Agenda Item 4
AVIATION AND THE ENVIRONMENT: USING ECONOMIC INSTRUMENTS
- AN UPDATE
1. At its 2003 meeting in Birmingham the Conference received a note about the stakeholder
meetings arranged by the Department for Transport and the Treasury to discuss the most
effective economic instruments for ensuring that the aviation industry is encouraged to take
account of, and where appropriate reduce, its contribution to global warming, and local air
and noise pollution.
2. Conference noted that the discussions in the stakeholder groups, along with any written
representations received, would be taken into account by the Government in considering if
and how economic instruments could be used as part of the environmental framework to be
included in the forthcoming Air Transport White Paper to ensure that the long term
development of aviation in the UK is sustainable. Subsequently a summary of the
stakeholder discussions was posted on the websites of the two Departments and copies
were circulated to all members1.
The Government’s Response
3. The Government's conclusions are included:
in the White Paper "The Future of Air Transport" issued in December 2003. Chapter
Three of the White Paper deals with Environmental Impacts - paragraphs 3.35 to
in their response to the Environmental Audit Committee's Report on Budget 2003
in their decisions on their July 2000 proposals for tackling noise from civil aircraft
The key points are described below.
Emissions Trading Scheme
4. The Government believes that the best way of ensuring that aviation contributes towards
the goal of climate stabilisation would be through a well-designed emissions trading regime.
For an international industry, an international trading regime is the best solution. The
Government is pressing for the development and implementation through ICAO of such a
regime. The ICAO Assembly has already endorsed the development of an open emissions
trading system for international aviation.
5. Meanwhile, the Government intends to press for the inclusion of intra-EU air services in
the forthcoming EU emissions trading scheme, and to make this a priority for the UK
Presidency of the EU in 2005, with a view to aviation joining the scheme from 2008, or as
soon as possible thereafter.
6. The EU ETS is one of the policies now being introduced across Europe to tackle
emissions of carbon dioxide and other greenhouse gases and combat the serious threat of
climate change. The relevant Directive is 2003/87/EC4
7. There is a full description of the scheme, and how it will operate in the UK, on the DEFRA
website5. The arrangements are complex but the key points are:
The scheme will commence on 1 January 2005. The first phase runs from 2005-2007
and the second phase will run from 2008-2012 to coincide with the first Kyoto
Commitment Period. Further 5-year periods are expected subsequently.
The scheme will work on a "Cap and Trade" basis. EU Member State governments
are required to set an emission cap for all installations covered by the scheme. Each
installation will then be allocated allowances for the particular commitment period in
The number of tradable allowances allocated to each installation for any given period
will be set down in a document called the National Allocation Plan. There will be a
Registry in which there will be individual accounts in which a record will be kept of
allowances held and transfers to and from those holding them. Anyone can register
to trade in allowances.
Installations will be required to have their annual emissions verified by the relevant
Regulator6 by the end of March each year. Allowances equal to these verified
emissions will then be “retired” from the installation’s holding.
8. As noted in the 2003 stakeholder meetings, a European scheme for the control of
emissions from aircraft probably represents the minimum level for an effective scheme. (A
UK national scheme, for example, would not have much impact and would certainly have a
deleterious effect on the competitiveness of UK airlines.) A worldwide ICAO scheme would
be much more effective and fair. Such a scheme will not be easy to achieve and
Conference may wish to express its support for the Government’s efforts to secure such a
scheme with a minimum of delay.
9. The Government will also take specific powers in relation to the use of economic
instruments in a local airport setting:
To enable the Secretary of State to require an emissions-related element to be
included in landing charges at airports where there are local air quality problems. In
the meantime, the Government sees merit in individual airport operators modifying
their charges to take account of local air quality impacts. There may also be scope,
subject to compliance with international laws and obligations in relation to slot
allocation, for other instruments such as permit trading schemes for NO2 at individual
To remove any doubt that airport charges can be directly related to compliance with
noise mitigation procedures.
10. Powers of this kind are probably useful tools in dealing with noise and air quality
problems at airports. But the use of charges is not a panacea. There are other techniques
which can used to help in tackle these problems either alone or in harness with economic
instruments of this kind. There will need to be a careful appraisal of the options in every
In England the Environment Agency, in Scotland the Scottish Environment Protection Agency and in Northern
Ireland the Department of Environment
case. It should be kept in mind that Airport charges are very often sensitive to competitive
forces and in that context the idea that the Secretary of State can intervene in their fixing
gives rise to concern. There will certainly need to be adequate provision for consultation
before any such powers are exercised.