giving wings to emission trading inclusion of aviation under the eu ets: design and impacts ron wit,...
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Giving wings to emission trading
Inclusion of aviation under the EU ETS:
Design and ImpactsRon Wit, ECCP II, Brussels 24th October 2005
Overview of talkObjectives of study
Design• Key design elements• Pros and cons of elements• Selection of policy options
Impacts• Impacts on ticket prices• Environmental impacts• Economic impacts• Marginal impact on EU ETS
Overall conclusion
Objectives of study
• Overarching objective:– To develop concepts for amending
Directive 2003/87/EC to address the full climate change impact of aviation through emission trading
• Specific goals:– How to address non-CO2 climate effects?– Design viable systems
• Geographical scope• Allocation and surrendering of allowances• Monitoring, reporting verification, etc.
– Impact analysis
Design: key elements
• Coverage of climate impacts• Geographical scope• Trading entity• Decision on allocation rules• Interplay with Kyoto Protocol• Allocation method• Monitoring method
• >> choices within each key design element
Coverage of climate impacts (1)
• CO2 and non-CO2 climate impacts from aviation
• Overall radiative forcing is 2 to 4 times larger than CO2 alone
IPCC, 1999
Coverage of climate impacts (2)Scenario 1: CO2 x multiplier (factor 2)
• GWP and RFI not a feasible multiplier, but multiplier based on GTP may be feasible
• less efficient: no incentives to reduce non-CO2 impacts
Scenario 2: effect-by-effect
• Not feasible (yet) to estimate impacts on individual flight level
Scenario 3: CO2 only, plus flanking instruments
• NOx LTO airport charge feasible: also reduces NOx cruise emissions
• Don’t need to be compatible with EU ETS
• ATM Flight procedures: contrails
Scope: CO2 emissions under various geographical scenarios(EU-ETS approx: 2200 Mt)
CO2 emissions in Mt in 2004
% of emissions in ETS
1) Intra-EU 52 Mt 2.4%
2) flights departing from EU Airports
130 Mt 5.9%
3) EU airspace 114 Mt 5.2%
4) Intra-EU and to/from KP states
72 Mt 3.3%
Trading entity?
• Aircraft operator most suitable• Other options (fuel supplier, airport, ATM,
manufacturer) have one or more decisive disadvantages
Decision on allocation rules
• Level to set total amount of allowances and rules to distribute allowances
• EU or member states?
• EU ETS: some degree of subsidiarity
• Two arguments for EU approach:– International aviation not included in
EU’s Burden Sharing agreement– Prevention of competitive distortions
Selection of policy optionsDesign element Option 1 Option 2 Option 3
Climate impacts CO2 x multiplier
CO2 only plus flanking instrument
CO2 only plus flanking instrument
Scope Intra-EU Departing from EU
EU airspace
Interplay KP Buy above baseline
Unrestricted trading (AAUs borrowed)
Gateway
Allocation method baseline Bench-marking
auctioning
Impact assessment
• Assumptions:– Emissions 2008 historic baseline– Results for the year 2012– Emissions growth 4% per annum– permit price of 10 to 30
euro/tonne CO2
– Multiplier of 2 (option 1 only)
Impact on ticket prices in 2012Return flight and 10 to 30 euro/tonne CO2 (lf=70%)
Option 1Intra-EU
and multiplie
r
Option 2100%
departing flights
Option 3EU
airspace/auctioning
Short haul 0.4 – 9.2 0.2 – 4,6 1.5 – 4.6
Medium haul
0.9 – 18 0.4 – 9.0 3.0 – 9.0
Long haul 0 1.0 – 19.8
2.3 – 6.9
CO2 reduction in 2012 compared to BaU emissions in 2012 (permit price: € 30 t/CO2)
Option 1Intra EU
Option 2all departures
Option 3EU airspace
BaU emissions in 2012
71 Mt 178.5 Mt 156.5 Mt
BaU emissions in 2008
60.7 Mt 152.6 Mt 133.8 Mt
Total reduction, of which:
20 Mt 25.9 Mt 22.7 Mt
Reduced within aviation sectorPurchased from other sectors
0.7 Mt
19,3 Mt
3.2 Mt
22.7 Mt
5.6 Mt
17.1 Mt
Potential trade-offs of ‘CO2 only’ regime?
-Overall NOx emissions will probably not increase-Contrails may increase due to cooler exhaust
Economic impacts• All carriers irrespective of nationality and
operator are subject to the same scheme
• Decrease in growth by 0.2 to 1.3% (option 1), 0.4 to 2.1% (option 2) and 1.4% (option 3), (permit price € 30 per t/CO2 )
• Therefore no significant impact on EU carriers’ economies of scale
• However: non EU carriers can more easy fly most efficient (=new) aircraft on EU routes
• Auction revenues: 1.3 to 4 billion euro (based on 2008 emissions and a permit price of 10 to 30 euro)
- Aviation would buy about 1% of allowances under the present EU ETS
- This percentage would be lower in case JI and CDM markets are taken into account
- In the short term no significant rise in the allowance price
- Long term impacts need further research
Marginal impact on EU ETS
Overall Conclusion
• Inclusion of aviation in the EU ETS is feasible
• Effectiveness and economic impacts depend on design choices
• Emission trading is a policy option that can be considered alongside emissions charges and fuel taxation to tackle the climate impact of aviation.
achterpagina CE
Thank you!
E-mail: wit@ce.nlFinal report and a separate
management summary can be downloaded from:
WWW.CE.NL
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