EU urged to strengthen ETS for aviation

Free carbon allowances for aviation under the EU's emissions trading system (ETS) should be scrapped and more support provided for the deployment of sustainable fuels to drive decarbonisation in the sector, environmental lobby group Transport and Environment (T&E) said this week.

Intra-EU flights are currently subject to the ETS, but in the scheme's third trading phase (2013-20) airlines have received 82pc of their allowances free, with just 15pc auctioned and 3pc placed into a reserve for fast-growing operations and new entrants.

These free allocations should be removed, T&E said, with revenues from auctioned allowances used to fund the development and deployment of sustainable fuels. And discounting factors should be applied to aviation emissions "to compensate for the overall lack of effective carbon pricing".

T&E recommends lowering the overall EU ETS supply cap and placing a limit on the number of stationary installation allowances airlines can use for compliance. A minimum carbon price should also be introduced, it said.

The group also called for the implementation of other means of encouraging clean fuel and zero-emission aircraft uptake, such as kerosine taxation and mandates for deploying sustainable fuels.

The EU should also reject options under consideration that would see aviation's coverage under the EU ETS replaced with the International Civil Aviation Organisation's (Icao) Carbon Offsetting and Reduction Scheme for International Aviation (Corsia), T&E said.

And it should consider reintegrating long-haul flights into the ETS until Corsia requires airlines to buy quality carbon offsets, which will not be the case until at least 2027, T&E said.

Icao's recent decision on Corsia's baseline means there will be "next to no financial impact" on airlines from the scheme, the group warned.

Icao decided in July that it would amend the baseline year for emissions under Corsia to 2019 from an average of 2019 and 2020 emissions as originally planned, amid fears that the drop in air traffic owing to the Covid-19 crisis would make a baseline founded partly on 2020 emissions too onerous.

The European Commission has put forward in its ongoing consultation on aviation's inclusion in the EU ETS a number of potential options for Corsia implementation. These include full legal application of the EU ETS by December 2023, maintaining the status quo — of applying the EU ETS only to intra-EU/EFTA flights — and only applying Corsia.

T&E's policy recommendations are based on analysis by German research group Oko-Institut, which found that current costs to airlines under the EU ETS do not incentivise the sector to shift towards clean technology, whether through infrastructure development or zero-emission fuel supply.

Of the options to create a sufficient price signal considered in its analysis, the Oko-Institut found that scrapping free allowances was "one of the most straightforward", and could raise €1bn/yr for sustainable fuel deployment.

But measures beyond a higher carbon price will be required to support the development of net-zero emissions technologies, given their often prohibitive costs, the group warned.

By Victoria Hatherick