Oct. 4 (Bloomberg) -- The United Nations’ aviation agency approved the first steps toward a market-based approach to reduce emissions in the $708 billion airline industry.
The International Civil Aviation Organization’s assembly of nations from the U.S. to Russia and the European Union today agreed to complete a plan in the next three years for a market to start in 2020. The accord for airlines, responsible for 2 percent of pollution worldwide, 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 international airlines in the EU emissions trading system prior to the start of the global program. Russia, Argentina and others rejected the 28-nation EU’s offer to scale back the scope of its carbon curbs in exchange for a global commitment to reduce pollution.
“While we would have liked more countries to accept our regional scheme, progress was made overall,” Connie Hedegaard, the EU’s Climate Change Commissioner, said in a statement. “We will now factor this in when, together with the member states and the European Parliament, we decide on the way forward with the EU ETS.”
How to regulate emissions for jetliners made it to the top of the ICAO agenda after the EU expanded its carbon market in 2012 to cover carriers, a step that triggered protests from China and Saudi Arabia to Brazil.
Europe, which wants to lead the effort to cut greenhouse gases linked to climate change, has said its goal was to encourage an international solution to aviation pollution. The EU’s carbon market, the world’s biggest, started in 2005 and allocates tradable emission permits to power plants, factories and airlines, which must surrender them to cover discharges.
ICAO’s decision “is probably enough to keep international emissions out of the EU ETS,” Trevor Sikorski, head of natural gas, coal and carbon at Energy Aspects Ltd. in London, said today by e-mail.
EU carbon allowances for December have more than doubled from a record low in April to close at 5.11 euros a metric ton on ICE Futures Europe exchange in London. Benchmark EU aviation permits last traded in March after falling 50 percent since the start of the year.
The compromise deal proposed by ICAO assembly President Michel Wachenheim requests that the agency’s 36-nation 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.
The resolution encourages nations to develop new aircraft technology, adopt carbon-dioxide standards and use sustainable alternatives to jet fuels.
ICAO has taken a “significant” step toward addressing greenhouse gases from aviation, Anthony Foxx, the U.S. secretary of transportation, said before the assembly’s decision today. “The resolution advances President Obama’s commitment to address climate change and ensures that all airlines are treated fairly wherever they fly.”
The assembly approved the deal ironed out by ICAO’s executive committee, which voted yesterday 97 to 39, with nine abstentions, to remove a provision that would allow the EU to continue a limited market for carriers. Instead, the measure encourages member states to engage in talks on designing new carbon markets and implementing existing programs. The deal also initially exempts routes to and from developing states if their share of international civil aviation is less than 1 percent.
The EU, which suspended its carbon curbs on foreign flights for a year to facilitate the ICAO talks, will now have to decide if the global deal is strong enough for it to relax its own emission rules. The freeze on EU emissions curbs on flights into and out of Europe, known as Stop the Clock, will expire automatically next year unless the bloc’s regulator proposes to renew it. That would return the system to its original design, where flights to and from Europe were subject to greenhouse gas limits on their entire length.
The EU has the right to impose emission limits on all airlines within the bloc, according to Siim Kallas, the bloc’s Transport Commissioner.
The European Commission, the 28-nation EU’s regulatory agency, “will rapidly form our opinion what to do” about the scope of the EU’s emissions-trading system for airlines, Kallas said.
Before Europe suspended carbon curbs on foreign flights, President Barack Obama signed a bill shielding carriers including Delta Air Lines Inc. from the EU legislation. 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 in limbo after the government there froze the contracts as part of a campaign against the EU plans.
ICAO took one step forward and half a step back yesterday by restricting individual countries’ ability to implement measures to cut aviation emissions prior to a global system, the Environmental Defense Fund said.
“On one hand, ICAO has opened a door to the possibility of a future global cap on these emissions and an array of programs,” Annie Petsonk, international council for the Environmental Defense Fund, said in an e-mailed statement. “But a bedrock principle of international law is that nations have the sovereign right to limit pollution emitted in their borders.”
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