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First Global Emissions Market for Airlines Wins Support

China, India and the U.S. joined other nations in approving a road map for building the first global market to reduce emissions from the $708 billion airlines industry.

The executive committee of the International Civil Aviation Organization’s assembly backed a draft measure that would set final details in 2016 for a market starting in 2020. The restrictions for airlines, which need approval at a plenary meeting tomorrow, is unprecedented for a single global industry.

In a blow to the European Union, envoys gathered in Montreal declined to validate its plan to include aviation in the EU emissions trading system prior to the start of the international program. Russia, Argentina and others rejected the 28-nation EU’s offer to scale back the geographic scope of its carbon curbs on airlines in exchange for a global commitment to reduce pollution from the industry, which emits 2 percent of greenhouse gases globally.

“After some very challenging discussions, including compromises by all parties, ICAO has made a strong commitment in favor of taking multilateral action to tackle climate change,” said Todd Stern, the U.S. special envoy on climate.

The issue of aviation emissions made it to the top of the ICAO agenda after the EU expanded its carbon market in 2012 to cover carriers from around the world, a step that triggered protests from China and Saudi Arabia to Brazil. Europe, which wants to be the leader in cutting greenhouse gases, has said its goal was to encourage an international solution. Reducing carbon dioxide would help limit global warming that exacerbates heat waves, flooding and intense storms, according to UN scientists.

Limited EU Market

Envoys voted today 97 to 39, with nine abstentions, to remove a provision allowing the EU to continue a limited market for carriers. Instead, the measure encourages member states to agree on designs and implementations for new and existing CO2 markets. The draft would also give an initial exemption to routes to and from developing states if their share of international civil aviation is below 1 percent.

“If this were a boxing match, the EU emissions trading system sadly is down on the mat,” said Jean Leston, transport policy manager at the U.K. branch of environment lobby WWF.

The EU, which suspended its carbon curbs on foreign flights for a year to facilitate ICAO talks, will now have to decide if the deal is strong enough to relax its emission rules. The freeze will expire automatically next year unless the bloc’s regulator moves to renew it. That would mean the system returns to its original design, where flights to and from Europe were subject to greenhouse gas limits at their entire length.

Trade War

Restoring full EU curbs on international routes would mean a trade war, and if it takes place, major countries won’t comply with the bloc’s carbon rules, India’s representative to ICAO Prashant Sukul said earlier this week.

Before Europe suspended carbon curbs on foreign flights, President Barack Obama signed a bill shielding carriers including Delta Air Lines Inc. (DAL) from the EU legislation, and Russia announced it was considering limits on European flights over Siberia as part of possible retaliatory measures. Airbus SAS said in June that 27 orders from China for A330 wide-body jetliners are still in limbo after the government there froze the contracts as part of a campaign against the EU plans.

The compromise deal approved today requests that the 36-nation ICAO Council finish work on technical aspects and options for a global carbon market. The outcome will be reported to the agency’s next triennial assembly for a decision.

“After a difficult day, ICAO is back on track for building a consensus for tomorrow,” EU Transport Commissioner Siim Kallas said on his Twitter account. “Wishing them success!”

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

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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