Proposals aimed at including airlines into the EU’s carbon trading scheme have been revised to take account of trade concerns. Non-EU airlines will be exempt until 2012.
The Commission, on 20 December 2006, tabled a proposal to integrate European airlines into the EU carbon trading scheme as of 2011.
After heated discussions at the Commission, foreign airlines were allowed to continue emitting CO2 freely for an extra year, until 2012.
An impact study evaluates that the scheme would raise ticket prices by €4.6-€39.6, depending on the distance covered.
The proposal will now be forwarded to Parliament and Council for approval.
The revised version is a result of pressure exerted on the one hand by Transport Commissioner Jacques Barrot – who supported the aviation industry’s view that the initial draft was too aggressive vis-à-vis third countries – and by Trade Commissioner Mandelson – who feared that it could compromise the EU’s trade relations with the United States.
US officials had earlier threatened to take legal action if the EU went ahead with plans to treat all airlines coming or going from EU airports, irrespective of their nationality, in the same way.
Details of the proposal include:
- Intra-EU flights come under the scheme in 2011. Flights in and out of the EU will be exempted until 2012;
- pollution limits will be set by the Commission EU-wide, calculated on the basis of average aviation emissions in 2004-2006. This is in contrast with the system currently in place for other industrial sectors, where ‘pollution credits’ are allocated at national level and then approved or rejected by Brussels;
- airlines will receive 90% of pollution permits for free. The remaining 10% will be auctioned with a view to setting a market price, and;
- pollution permits allocated under the scheme can only be used (and therefore traded) by the aviation sector.
- government and military flights are excluded, and;
- non-CO2 emissions are not tackled.
Environment Commissioner Stavros Dimas denied that his proposal had been “watered down” saying that all intra and extra EU flights had been included. He stressed that the proposal was in line with international rules and that third countries were thus unlikely to take legal action against the EU.
The US Federal Aviation Administration (FAA) was not readily available for comment, but the US is unlikely to welcome the proposal. Indeed, David Castelveter, vice president of the Air Transport Association of America stressed that countries outside of Europe, including the United States, "believe that unilateral imposition of emissions trading requirements absent mutual agreement between nations violates international law."
Also, senior officials in the Bush Administration indicated, end of November, that legal action would be considered in order to stop such a move applying to US-based airlines.
Ulrich Schulte-Strathaus, secretary general of the Association of European Airlines (AEA), which represents companies such as British Airways and Air France, welcomed the amendment of the "more extreme elements of the original proposal", adding: It vindicates what the airlines have been saying all along – that the package as originally presented was imperfectly thought through and its impact not properly assessed.” The airline industry will now examine the proposal in more detail, warning that a poorly-designed ETS would "like a tax, strip the airlines of the financial means to fund other measures which can deliver real environmental benefits".
But low fare airlines, which predominantly fly within Europe are worried that they will bear a bigger burden of costs per flight if only intra-EU flights are covered: "For us it's either everybody or nobody," said Toby Nicol, spokesman for easyJet.
Christoph Mueller of the TUI Airline Group and member of IACA’s Board lambasted the Commission’s plans to include aviation in the ETS, saying that this would simply "establish another layer of bureaucracy and not a tonne of kerosene less will be burned". Instead, he advised, the EU should concentrate on existing programmes, such as the Single European Sky: "The single European sky would allow airlines to burn 20% less fuel, thereby saving money for air carriers and benefiting the environment."
Olivier Jankovec, director general of Airport Council International Europe (ACI Europe), said: "Today’s decision is the right approach to face up to aviation’s contribution to climate change." But he said that he would first have to review the Commission’s proposal in detail to ensure that it does not prevent air transport being able to grow and develop. "Crucially, air transport must also be treated in exactly the same way as other industries under the existing ETS and should in no way be discriminated against," he said.
Chris Davies MEP, Liberal Democrat spokesman on climate change in the Parliament, said that the proposal amounts to window-dressing." A cynical industry sees this as a PR exercise to deflect criticism while doing nothing effective to curb the headlong growth in air travel…The aviation sector should be required to pay fuel taxes and VAT just as other means of transport."
Green MEP Caroline Lucas, who drafted the Parliament’s July 2006 resolution on aviation and climate change said: "If the Commission limits the scope to flights within the EU, it will undermine the environmental integrity of the scheme: just 44 million tonnes of carbon will be saved by 2020 compared to 183 if non-EU flights are included." She added that MEPs are unlikely to endorse these plans, which "flatly contradict the position adopted by the European Parliament in July, which expressly calls for all flight landing or taking off from EU airports to be included, whatever their origin or destination". She also criticised the fact that the proposal takes no account of non-CO2 emissions that also contribute to climate change.
The UK's Institute for Public Policy Research (IPPR) says that giving airlines emissions credits at no cost will give them "a cheap flight": "If the airlines are simply given the credits they will pass on … costs to passengers, leaving the industry to pocket up to £2.7 billion in windfall profits," it stated in a study published on 18 December.
In a separate study, global conservation organisation WWF estimated that EU airlines would make up to €3.5bn per year from inclusion in the ETS (EurActiv 19/12/06).
The European Federation for Transport and Environment (T&E) said the proposal was "too weak" and would only lead to emission reductions of 3% - less than one year's growth of the aviation sector's emissions. Jos Dings, director of T&E, added: "It is stunning that the aviation industry can talk about 'fairness' with a straight face. Not only does the industry stand to get double the permits of other sectors, the fuel tax exemption enjoyed by the sector is worth another €35 billion alone, not to mention the lack of VAT on tickets and the €20 billion European taxpayers have paid out in rescue aid to airlines."
- The proposal has been forwarded to Parliament and Council for approval, a process that usually takes about two years.