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Overview

Aviation and climate change Commission activities and policy statements relating to the use of economic instruments Niels Ladefoged DG Environment, European Commission December 2004. Overview. The challenge Major Commission policy statements Key Commission studies

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Overview

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  1. Aviation and climate changeCommission activities and policy statements relating to the use of economic instrumentsNiels LadefogedDG Environment, European Commission December 2004

  2. Overview • The challenge • Major Commission policy statements • Key Commission studies • The possible control options • Taxes or charges • Emissions trading • Next steps

  3. Aircraft emissions have grown rapidly… GHG emissions from international aviation reported by Annex I Parties to the UNFCCC: • + 48 % from 1990 to 2000 • ~ 1.2 % of total national emissions • Note: • Total radiative forcing of aviation higher than that of CO2 alone • Only comprise reported emissions of Annex I countries (e.g. not Thailand, Brazil, China)

  4. ..and air traffic is forecast to continue growing • According to ICAO analysis presented in February 2004, the world passenger aircraft fleet could double by 2020 - an increase from 12317 in 2002 to roughly 25000 aircraft in 2020. • “Global air freight will average 5.6% growth between 2003 and 2008” (MergeGlobal, Inc. Global Freighter Capacity & Fleet Model) • "World air cargo traffic will expand at an average annual rate of 6.2% for the next two decades, tripling over current traffic levels." (Boeing forecast) • “With respect to climate change (CO2-equivalents) air transport is dominating the EU-plus outbound and inbound tourism transport impact with 72% […] The general trend in tourism towards more frequent, less long and further away trips has a strong impact on transport demand. [… ]Cheap air transport leads to a combined mode-destination shift which very strongly influences the environmental impact.” (Feasibility and preparatory study regarding a Multi-stakeholder European Targeted Action for Sustainable Tourism & Transport, DG Enterprise)

  5. Major Commission policy statements of relevance • COM(96) 549 - Report under Directive 92/81/EEC… • COM(1997) 30 - Proposal for a Directive restructuring the Taxation of Energy Products • COM(1998) 466 - White Paper on Fair Payment for Infrastr. Use... • COM(1999) 640 - Air Transport and the Environment • COM(2000) 110 - Taxation of Aircraft Fuel • COM(2000)821 - Community objectives for 33rd ICAO GA • COM(2001) 31 - Proposal for the 6th Community Environment Action Programme (6EAP) • COM(2001) 370 - White Paper on the Common Transport Policy • COM(2004) 74 - A Community aviation policy towards its neighbours • COM(2004) 505 - Financing the European Union • SEC(2004) 923 - Impact of Int. Aviation on Climate Change – prep. For 35th ICAO Assembly

  6. Key Commission studies • Economic incentives to mitigate greenhouse gas emissions from air transport in Europe • Bibliographical data: R.C.N.Wit, J.M.W.Dings, P.Mendes de Leon, L.Thwaites, P.Peeters, D.Greenwood and R. Doganis. • Delft, CE, 2002. Publication number: 02.4733.10 • Further information on this study is available from Mr. Ron Wit: • Tel: +31 15 2 150150/e-mail: wit@ce.nl • The final report can be downloaded at: • http://europa.eu.int/comm/transport/air/4733_finalreport-en.pdf • Analysis of the taxation of aircraft fuel • Study VII/C/4-33/97 • Final report January 1999, prepared by a Consortium led by Resource analysis, Delft, The Netherlands (Tel:+31 15 2191519/e-mail : RA@resource.nl) • On the basis of this study, the Commission adopted a Communication on taxation of aircraft fuel – COM (2000)110 – which can be found at • http://europa.eu.int/comm/taxation_customs/publications/official_doc/com/com.htm#COM2000110

  7. 1999 Comm. on Aviation & Sustainable Development • Proposed long term policy target: to achieve improvements to the environmental performance of air transport that outweigh the environmental impact of growth • Noted this was very ambitious, especially for CO2 emissions, without breakthrough developments in engine technologies • Recognised new approaches are required

