;

– The details of how auctioning will work such as appropriate design and timing will be set out in a Commission Regulation. Auctioning proceeds should be used to mitigate and adapt to the impacts of climate change and to cover administrative costs;

– Like other participants in the Community scheme, aircraft operators will have to monitor their emissions of carbon dioxide and report them to the competent authority of its administering Member State by 31 March each year. The reports must be verified to make sure that they are accurate. The basic principles for monitoring, reporting and verifying emissions set out in the proposal will be elaborated by guidelines;

– Aircraft operators will be able to buy allowances from other sectors in the Community scheme for use to cover their emissions;

– Aircraft operators will also be able to use project credits – so-called Emission Reduction Units (ERUs) and Certified Emission Reductions (CERs) - from the Joint Implementation or Clean Development Mechanisms (JI/CDM) up to a harmonised limit equivalent to the average of the limits prescribed by Member States in their national allocation plans for other sectors in the Community scheme;

– Domestic aviation will be included in the scheme and treated in the same way as international aviation;

– Special consideration to the treatment of air services to remote or isolated regions, which are particularly dependent on air transport services, can best be given within the framework of existing measures such as public service obligations and aid having a social character under Article 87 i of the Treaty.

· Legal basis

The legal basis for the proposal is Article 175 of the Treaty (which was also the legal basis for Directive 2003/87/EC).

· Subsidiarity principle

The subsidiarity principle applies insofar as the proposal does not fall under the exclusive competence of the Community.

The objectives of the proposal cannot be sufficiently achieved by the Member States for the following reasons.

– The economic benefits from emissions trading will only be obtained if allowances can be traded and accepted across the Community. To achieve this, the establishment of a common framework is necessary.

– Given the high level of integration in the Community air transport market, distortions of competition could be created if different policies were applied in Member States.

Community action will better achieve the objectives of the proposal for the following reasons:

– Harmonised action to reduce the climate change impact of aviation can best be achieved by adopting legislation at Community level. As all airlines operating from Community airports would be treated in the same way, distortions of competition would be minimised.

– The Council and the European Parliament have called for the Commission to propose Community action and recognised the potential of emissions trading. Directive 2003/87/EC needs to be amended to include aviation in the Community scheme.

– The Community is a major player in global aviation, accounting for about half of the carbon dioxide emissions from international aviation reported by developed countries to the UNFCCC.

– The proposal amends the Community scheme to establish a common framework but will leave implementation and enforcement tasks to Member States which are better placed to perform them.

The proposal therefore complies with the subsidiarity principle.

· Proportionality principle

The proposal complies with the proportionality principle for the following reasons:

– Only the elements that are necessary to ensure that the scheme functions properly and to prevent distortions of competition which could result from differences in treatment of aircraft operators between Member States are regulated by the proposal. To ensure consistency and reduce implementation costs, the proposal makes use of the existing architecture of the Community scheme as much as possible. Where the procedures applied in the existing scheme are not appropriate for the aviation sector, special provision has been made whilst preserving the simplicity and environmental integrity of the scheme.

– Emissions trading can be used to achieve an environmental benefit at a lower cost than other means and is therefore the most cost-effective way of addressing greenhouse gas emissions from aviation.

· Choice of instrument

Proposed instruments: Directive.

Other means would not be adequate for the following reason.

As the Directive amends another Directive in order to include aviation in the Community scheme, other instruments would not have been appropriate.

2.

Budgetary implication



Expenditure on activities under this Directive will be covered by the financial instrument for the environment (LIFE+ for 2007-2013). No additional amount is requested.

11.

5. Additional information


· Review/revision/sunset clause

The proposal includes a revision clause.

· Correlation table

The Member States are required to communicate to the Commission the text of national provisions transposing the Directive as well as a correlation table between those provisions and this Directive.

· European Economic Area

The proposed act concerns an EEA matter and should therefore extend to the European Economic Area.