The European Commission has recently modified its proposed roll-out of a cap-and-trade scheme affecting international aviation.

On 16 October 2013, the European Commission introduced a proposal for a Directive amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in view of the implementation by 2020 of an international agreement applying a single global market-based measure to international aviation emissions (the “Proposal”).

This adjustment in the EU legislation would go into effect January 1, 2014 and follows a recent decision from the International Civil Aviation Organization (“ICAO”). The ICAO’s Assembly decided during its 38th Session, held in Montreal from September 24 to October 4, 2013 (the “2013 ICAO Assembly”) to implement a global market-based measure (“MBM”) for international aviation emissions by 2020.

Key Features of the European Commission’s Proposal for Aviation

The key features of the revised EU ETS system resulting from the Proposal are as follows:

  • All CO2 emissions from flights between airports in the EU/EEA1 would continue to be covered.
  • From 2014 to 2020, flights to and from countries outside the EU/EEA would benefit from a general exemption for those emissions that take place outside EU/EEA airspace. Only emissions from the part of flights taking place within EU/EEA airspace would be covered. For each calendar year between 2014 and 2020, the proportion of the flight concerned will be calculated by Eurocontrol on the basis of the great circle distance between the main airports in the EEA and third countries that is not more than 12 miles beyond the furthest point of EEA coastline. A table containing these percentages will be the subject of an Annex.
  • To accommodate the special circumstances of developing countries, flights between third countries which are not developed countries and airports in the EU/EEA which emit less than 1% of global aviation emissions would benefit from a full exemption. This would exclude routes to around 75 countries on a non-discriminatory basis.
  • Overflights of EU/EEA countries are exempt. Flights between European Dependencies and Territories and EEA or third countries airports are also exempt.
  • To further simplify the EU ETS, no action will be taken against non commercial aircraft operators in respect of emissions from small aircraft emitting less than 1000 tons CO2 per year.
  • All other obligations regarding flights remain unaffected including the existing exemptions, notably for government, military, police, customs and search/rescue flights.

Background information on the “stop-the-clock” Initiative

The EU ETS, introduced by Directive n° 2003/87/EC of 13 October 2003 (the “ETS Directive”), established a general “cap-and-trade” scheme for greenhouse gas emission allowance trading within the EU in order to combat climate change and to cost-effectively reduce industrial greenhouse gas emissions.

Since the beginning of 2012, emissions from international aviation have been included in the EU ETS. EU ETS applicable to airlines therefore covered flights for "scheduled or non-scheduled air transport services to the public for the carriage of passengers, freight or mail" performed by aircrafts with a certified maximum take-off mass of more than 5.700 kg.

As initially adopted, the EU ETS applied to EU/EEA and non-EU/EEA airlines covering “Flights which depart from or arrive in an aerodrome situated in the territory of a Member State to which the Treaty applies” 2.

The inclusion of non-EU/EEA airlines into the EU ETS prompted diverse reactions from several countries, including the United States. In November 2012, President Obama signed the European Union Emissions Trading Scheme Prohibition Act of 2011 allowing the US Secretary of Transportation to issue a “prohibition order” preventing all US-registered aircrafts from participating in the EU ETS if US interests are determined to be harmed by the effects of the EU ETS.

At the same time, the integration of aviation into the EU ETS has driven ICAO discussions forward. In order to allow time for the 2013 ICAO Assembly to reach a global agreement to tackle aviation emissions, the European Commission decided in April 20133  to temporarily suspend enforcement of the EU ETS requirements for flights operated in 2010, 2011, and 2012 from or to non-EU/EEA countries. It was nevertheless confirmed that the EU ETS remained applicable to flights within and between countries in Europe.

During its 2013 Assembly, the ICAO agreed on the development of a global MBM to curb carbon emissions from airlines to be finalized at the next ICAO Assembly in 2016 and to be implemented by 2020.

Next steps

The European Commission would like to see its proposal validated by the European Parliament and the European Council by March 2014 in order to provide legal certainty and clarity for aircraft operators.

However, in addition to the difficulties to have this proposal adopted by the European Parliament before the elections that will take place in May 2014, the proposed modification of the EU ETS has prompted largely negative reactions from the aviation industry and from the US Congress.

One the one hand, the aviation industry has indicated that adopting such a scheme could trigger non-compliance from countries outside of the EU and the US Congress, on the other hand, is willing to protect US aircraft operators from being subject to the EU ETS while a global plan to reduce emissions is being developed by ICAO.