Emissions cap and allowances
The overall volume of greenhouse gases that can be emitted by power plants, factories and other fixed installations covered by the EU emissions trading system (EU ETS) is limited by a 'cap' on the number of emission allowances. The EU ETS cap for the aviation sector has been separately calculated. Within the overall EU-wide cap, companies receive or buy emission allowances, which they can trade as needed.
Each allowance gives the holder the right to emit:
- one tonne of carbon dioxide (CO2), the most common greenhouse gas, or
- the equivalent amount of two more powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).
Allowances are allocated and auctioned specifically to aircraft operators. Airlines can use either aviation or general EU emissions allowances for compliance; however fixed installations can only surrender aviation allowances for their emissions from 2021 onwards.
Emissions cap in phase 3 (2013-2020)
Since the beginning of phase 3 of the EU ETS (2013-2020), an EU-wide cap on emissions is set centrally.
The cap for 2013 from fixed installations was set at 2,084,301,856 allowances. During phase 3, this cap decreases each year by a linear reduction factor of 1.74% of the average total quantity of allowances issued annually in 2008-2012. This amounts to a reduction of 38,264,246 allowances each year.
The linear reduction factor was set in line with the EU-wide climate action targets for 2020 - the overall 20% emissions reduction target and the EU ETS sector-specific 21% emissions reduction target relative to 2005.
Emissions cap in phase 4 (2021-2030)
In phase 4 (2021-2030), the cap on emissions will be subject to an annual linear reduction factor of 2.2%.
Around 38 million allowances have been issued to the aviation sector annually since 2013, following a reduction in scope to apply to flights within the European Economic Area. This is considerably below the actual verified CO 2 emissions from such flights, which have increased from 53.5 million tonnes CO 2 in 2013 to 67 million tonnes in 2018.
From 2021 onwards, the same linear reduction factor that applies to stationary installations, -2.2% annually, will also apply to aviation allowances.
