“Certain countries are opposing ETS which could cause manufacturing industries problems in terms of future orders and you can see the potential for a trade war, specifically with the Chinese,” said Paul Nash, head of environmental affairs for Airbus.
“We’re obviously concerned because the big growth industries today are Asia and South America so it could certainly impact us,” he told EurActiv.
But industry opinions are divided between short-haul companies that may charge customers as little as 30 cents a flight to compensate for carbon charges and long-haul carriers, which the EU says may pass on ticket price hikes of between €2 and €12, despite one US government-funded report predicting a potential €2 billion windfall from the ETS for airlines.
“We rather regret the turn this [Moscow meeting] is taking because there are moves within the International Civil Air Organisation to find alternative market-based mechanisms,” said John Hanlon, the secretary-general of the European Low Fares Airline Association.
“My understanding is that the Commission would be prepared to amend their legislation providing these alternatives achieved the same carbon reductions,” he added. “The noises offstage are unwelcome and obstructive to that process.”
Allowances
Since 1 January, airlines using EU airports have been obliged to buy some allowances to offset their carbon emissions, although 85% of the credits were initially given out free.
China responded by banning its airlines from participating in the scheme, but EU officials are playing down talks of a conflict.
“There's no need for a full-scale trade war,” one told EurActiv. “The political will to reduce emissions, and the rule of law are there.”
In December, the European Court of Justice upheld the inclusion of aviation in the ETS.
“We are confident the non-EU airlines will respect the EU law as we respect law from other countries,” the official said. “If they do not comply with the ETS, they will face penalties.”
If the EU stands firm, these could range from a €100 fine for each non-surrendered allowance, to an operating ban in the case of continued non-compliance.
Premature litigation
Speaking at the 26-nation conference in Moscow yesterday (21 February), Russian transport minister Igor Levitin said that it was ‘premature’ to introduce such rules.
With a conference agenda primed to discuss “a basket of countermeasures” and “coordinate action,” momentum in Moscow seemed to be with those pushing for a trade spat.
“The Russian government is now reviewing a bill prohibiting Russian airlines to participate in emission trading: it means considering a retaliatory approach,” an Aeroflot spokesperson told the Reuters news agency.
Industry observers, though, expect initial moves short of boycott.
“One of the first steps is suspending discussions on further landing rights and new routes – suspending cooperation effectively – and one of the last is bringing into law a measure making it illegal for airlines to comply,” one source told EurActiv.
Underlying issues
EU officials believe that the aviation industry has long had an easier ride than other industrial sectors in reducing emissions, partly because of its exemptions from paying value-added taxes and levies on the kerosene fuel they consume.
But predictions by the International Civil Air Organisation that airline emissions would soar – by 88% between 2005 and 2020 and by up to 700% by 2050 – called for urgent action, as a lack of it could sabotage efforts to limit global warming to 2 degrees Celsius.
The aviation industry complains that the ETS will simply push carbon emissions outside the EU’s borders.
“If you have specific locations of emissions trading, you remove the hubs of Europe,” Nash said. “People will bypass Europe and take different routes.”
This runs counter to EU studies which have found that the disadvantages for airlines of extra fuel costs and longer stopovers would outweigh the benefits of non-compliance with the ETS.
But there is agreement between the EU, the coalition of the unwilling and the airline industry that a global deal to limit aviation emissions would be the ideal way forward.
“We are a global industry and we need a global scheme,” Nash said. “Specifically located schemes hurt competition in a global industry.”
In Brussels, officials express frustration at the slow pace of movement to limit aviation emissions within ICAO.
“No one has fought harder than the EU to find a global solution,” one said, “and we are still trying to reach an agreement.”
But in its absence, the urgency of global warming compelled the EU to act alone, he said.
