Including the Aviation Sector in the European Union Emissions Trading Scheme

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Including the Aviation Sector in the European Union Emissions Trading Scheme 11mm Spine 6/2/06 2:06 pm Page 1 INCLUDING EUR Distributed by TSO (The Stationery Office) and available from: OPEAN UNION COMMITTEE 21st REPOR TSO HOUSE OF LORDS (Mail, telephone and fax orders only) PO Box 29, Norwich NR3 1GN General enquiries 0870 600 5522 THE Order through the Parliamentary Hotline Lo-call 0845 7 023474 Fax orders 0870 600 5533 A Email [email protected] VIA Internet http://www.tsoshop.co.uk European Union Committee TION SECT TSO Shops 123 Kingsway, London WC2B 6PQ 020 7242 6393 Fax 020 7242 6394 68-69 Bull Street, Birmingham B4 6AD 0121 236 9696 Fax 0121 236 9699 21st Report of Session 2005–06 9-21 Princess Street, Manchester M60 8AS OR IN 0161 834 7201 Fax 0161 833 0634 16 Arthur Street, Belfast BT1 4GD 028 9023 8451 Fax 028 9023 5401 THE EU EMISSIONS 18-19 High Street, Cardiff CF10 1PT 029 2039 5548 Fax 029 2038 4347 71 Lothian Road, Edinburgh EH3 9AZ T 2005–06 0870 606 5566 Fax 0870 606 5588 Including the The Parliamentary Bookshop 12 Bridge Street, Parliament Square London SW1A 2JX Telephone orders 020 7219 3890 Aviation Sector in the General enquiries 020 7219 3890 Fax orders 020 7219 3866 TRADING SCHEM Accredited Agents (See Yellow Pages) European Union and through good booksellers © Parliamentary Copyright House of Lords 2006 Applications for reproduction should be made in writing to The Licensing Division, Emissions Trading HMSO, St Clements House, 2–16 Colegate, Norwich NR3 1BQ – Fax 01603 723000 ISBN 0 10 400813 X E – Scheme Report with Evidene HL Paper 107 HOUSE OF LORDS European Union Committee 21st Report of Session 2005–06 Including the Aviation Sector in the European Union Emissions Trading Scheme Report with Evidence Ordered to be printed 17 January 2006 and published 9 February 2006 Published by the Authority of the House of Lords London : The Stationery Office Limited £17. 50 HL Paper 107 The European Union Committee The European Union Committee is appointed by the House of Lords “to consider European Union documents and other matters relating to the European Union”. The Committee has seven Sub-Committees which are: Economic and Financial Affairs, and International Trade (Sub-Committee A) Internal Market (Sub-Committee B) Foreign Affairs, Defence and Development Policy (Sub-Committee C) Environment and Agriculture (Sub-Committee D) Law and Institutions (Sub-Committee E) Home Affairs (Sub-Committee F) Social and Consumer Affairs (Sub-Committee G) Our Membership The Members of the European Union Committee are: Lord Blackwell Lord Maclennan of Rogart Lord Bowness Lord Marlesford Lord Brown of Eaton-under-Heywood Lord Neill of Bladen Lord Dubs Lord Radice Lord Geddes Lord Renton of Mount Harry Lord Grenfell (Chairman) Baroness Thomas of Walliswood Lord Goodhart Lord Tomlinson Lord Hannay of Chiswick Lord Woolmer of Leeds Lord Harrison Lord Wright of Richmond The Members of the Sub-Committee which carried out this inquiry (Sub-Committee B: Internal Market) are: Baroness Eccles of Moulton Lord Roper Lord Fearn Lord Swinfen Lord St John of Bletso Lord Fyfe of Fairhead Lord Walpole Lord Geddes Woolmer of Leeds (Chairman) Lord Haskel Information about the Committee The reports and evidence of the Committee are published by and available from The Stationery Office. For information freely available on the web, our homepage is: http://www.parliament.uk/parliamentary_committees/lords_eu_select_committee.cfm There you will find many of our publications, along with press notices, details of membership and forthcoming meetings, and other information about the ongoing work of the Committee and its Sub-Committees, each of which has its own homepage. General Information General information about the House of Lords and its Committees, including guidance to witnesses, details of current inquiries and forthcoming meetings is on the internet at http://www.parliament.uk/about_lords/about_lords.cfm Contacts for the European Union Committee Contact details for individual Sub-Committees are given on the website. General correspondence should be addressed to the Clerk of the European Union Committee, Committee Office, House of Lords, London, SW1A OPW The telephone number for general enquiries is 020 7219 5791. The Committee’s email address is [email protected] CONTENTS Paragraph Page Chapter 1: Tackling the climate-change impact of aviation 1 9 Kyoto Protocol 11 10 International Civil Aviation Organisation and the Intergovernmental Panel on Climate Change 16 11 The European Commission 22 12 The United Kingdom Government 25 13 Report for information 28 13 Chapter 2: Air transport and the environment 30 14 Introduction 30 14 Current and projected air traffic levels 33 14 Current and projected environmental effects of aviation 37 15 European Commission’s solution 44 16 Chapter 3: Options for tackling the climate-change impact of aviation emissions 46 17 Options considered to be not sufficiently effective or practicable 47 17 Restrictions on air traffic