Undeterred by the rising chorus of protest over inclusion of the international aviation sector in the European Union’s emissions trading scheme (ETS) from January 1 next year, the European Commission today announced it was going to weather the turbulence and go ahead with its proposed legislation.
Speaking to reporters here, Jos Delbeke, director-general of the EC’s Climate Action directorate, announced the benchmark values to be used to allocate free greenhouse gas emission allowances to airlines. Individual airlines can, thus, now assess the proposed legislation’s financial implications.
Bringing aviation into the ETS’ ambit will require all airlines flying within and into Europe to cap their emissions at a particular level and purchase additional carbon allowances if they exceed those limits.
In 2012, about 85 per cent of aviation allowances are to be allocated for free to aircraft operators, 30 per cent of which would go to non-EU carriers. In the period 2013-2020, the percentage of free allocations will be reduced to 82 per cent. The remaining percentage of allocations will be auctioned every year, beginning in 2012.
In a nod to the objections of new entrants and fast growing airlines from emerging economies, three per cent of allowances are to be set aside as a reserve for them. The EC said this three per cent translated to roughly 50 million allowances, worth € 600 million at current market values.
Ever since the EU made it clear that it was going ahead with its aviation ETS legislation, international carriers have been contesting the move, calling it unilateral and even “imperialist”. The Americans and Chinese, among others, have lodged official protests, raising questions over the legitimacy of the EU imposing charges on flights that start in San Francisco or Shanghai.
A legal challenge contesting the EU’s right to charge airlines for anything outside EU airspace has been launched by several American airlines, including American, Continental and United. The case is to be heard by the European Court of Justice in Luxembourg and a preliminary opinion is expected in October.
The airlines say that including aviation in the ETS will raise the costs of flights significantly. According to a study by Standard & Poor’s, inclusion in the ETS could cost the industry €1.1 billion ($1.6 bn) in the first year and (depending on the distance flown and the carbon price) put up to €40 on the price of a ticket.
In the absence of a global agreement on aviation emissions and of reciprocal measures by other governments, airline associations across the globe have declared the EU legislation unfair. Airlines in Asia, which run long-haul flights to Europe and beyond, will be particularly hard hit.
Manish Goswami, who heads the environmental division for India’s Jet Airways, makes the point that the proper forum to address climate change issues is the UN Framework Convention on Climate Change. “The unilateral attempt of the EU to introduce market-based measures will put an undue burden on emerging economies s like India,” he said.
He charges that since developed countries have the historical responsibility for climate change, including aviation, the EU ETS ignores the Common but Differentiated Responsibilities principle enshrined in the Kyoto protocol.
But, in replying to queries from Business Standard, the EC’s Delbeke countered that airlines are singly responsible for two to three per cent of the world’s emissions and their share is growing fast.
Aviation accounts for more emissions than any other single sector such as cement or steel, that are already included in the ETS.
He said the EU believed a global carbon market would be better than a European one, but despite more than a decade of negotiations within the International Civil Aviation Organisation, no global scheme for aviation and emissions had been forthcoming. Hence the EU’s unilateral decision to go ahead on its own.
Unlike the US and China, the Indian government has thus far been muted in its response to the EU move, despite three major Indian carriers (Air India, Jet Airways and Kingfisher) flying in and out of Europe. However, in an unusually combative move, the ministry for external affairs will be hosting a meeting in New Delhi on Thursday and Friday, to be attended by representatives of 12 countries, including the US, Qatar, Saudi Arabia, South Africa, Brazil and China, to protest the inclusion of aviation in the ETS.
Delbeke told Business Standard that Brussels was aware of the Indian meeting and he hoped it “will deal with the real issue of bringing down greenhouse gas emissions, rather than only criticising what we have”. Adding, “The EU has no pre-set view for how to deal with aviation emissions. We are always open to find ways to integrate our way with a global solution.”
In a statement, the EC added they estimated the impact of the move on air ticket prices to be between two and 12 euros on a trans-Atlantic or other long-haul flight, significantly lower than the S&P study. It would be up to the airlines as to what part of the additional costs they incurred would be passed on to ticket buyers. Delbeke noted the airlines could, should they choose, pass on the value of the free allowances to their customers as well, thereby creating additional revenues of up to €20 billion over the decade till 2020. This additional revenue could be used to modernise fleets, improve fuel efficiency and so on, he said.
According to a recent Climate Connect article, the aviation sectors of China and India have recorded substantial increases in carbon dioxide emissions. Between 1990 and 2007, China´s aviation sector emissions increased by 505 per cent, while India´s grew by 172 per cent.