Climate change & energy

Including aviation and surface transport in the EU ETS

Attention has become increasingly focused on the growing contribution of air transport to climate change. Forecasts from the 2003 Future of Air Transport White Paper suggest that by 2030 aviation could contribute up to about a quarter of the UK's total contribution to global warming.

The Government believes that the best way of ensuring that aviation contributes towards the goal of climate stabilisation would be through a well-designed emissions trading regime. An international industry requires an international solution and we are therefore pursuing this within the International Civil Aviation Organisation. However, until a truly global solution can be found, we are seeking to show EU leadership by pressing for the inclusion of aviation in the EU ETS as soon as possible and certainly before the end of Phase II of the scheme.

The UK Government welcomed the publication of the European Commission’s draft legislative proposal for including aviation in the EU ETS on 20 December 2006. We are now looking to future Presidencies of the EU to ensure the prompt progression of the proposal through the various legislative stages.

Summary of consultation responses on the inclusion of aviation in the EU emissions trading scheme

A consultation was held between March and June 2007 on the European Commission’s proposal to include aviation into the EU ETS and on the Government's initial analysis on the changes required to the proposal. Our initial analysis was presented as a partial Regulatory Impact Assessment (RIA) and was published alongside the consultation. The consultation aimed to inform the UK Government’s negotiating position in Europe throughout 2007/8. A summary of consultation responses has been published on the Department for Transport website at:
www.dft.gov.uk/consultations/closed/aviationemissionstrading/consrespeuemissionstrad

Aviation - background and research

During the UK Presidency of the EU (July-December 2005), taking forward the work programme for the inclusion of aviation into the EU ETS was a top priority.

Following public consultation and a feasibility study (“Giving Wings to Emissions Trading”, CE Delft), the Commission published a Communication on "Reducing the Climate Change Impact of Aviation" on 27 September 2005 highlighting the need for action to curb this growing area and recommending emissions trading as the best way forward. 

  • Details of the consultation, the feasibility study and the Communication are available on the Commission’s website.

The Commission also set up an Aviation Working Group (AWG) under the European Climate Change Programme (ECCP) to assess the ways of including aviation into the EU ETS. The AWG completed its work in 2006 and published its findings in a report European Climate Change Programme website.

At the EU Environment Council on 2 December 2005 (consisting of EU Environment Ministers) it was agreed that the inclusion of aviation in the EU Emissions Trading Scheme seems to be the best way forward and called on the European Commission to produce a legislative proposal which was published in December 2006.

In January 2006, the House of Lords published a report on this subject, called Including the Aviation Sector in the European Union Emissions Trading Scheme.

Research into potential impacts of the inclusion of aviation in the EU ETS

We have also published a study by ICF Consulting, which takes an initial look at the potential impacts of the inclusion of aviation in the EU ETS will have on the carbon allowance price (Including aviation into the EU ETS: Impact on EU allowance prices) – study by ICF Consulting, February 2006). This report assessed that there would be no discernable impact on the allowance price, of including aviation in the EU ETS. Their report is a starting point and we welcome stakeholders’ views on its conclusions.

Defra jointly commissioned with the Department for Transport (DfT) a report to estimate the amount of the cost of carbon emission allowances that will be passed on to flight tickets, as a result of the aviation sector joining the EU Emissions Trading Scheme. The report concludes there will be high amount of pass-through, even when allowances are allocated free of charge. The market in which a flight operates will have a large influence on the amount of this pass-through, which, in some circumstances, can be higher than the cost of the allowance.

The second of the two technical reports commissioned by Defra and DfT explores the level of allowances that should be allocated for free if the airline industry’s profits as a whole were to remain constant after its entry into the ETS, compared to their levels prior to entry. While this study is just one piece of evidence to inform policy, the Government welcomes its findings. It demonstrates that it is important to recognise the possible financial impacts on the industry of introducing aviation into the EU ETS and that to achieve the environmental objectives in an economically efficient way without undue adverse impact on the industry, the right balance needs to be found between allocating allowances for free and auctioning:

Aviation and Emissions Trading: Benchmarking Study

The Department for Transport and The Environment Agency commissioned Manchester Metropolitan University and CE Delft to research the economic, environmental and distributional impacts of various carbon allowance allocation methodologies on different airline models. It also looked at how the methodologies might incentivise behavioural change and reward early action.

This report represents the views of the consultants and not of the UK. The UK Government will now analyse these research findings along with the stakeholder responses to our recent consultation in order to finalise the UK's position on the most efficient benchmark for allocating free carbon allowances to the airlines.

Surface Transport and the EU ETS

Emissions trading in the surface transport sector could potentially be a cost-effective way for the transport sector to reduce its climate change impact. However, emissions trading is only one of a number of tools to reduce transport emissions, and is therefore being considered as a complementary measure rather than in isolation or in place of other measures. It will also be necessary to look at the potential impact of including surface transport in the EU ETS on carbon price, fuel price and industrial competitiveness as well as the potential impact on other EU ETS sectors, before we come to a definitive view.

The UK Climate Change Programme 2006 committed the Government to consider possible inclusion of surface transport into the EU Emissions Trading Scheme or as a UK self-standing measure. This was followed by a commitment in the Energy Review Report to engage with key organisations, the European Commission and other EU Member States to ensure that the potential for future inclusion of emissions from surface transport in the EU ETS is given serious consideration.

Further information is available on our Help page about downloading or reading Adobe Acrobat documents.

Page last modified: 1 February 2008
Page published: 8 September 2003

Department for Environment, Food and Rural Affairs