Brexit Institute News

Brexit and Aviation: The Fate of the Emissions Trading Scheme

Upcoming Event: Brexit and Aviation, November 15. Full details here.

Andrew Murphy (Transport & Environment)

In the jumble of issues that Brexit touches on, aviation is one that manages to regularly make headlines. From concerns about British manufacturing jobs in the sector, to allegations that Ireland is threatening access, to the risk posed to British holiday makers, aviation is a tangible example of the potential impact that Brexit may have on everyday life.Less reported on is the impact that Brexit will have on efforts to reverse aviation’s substantial and growing climate impact. The sector has more than doubled as a share of EU emissions, from 1.5% in 1990 to 3.4% today, and its emission grew 14% in just the last two years. Alone, the sector’s growth could torpedo our chances of meeting the goals of the Paris Agreement.

Brexit threatens to make a bad problem even worse by undermining at least two of the measures which the EU has put in place to try and limit this rapid growth. As well as hitting the climate, such an outcome could also put Ireland’s aviation sector at a competitive disadvantage compared to a post-Brexit UK.

The first measure is aviation’s inclusion in the Emissions Trading Scheme, the EU’s flagship climate policy. Since 2012, flights within Europe have been included in this scheme, with airlines required to purchase and surrender allowances equivalent to their total emissions. The number of allowances issued each year decreases, helping to drive emission reductions.

The UK recently announced that, in the event of a no deal scenario, they will break away from this scheme and introduce their own, separate, carbon pricing scheme. However the announcement stated this carbon price would cover only stationary installations (steel and power plants). It’s markedly silent on what will happen to aviation. Excluding flights to and from the UK from this scheme amounts to what is known as ‘carbon leakage’ – making it cheaper to fly to the UK than neighbouring countries.

The second measure is EU restrictions on state aid to the aviation sector. National governments were notorious for using taxpayer money to prop up failing airlines – something which was bad for the internal market, and which acted as a massive subsidy to this carbon intensive mode of transport. The EU has since cracked down on such bailouts, which is why we have seen airlines such as Monarch and Primera go to the wall. Post-Brexit, the UK could potentially be free of such restrictions, and able to bail out or even establish new state-backed airlines. A move which would be bad for the climate and introduce a direct competitive advantage over Ireland, which will still be bound by these state aid rules.

The EU-27 are, however, not without tools to address these risks.

For ETS, the solution is to continue to impose this scheme on flights between the EU and the UK. They actually have the legal competency to do this, even unilaterally. Two separate ECJ rulings have upheld the right of the EU to introduce ETS for flights both to and from Europe. The first was a 2011 ruling which upheld this right more broadly, but was never acted on due to concerted pressure from scores of countries and industry not to impose the scheme on flights to and from the EU (restricting it instead to flights solely within the EU).

The second was a 2016 ruling which upheld the EU’s right to impose ETS on specific countries, in this case Switzerland. The Court ruled that the EU could discriminate against individual countries, deciding on an individual basis whether to include flights to that country in the ETS. The EU later agreed not to include these flights on its ETS – but only after the Swiss authorities agreed to include aviation emissions in the so-called linking agreement between the emissions trading schemes of Switzerland and the EU. That linking agreement is slowly going through both sides’ Parliamentary approval, but all going according to plan, it means these flights will be regulated by an effective climate measure. Certainly a model for future EU-UK climate relations.

For state aid, the solution is a ‘fair competition’ clause in any aviation agreement signed between the EU and the UK. Again, Switzerland comes to the fore, with the EU-Swiss aviation agreement containing important anti-distortion provisions. The EU meanwhile is in the process of revising its legislation in this area, to make it easier to take action against third countries which seek to distort the market by unfairly subsiding their aviation sector. Reforms which are targeted at Gulf Carriers, but which may be relevant to controlling a post-Brexit UK.

The UK may balk at the unilateral imposition of ETS on flights both to and from the UK. It may also object to fair competition clauses, particularly if a Corbyn government has designs on a renewed state entry to the aviation sector. But the UK has few cards to play. Its aviation sector is a major employer, and that is partly thanks to the easy access to the EU-27, both for flights and the aircraft manufacturing. As the smaller party in any negotiation, if it wants access to the EU market it will have to acquiesce to its rules.

Acting decisively and quickly, the EU-27 have the tools to both protect the single market, and the few steps it has taken to address aviation’s runaway emissions growth. There is no reason why it should not act.


Andrew Murphy is Aviation Manager at Brussels-based environmental NGO Transport & Environment. Prior to that he worked in the European institutions.

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