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Commission's "Fit for 55" proposal on the revision of the EU ETS Directive

01/09/2021



On 14th July, the European Commission published the much-awaited “Fit for 55” legislative package which includes a series of legislative proposals to make its policies fit for delivering the updated 2030 greenhouse gas emissions net reduction target of 55% below 1990 levels, as set out in the 2030 Climate Target Plan and written into the European Climate Law.

The "Fit for 55" legislative proposals cover a wide range of policy areas including climate, energy, transport and taxation, setting out the ways in which the Commission will reach its updated 2030 target in real terms. In particular, the package includes a Revision of the EU Emission Trading System Directive concerning aviation.

In short, the purpose of the revision is to continue the implementation of the EU ETS on intra-European routes beyond 2024, and implement CORSIA for EU-based operators on extra-European routes with an option to revert to full scope EU ETS in 2027 on routes to and from countries not adopting CORSIA. Below is our summary of the Commission's proposal:
  1. From 2024, it is proposed that EU ETS apply to the following flights (for both EU-based and non-EU-based operators):
    1. All intra-European flights between EEA airports
    2. All departing flights from EEA airports to Switzerland
    3. All departing flights from EEA airports to the United Kingdom
    4. All flights within the same outermost region (e.g. Punta Delgada to Horta)
    5. All flights between different outermost regions (e.g. Punta Delgada to Madeira)
    6. All flights between an outermost region, and other EEA Member States than the Member State in which the outermost region is located (e.g. Punta Delgada to Paris)
    7. Note: the current derogation from EU ETS obligations of the routes mentioned in e. and f. above is temporary and will expire on 31 December 2023. From 2024, only flights between an outermost region and the EEA Member State in which the outermost region is located (e.g. Punta Delgada to Lisbon) will remain exempted from EU ETS obligations.
  2. It is proposed that CORSIA apply to the following flights (for EU-based operators only):
    1. All international flights worldwide with the exception of i. intra-European flights, ii. departing flights from EEA airports to Switzerland, and iii. departing flights from EEA airports to the United Kingdom.
    2. Note: although covered by the EU ETS, intra-European international flights will continue to be monitored and verified under CORSIA for the calculation of the sector growth factor.
    3. Until 2026, to ensure equal treatment on routes, flights to and from countries that are not implementing CORSIA are exempt from CORSIA obligations.
    4. From 2027, the Commission is proposing to re-introduce EU ETS for both EU and non-EU airlines on routes to and from countries that are not implementing CORSIA.
    5. Flights to and from Least Developed Countries (LDC) and Small Island Developing States (SIDS) not implementing CORSIA, other than those states whose GDP per capita equals or exceeds the EU average, will always be exempt from CORSIA obligations.
    6. Note: this means that the Commission is ignoring the concept of Landlocked Developing Countries and the concept of individual / cumulative share of international aviation activities as per the SARPs, and is introducing the new concept of GDP per capita.
  3. Regarding EU ETS allowances, it is proposed that:
    1. The total quantity of aviation allowances available in 2024 is based on the total allocation to active aircraft operators in 2023, reduced by the linear reduction factor as specified in the EU ETS Directive, and increased adequately to take into consideration the new EU ETS applicable scope due to the change of the rules governing outermost regions.
    2. In 2024, 2025 and 2026, 25%, 50% and 75% respectively of the aviation allowances originally set to be allocated for free shall be auctioned
    3. From 2027, 100% of the aviation allowances originally set to be allocated for free shall be auctioned
    4. Allowances which are allocated for free shall be allocated to aircraft operators proportionally to their share of verified emissions in 2023.
  4. Regarding CORSIA credits, it is proposed that:
    1. To calculate offsetting requirements, for the 2021-2023 period the 2019 emissions are used for the baseline; and for subsequent periods, the average of the 2019 and 2020 emissions are used for the baseline.
    2. EU-based airlines may use international credits to comply with CORSIA offsetting requirements; however the Commission proposes to add two eligibility criteria: these credits should originate from states that are parties to the Paris agreement, and that participate in CORSIA.
    3. The Commission will adopt a list of the credits which are acceptable by ICAO and that fulfil the two new eligibility criteria above. The second condition shall not apply for emissions before 2027, and shall not apply for flights to and from LDC, and to and from SIDS other that those states whose GDP per capita equals or exceeds the EU average.
    4. EEA Member State shall calculate the offsetting requirements each year for the preceding calendar year, and shall inform EU-based aircraft operators by 30 November each year.
    5. The cancelation of units shall take place by 31 January 2025 for the emissions during the period 2021-2023, by 31 January 2028 for the emissions during the period 2024-2026, by 31 January 2031 for the emissions during the period 2027-2029, by 31 January 2034 for the emissions during the period 2030-2032, and by 31 January 2037 for the emissions during the period 2033-2035.
    6. Where a significant distortion of competition to the detriment of EU-based airlines occurs due to a less stringent implementation or enforcement of CORSIA in the third country, the Commission may exempt EU-based operators from offsetting requirements for emissions from flights or may allow operator to use unit types additional to the adopted list (c.).
In addition, the European Commission proposed in a Decision that for the year 2021, EU-based aircraft operators shall have no CORSIA offsetting requirements. 

> Read Commission’s ‘Fit for 55’ climate package proposes removing European aviation’s fuel tax exemption, by GreenAir Online

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