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China, Japan Clash With EU Over Aviation CO2 Curbs at Summit

European Union plans to impose curbs on carbon-dioxide emissions by international airlines as of 2012 drew fire from countries including China, Venezuela and Japan, marking a new stumbling block at the climate summit this week.

The EU measure is against international civil aviation rules, Su Wei, China’s lead envoy, said in an interview during the United Nations talks in Durban, South Africa. Japan called the European law unacceptable, echoing concerns voiced this year by the United States, India and Russia, and highlighting the challenge of forging a global framework to cut greenhouse gases blamed for global warming.

“You can’t take unilateral measures to solve a multilateral issue,” Su Wei told reporters. “It has some impact on the discussions here in Durban.”

The criticism boosts pressure on the 27-nation bloc, which wants to lead the worldwide fight against climate change, to scale down its ambitions and emphasizes the divide between EU aims and policies that governments outside Europe may be able to accept to keep the increase in global temperatures below 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels. Exceeding that ceiling will cause more intense heat waves, floods and storms, a United Nations scientific panel on climate change has said.

‘Throw a Bomb’

The EU decided in 2008 that international aviation should become a part of its emissions trading system, or the ETS, after airline discharges in Europe doubled over two decades and international organizations failed to enact emission curbs.

“The measure they’re bringing in shows what they say is their frustration because the topic isn’t advancing,” said Claudia Salerno, the chief Venezuelan negotiator. “I don’t agree that when one is frustrated, one should throw a bomb that can cause lots of problems on an international level.”

Carriers including American Airlines Inc. and United Continental Inc. are already challenging the expansion of the ETS in an EU court, and Chinese airlines aim to file a lawsuit by the end of the year. The UN International Civil Aviation Organization, or ICAO, last month called on Europe to exempt international aircraft operators from its planned curbs on carbon in a declaration that drew together 26 countries.

‘Trade Barriers’

“Domestic law shouldn’t be applied to somebody who is not subscribing to that law,” Kuni Shimada, special adviser to Japanese Environment Minister Goshi Hosono, said in an interview. “It’s ok for the 27 EU members to comply with it, but not for us, because we didn’t decide it.”

ICAO aims to strike a deal next year to create a global carbon market for the industry, according to its secretary general Raymond Benjamin. The World Bank may help manage the proposed greenhouse gas market for the world’s 50 biggest nations that would supersede the EU program around 2014 or 2015, he said yesterday in an interview in London.

The EU has repeatedly said that while its preferred choice is a worldwide solution to cut greenhouse gases from aviation, it won’t give up the first expansion of cap-and-trade beyond its borders amid a lack of global action. The bloc’s regulatory arm may also impose pollution curbs on shipping should international talks fail to cut pollution from the industry.

‘Disguised Trade Barriers’

The European plan is equivalent to “unilateral trade measures, disguised trade barriers” that are against free trade principles, Venezuela’s Salerno said. An adviser to the EU court handling the lawsuit by U.S. carriers dismissed claims that the expansion of the ETS is not compatible with international law, signaling in a non-binding opinion on Oct. 6 that the suing airlines should lose the challenge.

Meanwhile, the U.S. House of Representatives passed a bill last month 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 from 2012 to 2020. The measure needs backing from the Senate and President Barack Obama to become law.

The EU 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. Emitters have to submit one emission permit for every metric ton of CO2 they discharge of pay a fine of 100 euros per ton.

Equivalent Measures

The EU law offers a possibility of exempting incoming flights from a particular country if that nation implements equivalent measures to cut pollution from its air transport sector, an option the bloc’s executive has said it puts on the agenda during bilateral meetings with various countries.

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. EU permits for delivery in December traded 1.6 percent down at 7.85 euros as of 9:30 a.m. on the ICE Futures Europe exchange, down 45 percent this year.

Since the annual limit for the aviation industry will begin at 97 percent of average discharges from 2004 to 2006 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. As airfares rise to exceed the cost of paid-for allowances, the industry may cover the additional costs of participating in ETS by 2014, BNEF said last month.

“It will detract tourists because it will raise travel costs,” said Grenada’s envoy Ambassador Dessima Williams, who speaks for the Alliance of Small Island States. “Anything that raises costs means people are not likely to do it in these stringent economic times, and that means it will impact negatively on our economies.”

Any increase in air fares related to 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, the European Commission estimated last month.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net Alex Morales in Durban at amorales2@bloomberg.net

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

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