Wednesday, 6 August 2008

Global airlines dispute EU emissions scheme

News @ European Parliament. On 26 June, following several negotiations, the Slovenian Presidency and the European Parliament reached an agreement on a Commission proposal from 2006 for a directive aimed at bringing greenhouse emissions from air transport into the EU Emissions Trading Scheme. This directive will have terrible consequences for the aviation industry especially at a time where airlines are already struggling to survive with high fuel prices. Moreover, the aviation industry is likely to pass their costs on to the consumer – therefore the price of ticket flights will probably need to rise.

The Commission has proposed to cover emissions from flights within the EU from 2011 and all flights to and from EU airports from 2012. Whereas the European Parliament and the Council agreed that the ETS should include at the same time intra-Community and intercontinental flights, the Council wanted to include airlines in the ETS in 2012 and the European Parliament has proposed the deadline of 2011. The Council wanted to allow airlines to keep emission levels at the 2004-2006 average levels after 2012 and until 2020 whereas the European Parliament has proposed a 10 per cent cut by 2011. The Council has also insisted that 90 per cent of emission permits would be distributed to airlines for free. Therefore, according to the Member States only 10 per cent of emission permits should be auctioned. However, according to the European Parliament 25 per cent of the emission permits should be auctioned. The European Parliament took the view that revenues from auctions should not be allocated by Member States to their general budget. The European Parliament has proposed that revenues from emission allowance should be used to fund research and to develop sustainable modes of transport. But according to EU Member States, environment ministers’ earmarks should not be binding as Member States should be free to decide how to use such money. As the Council has rejected the European Parliament amendments, the draft proposal has returned to European Parliament for a second reading.

On 26 June, following several negotiations, the Slovenian Presidency and the European Parliament reached an agreement on the inclusion of aviation in the European Emission Trading Scheme. The agreement was formally adopted by the European Parliament on 8 July. The European Parliament voted at second reading adopting a directive which includes aviation in the EU Emissions Trading System from 2012. Under the compromise reached all flights departing or landing in the EU, including intercontinental flights will be integrated in the ETS from 2012. The directive will apply to all airlines flying in and out of the EU, including airlines from third countries. The reduction of emissions from aviation is to be calculated on the basis of airlines’ average annual emissions between 2004-2006. In 2012 airline emissions will be cut by 3 percent therefore there will be a cap on emissions from aviation of 97 per cent of average emissions for 2004- 2006 which will be decreased to 95 per cent from 2013 hence airline emissions will be cut by 5 percent from 2013. Airlines can exceed their CO2 allowances but they will have to buy extra permits from other companies. The cap will be reviewed in light of the general review of the ETS.

Moreover, 85 per cent of the emissions permits will be allocated for free however 15 per cent of the airlines emission permits will be auctioned. Under the agreement reach is for the Member States to decide how to use the revenues generated from the auctioning of emissions allowances however such revenues should be used “to tackle climate change in the EU and third countries … to adapt to the impacts of climate change in the EU and third countries, especially developing countries, to fund research and development for mitigation and adaptation, including in particular in the fields of aeronautics and air transport, to reduce emissions through low-emissions transport, and to cover the cost of administering the scheme.” Moreover, such revenues should be also used “to fund contributions to the Global Energy Efficiency and Renewable Energy Fund, and measures to avoid deforestation.” Airlines whose annual emissions are less than 10,000 tonnes of CO2, humanitarian flights under a UN mandate, emergency flights, police, military flights and research flights are exempted.

The aviation industry is not pleased with such an agreement as they believe that their future business was not taken into account by the EU institutions. It is estimated that the directive could add between €3.5 billion and €7 billion to the costs of the aviation industry. According to Sylviane Lust, Director-General of the International Air Carrier Association, “Fifteen per cent auctioning in 2012 is unaffordable and unacceptable for our airlines given today’s high fuel prices and weakening demand.” The European Low Fares Airline Association (ELFAA) Secretary General, John Hanlon, has said “There is a huge risk that the legislation will impose unnecessary costs that do nothing to achieve its environmental objectives.” According to ELFAA it would be harder for airlines to invest in clean technologies as they will not have the financial means. Moreover, the US as well as Australia, Canada, China, Japan, South Korea (including their airlines) have already shown their opposition to the EU’s ETS and stressed that such move would violate EU Member State international obligations under the Convention on International Civil Aviation. The US is already considering taking legal action against the EU in the WTO. The draft directive still has to be formally approved by the Council which is very likely to accept it.

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