On 13 September 2017, pending the introduction of a worldwide scheme to offset CO2 emissions from air transport, MEPs voted to prolong the intercontinental exemption from EU Emissions Trading System (ETS) rules until December 2020. The report was approved by 601 votes to 69, with 26 abstentions.

From 2021 onwards, the aviation sector should receive only half of its EU ETS allowances for free, as against 85% today. Parliament also wants EU Member States to earmark revenue from the auctioning of emission allowances for climate change policies. Moreover, in the event of a hard Brexit, MEPs introduced an amendment to ensure that EU ETS CO2 allowances given free to UK airlines should be rendered invalid, so as to not to give them an unfair advantage over their EU competitors.

The EU ETS is a cornerstone of the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively.

This system works on the ‘cap and trade’ principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances which they can trade with one another as needed. After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances.

Participation in the EU ETS is mandatory for companies active in certain sectors, including the aviation sector. In this sector, currently the EU ETS applies only to flights between airports located in the European Economic Area (EEA).

In October 2016, the International Civil Aviation Organization (ICAO) agreed on a Resolution for a global market-based measure (GMBM) to address CO2 emissions from international aviation as of 2021. The agreed Resolution sets out the objective and key design elements of the global scheme, as well as a roadmap for the completion of the work on implementing modalities. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) aims to stabilise CO2 emissions at 2020 levels by requiring airlines to offset the growth of their emissions after 2020.

In February 2017, the EU Commission proposed a regulation to prolong the exemption for intercontinental flights, gradually reduce the number of aviation CO2 allowances from 2021 onwards, and prepare to implement the GMBM. In July 2017, the European Parliament Committee on Environment, Public Health and Food Safety adopted a report amending the proposal.

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