UN Aviation Body Calls on Europe to Limit CO2 Curbs on Airlines

The U.S., China, Russia and more than 20 other countries joined forces today at a United Nations aviation panel to push through a call on the European Union to exempt international airlines from its planned carbon curbs.

The UN International Civil Aviation Organization’s governing council adopted a non-binding declaration contesting the inclusion of airlines in the EU emissions-trading system as of next year. In a response from Brussels, EU Climate Commissioner Connie Hedegaard said the 27-nation bloc will stick to its plan.

Twenty six nations in the 36-member ICAO council meeting in Montreal today backed a declaration signed by a group of non-EU countries in Delhi in September that the European cap-and-trade system is “inconsistent with applicable international law.”

The signatories, which included China, Mexico, Russia, Saudi Arabia, South Africa, the United Arab Emirates and the U.S., called on the EU to “work collaboratively with the rest of the international community to address aviation emissions.”

The EU, which wants to lead the battle against climate change, decided in 2008 that aviation should become a part of its cap-and-trade carbon program after airline discharges in Europe doubled over two decades. Carriers including AMR Corp. (AMR)'s American Airlines and United Continental Holdings Inc. (UAL)’s Continental Airlines are challenging the law in an EU court, and China’s airline association said earlier this year the European initiative may prompt trade conflict.

“Disappointing”

“It is disappointing that ICAO discussions once again focus on what states should not do, instead of what they should do to curb growing aviation emissions,” Hedegaard said in an e- mailed statement. “This decision will affect neither the EU’s commitment to working within ICAO to agree on a global solution, nor our adopted legislation to include aviation in the EU emissions trading system.”

The rift between Europe and non-EU countries highlights the challenge of forging a global agreement to put a price on carbon just four weeks before a UN summit on post-2012 climate- protection rules.

While the EU’s preferred choice is a worldwide solution to cut greenhouse gases from aviation, Europe decided to include the sector in its emissions trading system after more than a decade of international talks on the issue brought no global plan, Hedegaard said earlier today in an interview during a visit to Moscow.

Excluding Flights

The EU emissions trading system, known as the ETS, is the cornerstone of the region’s plan to cut greenhouse gases that scientists blame for global warming. It imposes pollution limits on more than 11,000 manufacturers and power companies, leading to a cap in 2020 that will be 21 percent below 2005 discharges.

The EU law offers a possibility of excluding incoming flights from a particular country if that nation implements equivalent measures to cut pollution from its air transport sector, an option that Hedegaard highlighted today.

“You could set a target for your aviation sector, you could make an incentive for them to improve fuel efficiency for aviation, it could be many things,” she said after a meeting with Alexander Bedritsky, a climate adviser to President Dmitry Medvedev, today. “We do not define what that is. We invite a dialogue.”

Trade Conflict

The international opposition to the first expansion of the ETS beyond EU borders could lead to a trade conflict, the Airports Council International said in a resolution adopted today by its general assembly in Marrakesh. The International Air Transport Association also spoke against the EU plan.

“It’s important to remember that opposition to this move is coming from states as much as from airline and airports,” Tony Tyler, IATA chief executive officer said today at a briefing following the ACI meeting. “It’s governments who see this as a clear infringement of their sovereignty and it’s hard to see how something can be introduced when at least 26 states have come out publicly against it.”

Last month the U.S. House of Representatives passed a bill prohibiting the country’s airlines from participating in the ETS after the industry estimated that participation in the cap-and- trade system would cost U.S. airlines $3.1 billion between 2012 and 2020. The measure needs backing from the Senate and President Barack Obama to become law.

EU Court

An adviser to the EU court handling the lawsuit by U.S. carriers said in a non-binding opinion on Oct. 6 that the inclusion of aviation in the European cap-and-trade is compatible with international law, signaling that the suing airlines should lose the challenge.

When international carriers join the system next year they will be given emission permits making up 85 percent of the industry cap and will have to buy the remaining 15 percent at auction. One allowance carries the right to emit one metric ton of carbon dioxide.

EU permits for delivery in December closed 3.9 percent down at 9.49 euros on London’s ICE Futures Europe exchange, down 33 percent this year.

Since the annual limit for the industry will begin at 97 percent of 2004 to 2006 discharges and fall to 95 percent in 2013, free permits will cover some 65 percent of actual CO2 emissions through 2020, according to estimates by Bloomberg New Energy Finance. The industry may break even under the ETS starting in 2014, as airfares rise to exceed the cost of paid- for allowances, BNEF said last month.

Any increase in air fares related to the inclusion of airlines in the ETS will be “modest at most,” ranging from $1.40 to $8.60 per ticket each way on long-haul flights at current CO2 prices, according to the European Commission.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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