"Fit for 55" - The European Commission's legislative proposal to revise the EU ETS
20/07/2021
On 14th July, the European Commission has proposed the much-awaited “Fit for 55” legislative package which will include measures to reduce emissions by at least 55 percent by 2030 compared to 1990 levels. This is a comprehensive step in overhauling Union legislation to align it with the EU’s increased climate ambition. All initiatives in the package are closely interlinked, and each one depends on the design of the others.
Concerning aviation, the main legal amendments are:
(1) to consolidate the total quantity of aviation allowances at current levels and apply the linear reduction factor in accordance with Article 9 of the ETS Directive.
(2) to increase auctioning of aviation allowances.
(3) to continue intra-European application of the EU ETS while applying CORSIA as appropriate to extra-European flights; and
(4) to ensure that airlines are treated equally on the same routes with regard to their obligations with economic impacts.
In addition to these amendments, a separate proposal has been made to implement Member States’ notification to EU-based airlines of the offsetting for the year 2021 under ICAO’s CORSIA in a manner that minimizes the administrative burden of national authorities and airline operators and provides legal certainty as regards CORSIA offsetting by airlines based in the Member States.
How does the proposal change the rules on aviation under the EU ETS?
Significant emissions reductions in the aviation sector are needed to reach our 2030 climate targets. Despite flights within the European Economic Area (EEA) being covered by the EU ETS since 2012, aviation emissions in Europe increased an average of 5% year-on-year between 2013 and 2018. While there has been a recent reduction in air traffic as a consequence of the COVID-19 pandemic, aviation emissions are still projected to grow further. The Commission is proposing to revise the ETS aviation rules to create an effective price signal and ensure that the sector contributes its fair share. Flights within the European Economic Area (EEA), as well as flights to Switzerland and the UK, will continue to be covered by the EU ETS. The total number of aviation allowances in the ETS will be capped at current levels, and be reduced annually by 4.2% (linear reduction factor). The number of free allowances allocated to aircraft operators will be reduced progressively, with the aim of stopping free allocation to aviation by the end of 2026.
In parallel, the proposal implements the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) for extra-European flights. The EU ETS Directive will apply CORSIA to EU-based airlines' emissions from flights to and from countries outside the EEA. When emissions from flights outside the EEA reach levels above 2019 they will have to be offset with corresponding carbon credits. These credits should contribute to achieving emissions reductions in various sectors of the economy, such as renewable energy or waste management in countries that participate in the Paris Agreement and from 2027 in CORSIA. Offset credits must be reliably accounted for to avoid them being counted twice. Each offset credit should represent a tonne of CO2 that has been reduced or avoided.
Concerning aviation, the main legal amendments are:
(1) to consolidate the total quantity of aviation allowances at current levels and apply the linear reduction factor in accordance with Article 9 of the ETS Directive.
(2) to increase auctioning of aviation allowances.
(3) to continue intra-European application of the EU ETS while applying CORSIA as appropriate to extra-European flights; and
(4) to ensure that airlines are treated equally on the same routes with regard to their obligations with economic impacts.
In addition to these amendments, a separate proposal has been made to implement Member States’ notification to EU-based airlines of the offsetting for the year 2021 under ICAO’s CORSIA in a manner that minimizes the administrative burden of national authorities and airline operators and provides legal certainty as regards CORSIA offsetting by airlines based in the Member States.
How does the proposal change the rules on aviation under the EU ETS?
Significant emissions reductions in the aviation sector are needed to reach our 2030 climate targets. Despite flights within the European Economic Area (EEA) being covered by the EU ETS since 2012, aviation emissions in Europe increased an average of 5% year-on-year between 2013 and 2018. While there has been a recent reduction in air traffic as a consequence of the COVID-19 pandemic, aviation emissions are still projected to grow further. The Commission is proposing to revise the ETS aviation rules to create an effective price signal and ensure that the sector contributes its fair share. Flights within the European Economic Area (EEA), as well as flights to Switzerland and the UK, will continue to be covered by the EU ETS. The total number of aviation allowances in the ETS will be capped at current levels, and be reduced annually by 4.2% (linear reduction factor). The number of free allowances allocated to aircraft operators will be reduced progressively, with the aim of stopping free allocation to aviation by the end of 2026.
In parallel, the proposal implements the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) for extra-European flights. The EU ETS Directive will apply CORSIA to EU-based airlines' emissions from flights to and from countries outside the EEA. When emissions from flights outside the EEA reach levels above 2019 they will have to be offset with corresponding carbon credits. These credits should contribute to achieving emissions reductions in various sectors of the economy, such as renewable energy or waste management in countries that participate in the Paris Agreement and from 2027 in CORSIA. Offset credits must be reliably accounted for to avoid them being counted twice. Each offset credit should represent a tonne of CO2 that has been reduced or avoided.
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