Extending the EU ETS to All International Flights Departing Europe Could Raise $10bn a Year, Finds ICCT Study

by Christopher Surgenor (GreenAir) With the European Commission’s reveal of its long-awaited review of the EU Emissions Trading System (EU ETS) just days away, lobbying by climate and industry groups for and against an extension of the scheme to include carbon emissions from flights to destinations outside Europe has been intense. UN agency ICAO has also entered the debate with a plea to its member states, without naming the EU specifically, to maintain a globally harmonised approach to address international aviation emissions through its CORSIA carbon offsetting scheme. Industry argues that extending the scope of the EU ETS would damage CORSIA as it moves from the voluntary to the compliance phase, as well as add higher costs to airlines. Climate lobbyists contend the extension would properly price aviation emissions while bringing in extra revenue for climate action. A new study by ICCT estimates such a move could raise around €9 billion ($10.3bn) a year.

The study also finds concerns that long-haul passengers could switch to using flights from non-EU hubs or adding a stop on otherwise direct flights in order to avoid EU ETS costs passed on to them by airlines are overstated. In all its scenarios, the risk of shifting emissions outside Europe, known as carbon leakage, is limited to a maximum of 3.1%.

The originally intended scope of the EU ETS, which was paused under a ‘stop-the-clock’ provision, was to include both departing and incoming international flights serving the European Economic Area. If the scheme was to revert to the full scope, ICCT estimates it would generate €14.3 billion ($16.4) in annual revenue, with a leakage rate of 3.1%. The €9 billion per annum estimate for departing flights assumes a carbon price of €70 ($80) per tonne of CO2, with a leakage rate of 1.9%.

In a briefing to journalists on July 15, Peter Liese, a longstanding member of the European Parliament and the rapporteur who steered the legislative passage of the Directive, adopted in 2008, that originally brought the aviation sector into the EU ETS, indicated his and his EPP political group’s preference to keep the present scope “unless we can adopt smarter solutions”.

He believes extending the scope to all outgoing international flights “would create a storm and I don’t think it is wise. I don’t know anyone in the EPP who is for this proposal.”

Liese said aviation was one of the most difficult industries to decarbonise and “a reasonable approach is imperative”.

He suggested a “smart solution” could be an airspace approach to the ETS to protect European hubs, with more ETS allowances be given to support sustainable aviation fuel uplift in the EU and even free allowances made available to the sector.

However, a number of major aviation countries – notably Brazil, India and China – have yet to signal their intention to join CORSIA. The scheme moves in 2027 from its initial voluntary participation phases to a full compliance offsetting phase. READ MORE

Excerpt from IATA/Airlines: IATA (International Air Transport Association) is deeply frustrated at the proposed extension of the European Emissions Trading System (EU ETS) beyond Europe’s borders, an approach that was discredited over a decade ago.

“The EU is repeating a historic error. The consequences will be harmful—sowing acrimony over extraterritoriality, slowing global decarbonization, and sapping European competitiveness—with European travelers and businesses paying the price,” said Willie Walsh, IATA’s Director General.

“Instead of expanding the EU ETS beyond Europe’s borders, the EU should focus on making CORSIA—the agreed global mechanism—even more successful. Increasing SAF allowances and enabling a book-and-claim system for SAF could be promising steps, but the details are critical to success. We will engage with European policy makers towards a more effective approach with no extraterritoriality, full support for CORSIA, and effective SAF incentives.” READ MORE