Analysis: time running out for deal on airline emissions
The EU’s emissions trading scheme has put it on course for a confrontation with major nations such as the US, Russia and China. Is it already too late to avoid this clash? Stanley Slaughter reports
According to Jonathon Counsell, BA’s head of environment, the EU has just weeks to act to avoid a damaging clash with the International Civil Aviation Authority (ICAO) as well as the US, Russia and China over its controversial emissions trading scheme (ETS).
The warning was given by Counsell at a conference in London last week on A New Aviation Policy for the UK organised by the Waterfront Conference Company. If some sort of global deal is not reached by next April - when the EU starts collecting permits from airlines for their carbon emissions – it is possible the situation will degenerate into one where the EU starts to impound aircraft from refusenik carriers.
If that happens, Counsell said: “We shall all have lost.”
It was not meant to be like this. The EU quite reasonably saw CO2 emissions by the aviation industry as a legitimate target in its drive to cut greenhouse gas emissions. However as it was unable to reach a global agreement with the world aviation body, ICAO, and decided to go ahead unilaterally in January to include aviation in its already established ETS. Under this cap and trade scheme, all airlines flying into and out of Europe have to submit permits for their carbon emissions made since January 2012. Most of these permits have been given to airlines for free but if these do not cover their emissions then they have to buy more permits on the open market.
The move predictably incensed numerous countries who saw the imposition as a challenge to their sovereignty. Both China and Russia have threatened retaliation while the US Senate passed an act making it illegal for US carriers to pay the EU for their carbon emissions when they fly to Europe. Some 26 nations, dubbed the “coalition of the unwilling”, have attended conferences in the past year, with 16 attending the last meeting in Washington DC in July.
There has been some softening of attitude by ICAO and the “unwilling” countries. Counsell said the ICAO had taken more action over carbon emissions in the last 12 months than it did from 1997-2011, which was one of the EU’s aims. At the coalition’s Washington meeting, there was a change of tone from outright condemnation of the EU to looking into the possibilities of a global scheme, another EU objective.
But Counsell told the conference that time was running out. “The EU has to do something before Christmas to avoid that risk (of aircraft being impounded). Airlines need time to act,” he said.
Counsell added that the EU had two options on what they could do.
The first was to adjust the scheme to make it only apply to flights between airports within the EU. But this had been ruled out, Counsell said, because it would then only apply to 20 per cent of the original scope of the scheme and would exclude airlines from non-EU countries.
The second option was to apply to all flights within EU airspace. This was preferred, Counsell said, because it did not impinge on national sovereignty. “It would keep everyone in the scheme. If anyone left, they would not come back,” he said.
The idea that the ball is in the EU’s court is one also supported by IATA. Its CEO Tony Tyler said earlier this week: “We need to make the ICAO process a success. Technical experts are making great progress on narrowing down policy options in preparation for the 2013 ICAO Assembly. Now we need Europe to find a find a way to remove the roadblock to progress that its ETS plans have become—and create the space for global consensus to develop.”
Tyler claimed that several European ministers outside of the Directorate General for Climate Action have called recently for a delay in ETS implementation to allow time for the ICAO process to work.
But ICAO still doesn’t seem to be in any rush – or more likely does not wish to have been pushed by the EU - into taking action. It is due to hold a council meeting on November 9 at which possible global schemes might be discussed. But it is also talking about its conference in 2013 as a time for any decision. This will be held in the autumn next year - well after the April date the EU has set for charging airlines for their emissions.
The EU has said it is committed to reaching an eventual world agreement on emissions but has given no indication if it will water down the current scheme. Its stance has been helped by research which suggests that the cost of ETS is not likely to be as high as once feared. Dan Edwards, head of economics for the CAA, told the London conference that that the cost of ETS “was far lower than expected” and it was still fuel - not ETS - which was the main driver of costs. Counsell significantly said that BA had taken “no steps to recover the cost (of the ETS) because we don’t know what will happen to the scheme”.
There still seems to be an element of ICAO dragging its feet. If its members want a global scheme, it should deliver one. On the other hand, the EU, having successfully made its point, can make a concession from a position of strength. The alternative is a damaging confrontation which the aviation industry simply does not need.