EXPLANATORY MEMORANDUM
1.CONTEXT OF THE DELEGATED ACT
The EU emissions trading system (ETS) covers departing flights from aerodromes in the European Economic Area (EEA), as well as incoming flights from third countries subject to Article 25a of Directive 2003/87/EC. Article 25a confers implementing powers on the Commission to provide for flights to be excluded from the aviation activities listed in Annex I so as to provide for optimal interaction between the Union system and third countries' measures for reducing the climate change impact of flights. While the expectation in 2008 was that third country measures should be equivalent 1 , later amendments to Directive 2003/87/EC did not repeat this level of expectation 2 , and the scope of the EU ETS is currently limited to intra-EEA flights until the end of 2023 except where a linking Agreement is in place 3 .
Directive 2003/87/EC applies irrespective of the nationality of the airline operator and in principle covers flights, which depart from or arrive in an aerodrome situated in the territory of a Member State. The equal treatment of aircraft operators on routes is vital to avoid distortions of competition. An Agreement between the European Union and Switzerland on the linking of their greenhouse gas emissions trading systems was reached during the 21st Conference of the Parties to the UN Framework Convention on Climate Change in December 2015 and signed on 23 November 2017. 4 This linking Agreement maintains the equal treatment of aircraft operators on routes, with the EU regulating departing flights to Switzerland, and Switzerland being responsible for flights from Switzerland to the EEA 5 .
In line with the linking Agreement, this Decision exempts flights from aerodromes in Switzerland to aerodromes in the EEA from the EU ETS. It applies from the entry into force of the linking Agreement.
In terms of environmental effects, the additional carbon dioxide (CO2) emissions from aviation covered by carbon pricing through the linking of the EU ETS and the Swiss ETS are initially considered to amount to around 3.2 million tonnes, split equally between arriving and departing flights. In respect of the 1.6 million tonnes CO2 from flights from the EEA to aerodromes in Switzerland, the level of free allocation in 2020 will be around 550 000, and this will decrease by 2.2% per year from 2021. There will be additional auctioning of 100 000 allowances. Therefore, it is expected that 950 000 additional emissions will be offset from the other sectors covered by the emissions trading systems in respect of flights from the EEA to aerodromes in Switzerland. 6
The second step in operationalising this link is that free allocations, and the related levels of auctioning of allowances, are scaled in accordance with the scope of the EU ETS pursuant to Regulation (EU) 2017/2392 7 . The Commission Decision 2011/638/EU 8 on benchmarks for free allocation to aircraft operators explicitly foresaw changes to allocations where acts were adopted pursuant to Article 25a of Directive 2003/87/EC.
The third step, set out in Annex I, Part B to the linking Agreement, is to establish a form of ‘one-stop shop’ for aircraft operators. Without changing underlying legal responsibilities in either system, this means that, in practice, aircraft operators with the closest links to Switzerland should be administered by Switzerland for their emissions in both systems. Aircraft operators with closer links to EEA countries will continue to be regulated solely by their existing administrative Member State. They will therefore also report their emissions from activities under both systems, and surrender corresponding allowances. Under the linking Agreement, each Party remains responsible for enforcing its own emissions trading system and geographical scope (sections on ‘Legal Enforcement’ and ‘Administrative attribution of aircraft operators’ in Annex I Part B).
Annex I to the EU ETS Directive is amended to change its scope of application in respect of incoming flights from Switzerland. A ‘one stop shop’ is foreseen as an administrative convenience in respect of the aircraft operators that have closer links to Switzerland and vice versa. If enforcement proceedings were ever necessary, Switzerland would act first for aircraft operators administered by Switzerland, and the EU administering State would act first for all other cases. There will be sharing of information between the Parties to ensure that there is smooth and effective application in practice. The aircraft operators administered by Switzerland are indicated by Regulation (EC) No 748/2009 on the list of aircraft operators, which performed an aviation activity listed in Annex I to Directive 2003/87/EC on or after 1 January 2006 specifying the administering Member State for each aircraft operator.
The fourth step in facilitating the linking process relates to the allocation of free allowances. If the linking Agreement were ever to be suspended or terminated, each aircraft operator would be responsible for complying in the emissions trading systems individually, using the allowances that they have been allocated as well as those from the market. It is therefore appropriate that the EU should be responsible for transferring allowances allocated for free to the aircraft operators administered by Switzerland, in respect of their intra-EEA flight activities and flights departing from the EEA to Switzerland. At the same time as free allowances for other departing flights from the EEA are transferred to aircraft operators, free allocations relating to flights from the EEA to Switzerland should also be transferred. The corollary is that Switzerland would be responsible for sending quantities of allowances to EU administered aircraft operators in respect of their flight activities covered by the Swiss ETS, which will mirror the coverage of the EU ETS.
This fourth step is put into effect through Commission Regulation (EU) No 389/2013 9 , the “Registry Regulation”, the relevant Articles of which state:
“Article 59
Implementation of linking arrangements
The central administrator may create accounts and processes and undertake transactions and other operations at appropriate times to implement agreements and arrangements made pursuant to Articles 25 and 25a of Directive 2003/87/EC.”
Commission Regulation (EU) No 389/2013 provides for transfers of allowances to/from Switzerland using the Union Registry through Article 56:
“Article 56
Free allocation of aviation allowances
4. Where an agreement pursuant to Article 25 of Directive 2003/87/EC is in force and requires transferring aviation allowances to aircraft operators holding accounts in the registry of another greenhouse gas emissions trading system, the central administrator, in cooperation with the administrator of the other registry, shall ensure that the Union Registry transfers those aviation allowances from the EU Aviation Allocation Account to the corresponding accounts in the other registry.
5. Where an agreement pursuant to Article 25 of Directive 2003/87/EC is in force and requires transferring aviation allowances corresponding to another greenhouse gas emissions trading system to aircraft operators holding accounts in the Union Registry, the central administrator, in cooperation with the administrator of the other registry, shall ensure that the Union Registry transfers those aviation allowances from the corresponding accounts of the other registry to the aircraft operator holding accounts in the Union Registry, upon approval by the competent authority responsible for the administration of the other greenhouse gas emissions trading system.”