Reducing the Climate Change Impact of Aviation: Economic aspects of inclusion of the aviation sector in the EU Emissions Trading Scheme

The opinions expressed in this document do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised provided the source is acknowledged and the publisher is given prior notice and receives a copy. 1. As a result of the recent and projected future increase in greenhouse gas emissions (GHG) from the aviation sector, action to design a framework incentivizing industry to reduce these emissions should be a political priority. 2. According to recent studies, inclusion of aviation in the EU Emissions Trading Scheme (ETS) by 2012, with an initial allocation based on 2008 emission levels, is unlikely to affect substantially the demand for credits in the ETS, or the carbon price. 3. Design options significantly affect the cost to the aviation industry of the measures, notably grandfathering versus auctioning. Intra-sector competitiveness impacts are likely to be more pronounced than concerns about effects on other sectors. 4. The requirements of the Emissions Trading Directive have required a steep learning curve for current sectors, which will be even more true for aviation, which has less experience with similar regulation. Sufficient thought would have to be given to the technical underpinnings of the system to facilitate integration. 5. If there current moment toward implementing an emissions trading system for aviation in the first Kyoto period 2008-2012 is insufficient to lead to agreement to do so, it could be more realistic to consider a post-2012 system. However, were this to be the case, then much of the work done to date predicting the economic impacts is likely to be irrelevant: far from being a minor addition to the system with little effect on price, aviation could be a major inclusion, given emissions growth rates. 6. If the introduction of a system for aviation happens late in the 2008-12 period, or later, incentives may be created for airlines to put off fleet renewal or efficiency improvements until after the introduction of the system. Interim measures need to be taken to avoid this downward spiral.