Abstract
European airlines are closely exploring potential pathways towards a net-zero, or low-carbon European air transport through the reduction of CO2 emissions in absolute terms and CO2 mitigation (offsets or market-based measures). It is crucial to recognise the magnitude and the urgency of the commitment adopted by the European Commission. Airlines know the importance of not failing to turn this pledge into a future reality. Carrying more than 720 million passengers each year and operating around 3000 aircraft, A4E airlines are ready and willing to contribute to making the European Green Deal a success.
Over the next 10 years, European airlines will invest €169 billion in greener aircraft technologies which are on average 25% cleaner and less noisy than their predecessors. The breadth of knowledge, best practices, track record in efficiency and especially the competencies that Europe’s aviation sector holds are valuable tools in reaching these ambitious goals. Air transport is a prerequisite for achieving many UN Sustainable Development Goals. It represents the right to access essential human needs: jobs, markets and goods, social interaction, education and other services. Improved access helps address general concerns such as socio-economic cohesion throughout the EU or the depopulation of rural areas.
Introduction
A4E’s core objective is that aviation can grow sustainably while continuing to benefit the social and economic development of countries across Europe in the coming decades. This requires a coherent policy framework that promotes sustainability while supporting competitiveness.
The EU institutions and Member States should find ways to support the industry’s substantial efforts to become more sustainable and its ambitious goals to cut CO2 emissions. This requires public incentives for investment in sustainable technologies and fuels, which offer a real prospect for the future decarbonisation of air travel. This should be complemented by smart economic instruments to enable carbon pricing and cost-effective emissions reductions in other parts of the economy.
CO2 emissions from aviation represent 3.6% of the EU’s total CO2 emissions. The EU’s Emissions Trading System (ETS) addresses emissions from intra-EEA flights whilst the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will also address intercontinental flights, representing around 80% of Europe’s aviation emissions.
Due to the global nature of air transport, European airlines, the aviation industry, other stakeholders as well as European institutions have for many years been consistently advocating a global solution.
A4E welcomed the ICAO Assembly’s approval in October 2019 to move forward with CORSIA and commitment to undertake the research needed to develop, by 2022, a roadmap for a long-term climate goal for international aviation. Following the ICAO agreement, there is now an opportunity to have a fresh look at environmental regulation in Europe.
Smart economic instruments to cap and reduce emissions
To limit the climate impact of air travel, it is essential that a basket of measures be applied simultaneously to allow European aviation to fully contribute to the climate effort while long-term solutions are implemented to reduce emissions. These include:
- Greener aircraft technologies,
- More efficient operations and infrastructure,
- The development of and appropriate support for sustainable aviation fuels (SAFs), and smart economic instruments.
Smart economic instruments such as carbon trading and offsetting schemes are preferable to taxes, as they achieve substantial emissions cuts at least cost to consumers, which is something that simply imposing taxes does not lead to. Market-based measures have therefore the advantage of ensuring the achievement of pre-defined environmental targets in a cost-efficient manner. By putting a price on CO2 emissions, emitters are incentivized to reduce their carbon footprint in the most cost-efficient way.
Such instruments also provide further stimulation to progress in the other elements of the basket of measures, including driving efficiency in every aspect of an airline’s business.
The EU’s Emissions Trading System and CORSIA
Aviation has been part of the EU ETS since 2012.European Union (EU). Directive 2009/29/EC of the European Parliament and the Council Amending Directive 2003/87/EC so as to Improve and Extend the Greenhouse Gas Emission Allowance Trading System of the Community, 2009, 140, 63–87. Available online: https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:32009L0029&from=EN It is currently the only transport sector that is part of the ETS scheme where the cost of emissions has reached €26 per ton of CO2.Harttree European Market Update 24. August 2018 In total, the net reduction in aviation-related emissions for the entire 2013-2020 phase is estimated to be 193.4 million tons of CO2 emissions.https://www.eurocontrol.int/sites/default/files/publication/files/eaer-2019.pdf, 2019. European Aviation Environmental Report. In 2018, European airlines purchased CO2 certificates for more than 58 % of their emissions for a value of €450 million.
At the international level, aviation will be the first industry to have a global scheme to limit CO2 emissions in 2021. We were delighted when governments agreed in October 2016 to regulate global aviation emissions through a smart economic measure — CORSIA.International Civil Aviation Organisation (ICAO). Resolution A39-3: Consolidated Statement of Continuing ICAO Policies and Practices Related to Environmental Protection—Global Market-based Measure (MBM) Scheme; International Civil Aviation Organisation: Montréal, QC, Canada, 2016; Available online: https://www.icao. int/environmental…/resolution_a39_3.pdf We recognise the contribution made by the EU to achieve this historic outcome and are committed to supporting the introduction of CORSIA. The scheme, which is overseen by ICAO, will deliver projects that will reduce carbon by around 2.5 billion tons between 2021 and 2035. 81 countries have currently signed up, covering 77% of global aviation CO2 emissions.International Civil Aviation Organisation (ICAO). CORSIA States for Chapter 3 State Pairs. Available online: https://www.icao.int/environmental-protection/CORSIA/Pages/state-pairs.aspx
All national and regional policies on aviation emissions must now be done with the utmost care to align with and support CORSIA, avoid double regulation of the same CO2 emissions, and avoid international disputes. This applies especially when considering the future of the EU ETS.