  8. Other reasons to consider market based instruments • internalising external costs • getting fairer treatment between sectors • the internal market • general transport and tax policies • possibly helping finance the EU

  9. Fuel/Emission Tax • 1996 EC Report on imbalances from the exemption of international aviation from excise duty • 1997 EU Council noted the Report & requested information on effects of introducing such taxation • 1999 Analysis of Taxation of Aircraft Fuel by Resource Analysis et al published

  10. Main Tax Options Studied • Taxation Level 245 euros/1000 litres wef 1998 • Option A All routes from EU • Option B Intra-EU routes/EU carriers only

  11. Tax - Results • Option A - more environmentally effective - less economic/competitive impact - more cost-effective • Option B - immediately feasible legally - but not really effective

  12. Tax - Conclusion • Confirmed commercial aviation fuel should be taxed as soon as the international legal situation allows such a tax to be levied on all carriers, including those from third countries. EU should pursue this in ICAO. • Recommended EU Member States should be able to tax fuel used for domestic flights and, by mutual agreement, fuel used on flights between such States. [Since given effect by Directive 2003/96/EC] • Differential en route charges based on environmental impact of aircraft should be pursued in addition or as an alternative meantime.

  13. Emissions Charges These could e.g. take the form of • a levy added to the fare • a levy based on distance flown/ environmental performance of the aircraft • a levy associated with airport LTO charges

  14. The revenues These could • fund environmental investments (eg. in R&D, in new technologies) • fund compensatory measures (direct or indirect eg. carbon offset) • be revenue neutral (ie. reward the better environmental performer at the expense of the worse) • be some combination of these

  15. Options studied • An environmental charge • A Performance Standard Incentive (PSI)

  16. Incentive Level • Same for both options • Based on external costs of climate change • Mid-range working values of 30 euros per tonne of CO2 and 3.6 euros per kg of NOx • Sensitivity analysis: low(10 euros and 1.2 euros respectively) and high (50 euros and 6 euros) • Choice of level ultimately a political issue

  17. Environmental charge - impact Main effects would be • reduced CO2 emissions in EU airspace of 10 megatonnes (9%) in 2010 • increased ticket prices of 3-5 euros for short flights and 10-16 for long ones • annual revenues 1-9 billion euros Revenues could either be - allocated to Member States, or - to an EU emission abatement fund

  18. Revenue-neutral PSI - impact • Reduced CO2 emissions in EU airspace of 6 megatonnes (5%) in 2010 • Impact on ticket price would depend on the definition of the ‘performance standard’ • No net financial burden on industry, though some segments would benefit at the expense of others

  19. Other findings • No significant economic distortions between airlines identified • No legal obstacles provided the incentive - has no fiscal aim - is based on the ‘polluter pays’ principle - is not directly linked to fuel consumption

  20. Emissions trading • Commission is now launching a study • Will examine the feasibility of including aviation in the EU ETS • Terms of Reference available • Final report due 8 July 2005 • If aviation were to be included it should be done in a way that doesn’t compromise the environmental integrity of the current scheme

  21. Implications for air service agreements • Important to ensure that the ongoing reform of the EU’s external air transport relations does not undermine but support efforts to mitigate the sectors’ impact on the environment: • To allow for the taxation option created by Council Directive 96/2003/EC and to keep all options for market-based measures open to mitigate the climate impacts of international aviation, air services agreements between Member States and third countries should not contain provisions excluding the option of fuel taxation on flights operated by third country carriers between two points in the EU • In future negotiations on comprehensive Community agreements the services of the Commission are of the view that the Community should insist on preserving full flexibility as regards aviation fuel taxation.

  22. Next steps • The Commission may announce proposals to deal with the impact of aviation on climate change in 2005. If and when it does so and what it will consist of will depend on • The outcome of the study on aviation and EU emissions trading • The relative merits of the different options • How the new Commission sees this

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