A new analysis shows the expansion of the scope of the EU’s Emission Trading System (EU ETS) for aviation could bring several environmental and economic benefits without significantly increasing operating costs for airlines.
The major benefits of expanding the scope of the EU ETS for aviation has this month been demonstrated by a new study. Research showed that including more flights in the EU carbon market would lead to significantly higher emission reductions, create more balanced pricing between low-cost carriers and legacy airlines and generate higher EU ETS revenues that can be used to decarbonise aviation, all with limited costs for airlines.
This study was commissioned by Carbon Market Watch and Transport & Environment (T&E), and conducted by TAKS, and aims to provide more nuance and data for the ongoing discussion on the revision of the EU ETS for aviation.
Big emissions reductions
Currently, only intra-European Economic Area (EEA) flights are included in the Commission’s EU ETS proposal, but the study shows that expanding the scope to departing flights (semi-scope), would result in 50% more emissions reductions, and applying the EU ETS to all flights leaving and arriving (full scope) in the EU would lead to reductions that are113% greater than the Commission’s proposal.
The study also showed that the additional carbon cost for airlines related to the purchase of EU allowances and international credits is minor compared to the total operating costs of airlines. In the semi-scope scenario, the cost for intra-EEA flights would take a 5.5% share of total airline operating costs, and for flights outside the EEA would only amount to 3.4%. Even the full scope scenario, the most ambitious option for the climate, would only cost a forecasted 6.8% of total airline operating expenditure.
Funding climate action
Moreover, the study shows that the revenues raised from the sale of EU allowances would be much higher with an expanded scope: compared to the Commission proposal where €26.1 billion is raised, the inclusion of departing flights in the system would raise up to €60.8 billion and the expansion to full scope up to €95.4 billion.
If the polluter pays principle was applied, ending the allocation of free allowances to airlines, there could be a further increase in the auctioning revenues: €68.4 billion for semi-scope and €107.4 billion for full scope. This means that full scope, combined with an immediate phase-out of free allocation, will raise the most revenues and presents the best option for the urgent climate action that is desperately needed from the aviation sector.
The cracks in CORSIA exposed
The last important finding of the report relates to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), with the study detailing how weak and uncertain the system is. CORSIA could lead to 77% less emissions savings compared to the Commission proposal, due to uncertainties related to the baseline that will be used from October 2022 and the fact that some countries (Brazil, China, India, Russia and Vietnam) are unwilling to join the scheme. The EU cannot rely on this ineffective offsetting scheme to regulate long-haul aviation emissions.
This study was conducted in a crucial moment, where lawmakers and EU institutions are discussing the review of the EU ETS for aviation. On Wednesday 8 June, MEPs agreed in a plenary vote to further increase ambition for the ETS for aviation: the adopted text proposes to expand the scope of the EU ETS to all departing flights and to phase out free allocations by 2025.
While this is an improvement on the Commission proposal, there’s still space to increase the ambition of the whole system further. As the study shows, accelerating the phase-out of free allowances not only ensures the application of the polluter pays principle, but is also the most effective solution in light of the climate crisis, if accompanied by a further expansion of the scope to all arriving and departing flights.