volume 48 17 Regulatory standards 49 17 Restrictions on access to EU airports for the least-efficient aircraft 50 17 Voluntary agreements with airlines to reduce emissions 51 18 Departure/arrival taxes, VAT on air transport, removal of public subsidies 52 18 Options considered inadequate to achieve policy objective but worth pursuing 55 18 Raising awareness of air transport users 56 18 Improving air traffic management 57 19 Research and development in air transport technology and operations 58 19 Applying energy taxes to commercial aviation 59 19 Improving the competitiveness of rail transport 60 19 Options considered in detail by the Commission 61 19 En-route charges or taxes on aircraft emissions and impacts 62 20 Emissions trading for aviation 64 20 Commission’s conclusions 65 20 What views were expressed in written and oral evidence? 67 20 Other solutions to aviation’s climate change impacts 72 21 Fuel tax 73 22 En-route charges 76 22 Carbon offset schemes 77 22 Improved efficiency of Air Traffic Control 79 23 Investment in new technologies 82 23 Other policy tools 83 24 Inclusion of intra-UK flights in NAP of current ETS 84 24 Conclusions 85 24 Chapter 4: Design of an ETS which includes aviation 88 25 Interplay with Kyoto Protocol and with the existing EU ETS 93 25 Coverage of climate impacts 98 26 Geographical scope of scheme 103 27 A global scheme 105 28 Inclusion of intra-EU flights only 107 28 Inclusion of intra-EU flights plus flights departing from the EU 114 30 Inclusion of intra-EU flights plus flights departing from and landing in the EU 122 31 Conclusions on geographical scope 127 32 Decision on allocation rules 130 32 Trading entities 135 33 Allocation method for allowances 137 34 Auctioning or free allocation? 137 34 Grandfathering or benchmarking? 149 36 Chapter 5: The impact of aviation entering the ETS 157 38 More research on impacts needed 158 38 Impact on air fares and the environment 161 39 TABLE 1: Estimates of impacts of ETS on air fares 40 Length of flight 169 41 Range of fare increases depending on assumptions in Euros) – per round trip 169 41 Other impacts 186 44 Would no-frills airlines be disproportionately affected? 187 45 Would European airlines be disadvantaged? 191 45 Environmental impacts 195 46 Clean Development Mechanisms and Joint Implementation Projects 201 46 Impact on economies, business and tourism 206 47 Is there a better solution to aviation emissions? 211 48 Chapter 6: Summary and Conclusions 220 51 Appendix 1: Sub-Committee B (Internal Market) 58 Appendix 2: Call for Evidence 59 Appendix 3: LIST OF WITNESSES 60 Appendix 4: Glossary 61 Appendix 5: Recent Reports 64 ORAL EVIDENCE British Air Transport Association Written evidence 1 Oral evidence, 17 October 2005 3 European Commission Written evidence 16 Oral evidence, 18 October 2005 16 Supplementary written evidence 23 European Low Fares Airline Association (ELFAA) Written evidence 25 Oral evidence, 18 October 2005 27 Aviation Environment Federation (AEF) Written evidence 35 Oral evidence, 24 October 2005 38 Supplementary written evidence 45 British Airways Written evidence 46 Oral evidence, 24 October 2005 50 Supplementary written evidence 61 Mr Elliot Morley MP, Minister of State for Climate Change and Environment, Department for Environment, Food and Rural Affairs (Defra) Written evidence 63 Oral evidence, 31 October 2005 66 Supplementary written evidence 76 Tyndall Centre for Climate Change, The University of Manchester Written evidence 79 Oral evidence, 31 October 2005 82 WRITTEN EVIDENCE Air France 93 BAA plc 93 Environment Agency 99 Supplementary Memorandum by Environment Agency 102 Friends of the Earth 104 Monarch Airlines Limited 108 NOTE: References in the text of the report are as follows: (Q) refers to a question in oral evidence (p) refers to a page of written evidence ABSTRACT ___________________________________________________________________________________________________________________________________________________________________________________________________________________ Global aviation emissions are not currently a serious problem but they will become so. The December 2005 European Environment Council said that the inclusion of the aviation sector in the European Union Emissions Trading Scheme (EU ETS) seems to be the best way forward on aviation emissions and that it has greater potential for application internationally than other policy alternatives. We agree with them but there are substantial problems ahead. Any legislative proposals must be well thought through and sustainable in the longer term, both on environmental and economic grounds. There must be a robust framework within which to accommodate EU and UK policies on aviation emissions and on air-passenger and air freight growth. It is not clear that those policies are compatible. An ETS scheme with aviation should include all flights departing EU airports. This would cover all the EU’s contribution to aviation’s CO2 emissions, some 40% of which arise from intra-EU flights and some 60% from departing flights to third countries.
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