The EU ETS and CORSIA post 2021
Regional climate solutions risk shifting CO2 at the expense of airlines based in the region. Aviation is a global economic activity and air traffic is international. Global solutions are the most effective in terms of climate and environmental policy addressing air traffic. While CORSIA as a global instrument has minimal negative competitive effects, the EU ETS hinders EU airlines’ global competitiveness. A global scheme offers a level playing field for European airlines, provides a global solution to the global carbon challenge, and minimises the risk of loss of market share and carbon leakage. The drafting of regional climate measures should avoid creating competitive disadvantages and market distortions at an international level. Proposals for a carbon border adjustment mechanism, for selected sectors, to reduce the risk of carbon leakage should take into consideration such disadvantages.
A4E fully supports the EU’s ambition that CORSIA should be as robust as possible and believes it should be the key mechanism to curb aviation emissions. It will help to achieve one of the industry’s key goals: carbon-neutral growth from 2020 onwards.
Many of the international flights currently covered by the EU ETS will also be in the scope of CORSIA from 2021. Policymakers must ensure that aircraft operators are not required to pay for the same ton of CO2 under multiple schemes.
We believe that the requirements of the Chicago Convention Annex 16 on CORSIA must be implemented for intra-European flights in full. The European Commission has proposed that CORSIA Monitoring Reporting and Verification (MRV) be implemented through the EU ETS legislation, with various inconsistencies in the MRV rules. We are concerned that the EU may extend this approach by claiming that CORSIA compliance requirements are automatically met by compliance with the EU ETS from 2021. This would be highly inappropriate and would be a failure to implement CORSIA, a vote of no-confidence in the scheme, a disregard for the harmonised requirements that are necessary for aviation and would set an unacceptable precedent.
Scenarios for ETS & CORSIA
A4E airlines are ready and willing to contribute to making the European Green Deal a success and willing to contribute to the decarbonization effort. European airlines recognize the role they should play in the decarbonization of the EU and the central role the EU ETS plays in reducing CO2 emissions in the EU.
Very soon, the EU will have to decide how to continue with the EU ETS from the beginning of the CORSIA pilot offsetting phase. The lack of clarity over the presence of the EU ETS alongside CORSIA needs to be addressed, especially with regard to international intra-EEA flights which are, as matters stand, subject to both schemes. According to Annex 16, Vol. IV, this issue is clear: All EU states have agreed to join CORSIA from its inception, which regulates all international routes between participating states. Hence, emissions from international intra-EU flights are clearly subject to offsetting under CORSIA.
Scenarios that may open the door to divergences on the pricing of carbon within the EEA due to the emergence of a patchwork of initiatives for domestic flights however should be avoided. Similarly, options that would foresee an exemption from the aviation sector from the EU ETS should not be supported.
Recognizing the EU’s willingness to review its CO2 emissions targets at the 2030 and 2050 targets, there is an opportunity to rethink the way that intra-European ambition and policy can co-exist and complement CORSIA. We believe future policy should be built on CORSIA rather than trying to ‘shoe-horn’ CORSIA into the EU ETS model.
Review of allowances
Decisions on the increase of the auctioning percentage of allowances under the EU ETS should take into consideration the large structural changes required to enable the aviation sector to decarbonize and the unprecedented crisis it is experiencing as a result of the COVID-19 pandemic. It also needs to be handled in conjunction with the foreseen carbon border adjustment mechanism to remove free allowances from the industrial sector rather than aviation.
ETS scope
Whilst aviation has been part of the EU ETS for several years, road transport and maritime transport, together representing around 75% of GHG emissions from transport in Europe, remain outside of the ETS. The efficiency of a cap-and-trade system resides in the system’s capacity to cut emissions where costs are the lowest. For this reason, a broadening of the scope of the ETS would allow a more ambitious reduction of European transport’s carbon footprint over time through the trading of allowances with other transport modes where more options for reductions are available and abatement costs can be lower and efficiency gains more affordable.
ETS revenues and the ETS Innovation Fund
The development and deployment of Sustainable Aviation Fuels (SAFs), Research and innovation on alternatives to fossil fuels are ongoing and should be supported. In the absence of an alternative to liquid drop-in sources of energy for mainstream commercial flights in the next years, coupled with the commitment for aviation to reduce its CO2 footprint, this reduction will have to be achieved by switching to aviation fuels that are increasingly CO2 neutral, whilst remaining cost-competitive.
To mobilise the huge amounts of investment needs,According to the European Commission’s long-term climate strategy, investment needs for low-emission transport alone under the current energy and climate policy will amount to EUR 685 bn/year between 2021–2030, and EUR 904 bn/year between 2031-2050. European Commission, 2018. 2050 long-term strategy. financing for research, development and deployment must be improved. To this end, measures to support the development of SAFs are crucially missing and were not sufficiently considered in the 2018 Review of the Renewable Energy Directive (REDII); the remaining structural funds and the new Multiannual Financial Framework (MFF) should be leveraged; incentives could be improved under the Alternative Fuels Infrastructure Directive and infrastructure and technology solutions could be further standardised; projects with the potential to significantly contribute to aviation decarbonisation efforts, notably through the development of alternative fuels for aviation or electrification should also be supported by the EU’s future ETS Innovation Fund.
At member states level too, the full revenues of auctioning of aviation allowances in the EU ETS should be used in supporting the development and deployment of SAFs as well as electrification.