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Giving wings to emission trading

Inclusion of aviation under the European emission trading system (ETS): design and impacts

Report for the European Commission, DG Environment
No. ENV.C.2/ETU/2004/0074r

Delft, July 2005

R.C.N. (Ron) Wit, B.H. (Bart) Boon and A. (André) van Velzen (CE Delft), M. (Martin) Cames and O. (Odette) Deuber (Oeko-Institut, Berlin), D.S. (David) Lee (Manchester Metropolitan University)



Air transport performs many important functions in modern societies. Aviation facilitates economic growth and cultural exchanges and in many regions the industry provides direct employment. However, aviation also contributes to global climate change, and its contribution is increasing. While the EU's total greenhouse gas emissions fell by 5.5% from 1990 to 2003, carbon dioxide emissions alone from the international aviation of the 25 Member States of the European Union increased by 73% in the same period. Even though there have been significant improvements to aircraft technology and operational efficiency this has not been enough to neutralise the effect of increased traffic. Without due policy intervention, the growth in emissions is expected to continue in the coming decades.

The full climate impact of aviation goes beyond the effects of CO2 emissions, though. Apart from emitting CO2, aircraft contribute to climate change through the emission of nitrogen oxides (NOx), which are particularly effective in forming the greenhouse gas ozone when emitted at cruise altitudes. Aircraft also trigger formation of condensation trails, or contrails, and are suspected of enhancing formation of cirrus clouds, both of which add to the overall global warming effect.

In 1999 the Intergovernmental Panel on Climate Change (IPCC), examining the total climate impact of aviation, estimated these effects to be about 2 to 4 times greater than those of CO2 alone, even without considering the potential impact of cirrus cloud enhancement. This means the environmental effectiveness of any mitigation policy will depend on the extent to which these non-CO2 effects are also taken into account.

A variety of economic instruments such as fuel taxation, emission charges and emissions trading have been proposed to mitigate the climate impacts of aviation. At the European level there have already been studies on an aviation fuel tax and en-route emission charges. In order to complete the existing knowledge base, the European Commission has now taken the initiative of investigating the detailed modalities and impacts of inclusion of aviation in the EU's emissions trading scheme.

Objective of the study

The overarching objective of the present project is

To develop concepts for amending Directive 2003/87/EC to address the full climate change impact of aviation through emissions trading.

This overarching objective has been achieved by securing the following specific goals:

  1. To examine the means by which non-CO2 effects of aviation impact on climate change and the ways in which the ‘full climate change impact’ ofaviation might be captured within the EU emissions trading scheme withoutundermining the scheme’s environmental integrity.
  2. To design viable policy options for including aviation in the existing EUEmissions Trading Scheme (EUETS), in particular to propose viable options for:
    • a. Scope in terms of geographical coverage and types of flights included
    • b. Allocation and surrendering of allowances
    • c. Monitoring, reporting and verification of data
  3. To assess the qualitative impact of policy options developed for includingaviation in the EU ETS.

Design of policy options

The study identifies seven key design elements to be addressed if the climate impacts of the international aviation sector are to be included in the EU ETS:

  • Coverage of climate impacts – besides CO2 emissions, this refers to whether and by what metrics or instruments the non-CO2 effects of aviation are to be addressed.
  • Geographical scope – refers to the geographical coverage of aviation emissions under the trading scheme, i.e. specification of the countries, routes and type of flights/aircraft to be included.
  • Trading entity – refers to the entities that would be obliged to surrender allowances for emissions generated and be allowed to trade.
  • Decision on allocation rules – refers to the institutional level (EU or Member State) at which emission targets and methodologies for the distribution of allowances are to be set, i.e. the degree of subsidiarity granted to Member States with regard to the method used for allocating allowances.
  • Interplay with Kyoto Protocol – refers to the question how aviation can be integrated in the EU ETS, given the separate treatment of this sector under the Kyoto Protocol.
  • Allocation method – refers to the method to be used for initial distribution of allowances among entities.
  • Monitoring method – refers to the emission measurement or calculation method to be used and the agency responsible for monitoring and reporting emissions.

Further excerpt:

Potential trade-offs of CO2 optimisationThe crucial question with a CO2-only scheme is whether it will lead to any negative trade-offs. This is an extremely difficult issue to evaluate, because of its speculative nature and also for lack of technological documentation in the public domain.

CO2 - NOx This study indicates that emission trading based on CO2 only (with potentially a multiplier covering the non-CO2 effects) would not adversely impact NOx emissions overall. In the medium term, at constant engine technology level, overall fleet reductions in CO2 that might arise from emissions trading go more or less hand in hand with NOx emissions reductions. This is because in the short and medium term, the total amount of fuel used by all air traffic in Europe can to a large extent only be reduced by fuel efficiency measures that also reduce NOx, such as operational measures (network, load factor, speed, climb angle, etc.) and any reduced demand for air transport.

In the longer term, it is more uncertain whether CO2 optimisation would also reduce overall NOx. The NOx emissions index (NOx emissions per unit fuel) might increase faster if aviation were incorporated in the European Emissions Trading Scheme on a CO2-only basis. In other words, the EI NOx of the aircraft fleet might increase compared with a Business as Usual scenario owing to the higher combustor temperatures and pressures resulting from technological innovations to increase the fuel efficiency of gas turbine engines. However, although it is uncertain, an additional EI NOx increase is expected to be offset by other measures aimed at increased fuel efficiency such as operational measures, demand effects and airframe innovations (e.g. weight reduction). Moreover, there is a European commitment (ACARE) to improve NOx performance (bearing in mind that not all aircraft flying in Europe have European-manufactured engines/airframes).

Based on the above findings, we conclude that a CO2-only based scheme will most probably reduce both CO2 and NOx emissions in the shorter term and longer term, but that the uncertainties of the impact in the longer term suggest that a precautionary approach to NOx emissions is appropriate.

C02 Contrails - Whilst environmental conditions of ice supersaturation and temperature are the primary determinants of whether a persistent contrail is formed, it has been reported that more modern technology has a higher propensity to cause contrails because of a cooler exhaust, causing contrails over a greater depth of the atmosphere than was the case with older technology.

Based on assumptions regarding the likely increase in propulsive efficiency (n), this trend is expected to continue in the future. This effect and whether it will increase over a BAU situation (like NOx) is rather speculative. However, that there is an effect of more modern engines has been shown from observations and theoretical calculations. If the pressure on fuel efficiency increases as a result of incorporating aviation in the ETS, then n will also increase, with a consequent impact on contrail production. As an indication of the potential of this effect, sensitivity calculations from the literature suggest that an n of 0.5 in 2050 will result in 20% greater contrail coverage than an approximate estimate of the 1990’s n of 0.3. It is uncertain, however, whether this trend will increase faster if aviation were incorporated in the EU ETS.

Read full report in pdf format

Source: Europa. Aviation and Climate Change

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