Aviation and the European Union’s Emission Trading Scheme

Jane A. Leggett
Specialist in Energy and Environmental Policy

Bart Elias
Specialist in Aviation Policy

Daniel T. Shedd
Legislative Attorney

Beginning January 1, 2012, most carbon dioxide (CO2) emissions from commercial flights to, from, and within the European Union (EU) are covered by the EU Emission Trading Scheme (EU ETS). Flights are covered regardless of whether the airline or operator is based in the EU region. The EU ETS caps aviation emissions of CO2 in 2012 at 97% of the average in 2004-2006 and at 95% in each year from 2013 to 2020. Each April, beginning 2013, covered aircraft operators must turn in emission “allowances” (permits) equal to the previous year’s emissions from their flights arriving at or departing from EU airports. Airline operators will receive free allowances for 82%- 85% of their 2010 emissions. Airlines that have more allowances than they need may sell them to others or save them for future use. Airlines that need more allowances may buy them from EU auctions, other carriers, other emission sources in the EU ETS, brokers, or international emission trading mechanisms. A small reserve of free allowances will be available for new or rapidly expanding airlines.

The entry into force of an EU law covering international aviation emissions is a significant move in a two-decade process concerning whether and how aviation emissions of CO2 may be abated. Even among those who agree on the benefits of reducing greenhouse gas (GHG) emissions, how to share reductions across nations and sectors remains a continuing, major controversy internationally and within countries. Emissions from international air transport have, since early negotiations, posed a particular challenge.

The 1997 Kyoto Protocol (to which the United States is not a Party) specified that Parties should pursue limitation or reduction of GHG emissions from aviation fuels, working through the International Civil Aviation Organization (ICAO), an agency of the United Nations. In 2008, the EU cited a lack of “substantive progress” in ICAO and legislated to include aviation in its existing EU ETS by 2012. ICAO members have agreed to a variety of voluntary actions and goals. In October 2011, faced with impending inclusion of aviation emissions in the EU ETS, the ICAO Council agreed to accelerate its work, including continuing to explore market-based measures, CO2 standards for new aircraft, and other options.

EU officials have stated their preference for agreeing on global, binding measures in ICAO. One official stated that the EU would agree to suspend inclusion of aviation in the ETS only if a new global ICAO scheme met three conditions: it must deliver more emissions reductions than the EU ETS on its own; it must have targets and measures; and any action must be non-discriminatory and apply to all airlines. Alternatively, EU law allows exemptions for incoming flights from countries that have adopted “equivalent measures” to reduce emissions. Some countries are likely negotiating with the EU for an equivalent measures exemption for their airlines.

Air carriers from the United States and other countries have vociferously objected to inclusion of international aviation in the EU ETS. The U.S. government and other nations have pressed the EU to exclude foreign carriers. Two bills in Congress address the controversy. The U.S. House of Representatives passed H.R. 2594, the European Union Emissions Trading Scheme Prohibition Act of 2011. It would prohibit U.S. aircraft operators from participating in the EU ETS. It also would direct the Administration to negotiate and take other actions to ensure that U.S. civil aircraft operators are not penalized by any unilateral EU regulation of GHG emissions. A similar bill with more flexibility, S. 1956, was introduced in the Senate. In January 2012, House and Senate conferees on reauthorization of the Federal Aviation Administration (FAA) agreed to a sense of the Congress resolution opposing the EU action.


Date of Report: June 11, 2012
Number of Pages: 44
Order Number: R42392
Price: $29.95

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