European Parliament approves imposition of ETS in 2012; IATA gives a thumbs down

The European Parliament has adopted a compromise agreement with the European Council on the inclusion of aviation in the EU Emissions Trading System (ETS) beginning n 1 January, 2012, much to the chagrin of airlines.

The legislation could possibly cost the airline industry billions of dollars. A parliament statement confirmed reports that airlines would be required to cut emissions by three per cent in the first year, and by five per cent from 2013 onwards. The accord by European Parliament and government negotiators adds European Union and foreign airlines to the European emissions-trading system (ETS) in January 2012. The system imposes carbon-dioxide quotas on businesses, and mandates those exceeding their limits to buy permits from companies that emit less. (See: EU caps airline CO2 emissions as of 2012)

All flights starting and/or touching down in Europe, including government flights, will be included in the ETS. Airline emissions allowances in 2012 will be capped at 97 per cent of the average annual emissions in 2004-06, and at 95 per cent from 2013 onwards. 85 per cent of emissions certificates will be allocated for free, according to a common European benchmark, with the balance 15 per cent being auctioned.

The compromise deal obliges the EU "to seek an agreement on global measures to reduce greenhouse gas emissions from aviation. Bilateral agreements, for example with the US, could be a first step."

27 member states of the European Union will have discretion over the use of revenues generated from allowance auctions, so long as it is applied to research and development, climate change mitigation or related endeavours. Operations excluded from the ETS cover those performed by aircraft with MTOW (maximum take off weight) under 5.7 tonnes, and airlines operating fewer than an average 243 flights per four-month period. Also excluded are those producing emissions under 10,000 tonnes per year.

The European Parliament said that in accordance with the European Commission's impact assessment, "Fully passing on costs to customers would mean that by 2020 airline tickets for a return journey could increase by €4.60 ($7.21) to €39.60, depending on the journey length."

The Association of European Airlines and other aviation bodies are opposed to the ruling, saying that it "could have consequences far beyond the blinkered vision of the legislators."

The International Air Transport Association (IATA) severely criticised the European Parliament vote to bring aviation into the European Emissions Trading Scheme (ETS). ''It's absolutely the wrong answer to the very serious issue of environment,'' said Giovanni Bisignani, IATA's Director General and CEO. ''We support emissions trading, but not this decision. Europe has taken the wrong approach, with the wrong conditions at the wrong time.''

IATA says that this is the wrong approach as Europe's unilateral and extra-territorial approach will apply ETS to all aircraft flying to or from Europe. Without international agreement this will only spark international legal battles.

''What right does Europe have to impose ETS charges on, for example, an Australian carrier flying from Asia to Europe for emissions over the Middle East? Article 1 of the Chicago Convention prohibits this. And it goes against Article 2 of the Kyoto Protocol. Fuelling legal battles and trade wars is no way to help the environment. Already over 130 states have vowed to oppose it. The only successful way forward for ETS is as the drafters of Kyoto envisaged. That's a global scheme brokered through the International Civil Aviation Organization (ICAO),'' said Bisignani.

The IATA also says that in its first year of operation, the ETS will add €3.5 billion to industry costs and this will rise year-on-year. There is no guarantee that any of the funds generated will be earmarked for environmental purposes. It says the decision only indicates that revenues generated from the auctioning of allowances ''should'' be used to reduce greenhouse gas emissions.

''It's the weakest possible language. The plain fact is that the only sure beneficiaries of the €3.5 billion cost will be national government coffers. There is no assurance that any of the money will go to environmental programmes. It's time for Europe's politicians to be honest. This is a punitive tax put in place by politicians who want to paint themselves green. Worse, it's not even part of a coordinated European policy. This tax will come on top of the UK's Air Passenger Duty and the Dutch departure tax. Rather than double or triple charging for emissions, governments should focus on solutions to improve environmental performance,'' said Bisignani.

With oil trading above $140 a barrel, and jet fuel above $170 per barrel, the industry fuel bill for 2008 will be at least $190 billion.

''Airlines are struggling to reduce fuel burn to survive. Adding an extra EUR 3.5 billion to industry costs will not produce any better results. If Europe is serious about environment, it would move forward quickly with the Single European Sky proposal. By the Commission's own calculation, this would save up to 16 million tonnes of CO2, reduce delays and improve environmental performance,'' said Bisignani.

Airlines are committed to effective measures to reduce the two per cent of carbon emissions attributed to aviation. ''Reducing fuel burn to improve environmental performance is a top priority. IATA's four-pillar strategy to address climate change is now an industry commitment that does just that. Emissions trading is one small part of a comprehensive strategy that includes investing in technology, improving operations, building efficient infrastructure and using positive economic measures,'' said Bisignani.

''Our focus is on results. Last year the strategy saved at least 10.5 million tonnes of CO2. Our target is a 25% improvement in fuel efficiency by 2020. And we are working towards carbon-neutral growth with a vision for a carbon-free future. Europe's tunnel-vision focus on a unilateral, punitive and illegal ETS may help some government budgets, but it will do little if anything to improve environmental performance. It's time for Europe to re-focus,'' said Bisignani.