Thank you for your letter of 24 April 2007[15] which followed the meeting of Sub-Committee B on 23 April. In that letter you requested a clarification of the Government view on the inclusion of both flights arriving at and departing from EU airports.

  It is our view that an EU scheme covering all arriving and departing flights would have the greatest environmental benefit—the Commission's impact assessment estimates that by 2020 a total of 183 million tonnes of CO2 would be saved per year on the flights covered, a 46% reduction compared with business as usual.

  While we are aware that the inclusion of third country airlines in the EU scheme has been controversial, our assessment is that the EU is legally justified in including international aviation and that tackling climate change is too important to allow non-discriminatory action to be delayed by slow progress at international level.

  But we have also been working at an international level to promote emissions trading as the most efficient way to tackle aviation's climate change impacts. The UK has played a key role in recent discussions on emissions trading in the International Civil Aviation Organisation (ICAO), and assisted in finalising draft guidance on emissions trading through ICAO's Committee on Aviation Environmental Protection (CAEP), due to be considered at the triennial ICAO Assembly in September. The UK, along with the Commission, has encouraged an open dialogue with third countries and has also begun to explore non-confrontational ways forward with non-European states.

  For ease of reference, please find below the three questions you asked in your letter, along with our responses.

1.   What is the legal basis for including flights originating from outside the EU?

  I can, of course, reassure the Committee that the UK Government would not take action on aviation and emissions trading that was not legally justifiable. Having considered the relevant legal framework we have concluded that the EU proposals are lawful and consistent with the provisions of and principles underlying the Chicago Convention which governs international civil aviation.

  This judgement is consistent with the EU Commission's view. The Commission has conducted its own analysis on the legal base of including aviation in the EU emissions trading scheme, the main summary of which is available in the CE Delft report Giving wings to emission trading, July 2005, which I believe your Committee considered as part of its report on Including the Aviation Sector in the EU Emissions Trading Scheme. The Commission has continued to keep in contact with their legal advisors on this subject, and has reacted to legal questions raised by Member States through the Environment Council working groups.

2.   How will their emissions be measured?

  Emissions by non-EU airlines flying into or out of the EU would be measured in the same way as flights by EU airlines included in the scheme. The Commission's draft Directive states in Part B, Annex IV, that monitoring of carbon dioxide emissions would be achieved through calculations based on fuel consumption multiplied by an emissions factor. Where actual fuel consumption data were not available, the Commission proposes to use a `standardised, tiered method' based on `best available information', probably supplied by Eurocontrol, the European Organisation for the Safety of Air Navigation.

3.   How will the scheme be enforced on these flights?

  The current Directive on emissions trading (2003/87/EC) addresses the issue of penalties in Article 16, and aircraft operators would be subject to these penalties as any other operator would be. In terms of the potential application and enforcement of these penalties, the UK has yet to explore which are the most appropriate enforcement provisions for those airlines that it would administer. We shall ensure that there is a full analysis of all the options and that stakeholders are consulted and kept informed of any developments.

  We would also like to update you on the progress to date with European negotiations. Since the Commission published its proposal in December 2006, the UK has been participating in Environment Council Working Groups to consider the key issues for Member States. Negotiations have gone well so far, with most Member States agreeing to the all arriving and departing geographical scope and the inclusion of third country operators.

  There remain a number of issues on which we still have to reach a consensus, broadly these are: the start date of the scheme; measures to accommodate new accession states and peripheral regions; the allocation methodology of free allowances and the level of the cap. The UK has actively participated in the discussions. We have also undertaken work to enable decisions to be based on the best information. For example, we have commissioned research on the implications of different methods for allocating emissions permits to airlines. This will help to ensure that decisions on this issue will be based on a better understanding of the practical effects for different operators.

  We expect a discussion and progress report on this dossier to be considered in the June Environment Council. The German Presidency intends to present a progress report to the Council, outlining areas of agreement, compromise and disagreement between Member States. As yet we are unaware of the Portuguese Presidency's plans regarding aviation and the EU ETS.

  In parallel to progress in the Environment Council, the European Parliament has now begun scrutiny of the Commission's draft proposal. I understand the proposed timetable involves consideration of the draft report at the end of June, with a deadline for amendments in the first week of July, all of which will lead to the first reading of the proposal scheduled for October.

  I will, of course, continue to keep your Committee informed of progress, including the outcome of the June Environment Council and the European Parliament's first reading.

14 June 2007

  Thank you for your letter of 14 June. Sub-Committee B considered it at its meeting on 25 June.

  The Committee was grateful for the information regarding flights originating outside the European Union.

  Your letter referred to ongoing negotiations, with particular reference to the issue of allocation of free emissions permits. As you may recall, our report `Including the Aviation Sector in the European Union Emissions Trading Scheme' (21st Report, session 2005-06, HL 107) recommended that such allocations were made on the basis of `benchmarking', whereby free permits are allocated with reference to a level of emissions fixed according to industry best practice. We believe that this is consistent with the `polluter pays' principle. We would be grateful if you could update us on what discussions have taken place about the allocation of free permits and, in particular, what consideration has been given to the benchmarking system.

  Your letter mentions that "the UK has yet to explore which are the most appropriate enforcement provisions for those airlines that it would administer". We would like to know what decision you have come to about enforcement provisions.

  We will maintain scrutiny of this document pending your reply.

26 June 2007