Is the EU’s airline climate fight a precursor for shipping?

Wednesday, October 26th, 2011
Sailing into a storm

The drama of the debates at last month’s “Greener Skies” Aviation and Environment Conference in Hong Kong was heightened earlier this month when a senior European Union legal officer advised the EU Court of Justice that the inclusion of aviation into the EU Emissions Trading Scheme (EU ETS) was lawful. The Court usually accepts the legal officer’s advice.

At Greener Skies, a lone voice from the EU entered the lion’s den to justify the inclusion of the sector into the scheme, while the aviation industry lined up a strong contingent of speakers in opposition. In a nutshell, from 2012, the EU ETS will apply to any flight coming into or leaving from an EU airport. Like other companies bound by the scheme, airlines would be required to buy permits to emit carbon dioxide above and beyond any permits they already hold. That much is not controversial.

For the purposes of calculating the required permits, however, the emissions counted are those for the whole trip, even if part of the trip were outside EU air space. The airlines and some non-EU governments are livid. US airlines are suing the EU in the courts, the US House of Representatives has proposed a law making it illegal for US airlines to participate in the scheme, and a Chinese industry representative at the conference frankly warned of economic retaliation from China.

Speakers from the aviation industry reeled off a long list of complaints about the EU ETS:

  • It would “penalize” non-EU airlines, especially those in high growth markets such as Asia.
  • It would “infringe national sovereignty”.
  • It would encourage an unnecessary “patchwork of national ETSes and local carbon taxes”.
  • It would divert funds away from investment in newer, more efficient planes in an industry that already suffers slim margins.
  • It was said to ignore the effort the aviation industry through the International Air Transport Association (IATA) has already put into developing a carbon reductions strategy.
  • It was said that fuel costs are a sufficient driver for increased efficiencies and the industry doesn't need any more "incentive" from the EU.
  • It was claimed that the EU ETS won't achieve any meaningful emissions reductions and may even encourage perverse outcomes.
  • And it was feared that the disagreement could embroil the industry into a highly politicized trade war as nations retaliate against the EU.  

For its part, the EU simply doesn’t think IATA’s strategy is credible. The strategy asks for leeway for the industry to actually increase absolute emissions in the near term, and is heavily dependent on major technology breakthroughs, including the development and commercialization of biofuels, which – if the presentations at Greener Skies are any indication – is a long way off in terms of making a significant contribution to a low carbon aviation sector.

The EU is sensitive to the whole issue of biofuels, given its biofuel programmes were implicated in the food riots across the world in 2007-08. Furthermore, the EU is still smarting from its perceived humiliation at the UN’s 2009 international climate negotiations in Copenhagen and would likely consider the UN forum for international agreement on aviation issues, the International Civil Aviation Organization (ICAO), as having have no better chance of coming to an international climate agreement.

For those in peril on the sea

What does this mean for the shipping industry? Does it need to be worried?



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