The EU Council of Ministers officially adopted, on 24 October 2008, the new directive which, from 1 January 2012, includes flights to and from Community airports in the European emissions trading scheme (ETS - Directive 2008/101/CE). As from that date, airlines will be obliged to comply with a certain CO2 emissions level, corresponding to an initial level of free allowances. If they emit more CO2 than the initially defined amount, they will have to buy quotas on the market.

As it is defined today, the ETS will require airlines to buy emissions allowances if they emit a volume of CO2 greater than around 85% of the average emissions registered between 2004 and 2006 (see technical fact sheet on ETS). This is what is known as a ‘cap and trade’ system, the principles of which are to limit emissions to a given level (cap) and to allow operators to buy or sell allowances on the market (trade).

The inclusion of aviation in the ETS can be seen as the first real political attempt to limit CO2 emissions from aviation.

Why act? Aviation’s share of total greenhouse gas emissions in the EU is relatively limited. It is generally estimated at 3%. However, the figures cited by the aviation sector and the environmentalists do not tally. According to the United Nations Intergovernmental Panel on Climate Change (IPCC), aviation accounts for only 2% of CO2 emissions at global level. European aviation alone is believed to account for only 0.5% of global CO2 emissions. So is this really cause for concern? These figures are a good argument for airlines, which point out that the impact of ‘their’ ETS on climate change at global level will necessarily be limited.

Environmentalists reply that these figures only refer to CO2 and not to the other greenhouse gases emitted by aircraft. The IPPC also estimates that the total impact of aviation on climate change is two to four times higher than the effect of CO2 emissions alone. The EU tends to confirm the more ‘optimistic’ ratio, estimating that the real impact of aviation is twice as high as that of CO2 emissions. These estimates may be too low because they do not take into account the impact of cirrus clouds that can form as a result of the water vapour discharged by aircraft. That impact is not well known today but is believed to be significant.

It should be noted that a recent update of the IPCC estimates, taking into account the latest traffic statistics and gases other than CO2, argue that the impact of aviation on climate change falls within a range of 3.5% (without cirrus clouds) to 4.9% (with cirrus clouds).

The problem resides above all in the continuous and fast growth in air traffic – which is projected to double between 2005 and 2020 – and consequently in emissions. In the impact study presented with the proposal on the inclusion of aviation in the ETS, the Commission states that the EU’s CO2 emissions from aviation increased by 87% between 1990 and 2005, while total EU emissions for the same period declined by more than 5.5%. If current trends continue, the Commission warns that emissions from aviation could become «one of the main sources of greenhouse gases» ⁽¹⁾

For what environmental benefit?Assuming that is the case, some doubt the capacity of the EU’s system to reduce greenhouse gas emissions from the aviation. According to the Commission, it is «realistic» to consider that the inclusion of aviation in the ETS will make it possible to stabilise emissions from the sector at 2005 levels during the period from 2011 to 2022 (impact study). It estimates a 46% reduction in emissions by 2020 compared to the «business as usual» scenario, or savings of 183 million tonnes of CO2. These figures are disputed, however. Environmental NGOs do not expect emissions to be stabilised, in particular due to the low price of carbon. T&E (the European Federation for Transport and Environment), which bases its opinion on a study conducted on behalf of the air sector by Ernst & Young ⁽²⁾, estimates that emissions from aviation will have declined by only 3% compared to the business-as-usual scenario by 2020.

What impact for the sector? These too are disputed. In the impact study presented with its proposal, the Commission notes that the sector’s inclusion in the ETS will have only a minimal impact on its profits. All airlines are «likely» to pass on most if not all of the costs to their customers. According to the Commission, airlines present characteristics similar to those of European electricity companies, which are assumed to have earned profits while passing on a larger than necessary share of the cost of the system to their customers. Environmental organisations support that view, which is rejected by the aviation sector. The Ernst & Young study conducted on behalf of the sector states that airlines will not be able to pass on a large share of the costs to customers because demand is very price-sensitive (great elasticity).

This same sensitivity to prices prompts the sector’s view that the consequences on growth in traffic are hard to project. The Commission suggests a limited impact: from 142% growth by 2020 in the case of business as usual to 135% with the ETS. This hypothesis is based on the principle that demand in the sector...is not highly price-sensitive!

The inclusion of aviation in the ETS can be seen as the first real political attempt to limit CO2 emissions from aviation
⁽¹⁾ Com(2005)459: Reduction of the impact of aviation on climate change.
⁽²⁾ Analysis of the EC proposal to include aviation activities in the emissions trading scheme – can be downloaded from www.aea.be