EU Carbon Market Main Hurdle to Aviation Deal, India Says

The European Union’s plan to keep its curbs on pollution from airlines is the main hindrance to an international agreement on a carbon market for the industry, according to a senior Indian official.

An accord discussed by the International Civil Aviation Organization shouldn’t authorize EU measures prior to the global deal unless they are mutually agreed with other states, said Prashant Sukul, India’s representative to the United Nations agency. Envoys from more than 190 countries meeting in Montreal are trying to iron out differences over the first-ever commitment to a carbon tool for the $708 billion industry.

“It’s all boiling down to whether this body can give sanction to unilateral measures,” Sukul said in an interview yesterday. “Any scheme that starts in the interim will work against a future global system.”

The ICAO general assembly is due to decide this week whether to back a pledge to agree on the details of a global carbon-reduction program for airlines in 2016 and start the system by 2020. A potential deal, a precedent for a single industry worldwide, would help avert a trade war between the 28-nation EU and other regions over carbon-reduction policies.

The creation of a greenhouse-gas market for airlines made it to the agenda of the UN agency’s triennial assembly after the EU included airlines in its emissions-trading system beginning in 2012. Europe, which wants to lead the global fight against climate change, said it decided to act after aviation emissions in the region doubled over two decades.

Draft Deal

Under a draft deal recommended by a majority of states in the 36-nation ICAO Council last month, the EU would be allowed to continue its program in a limited form in exchange for a global pledge to facilitate an international market. The proposed resolution, which would give the EU the right to impose pollution curbs on airlines in its own airspace, is unacceptable to some member states, according to Sukul.

“Any regional scheme to be implemented in the interim should be based on mutual agreement,” he said.

Nations that oppose any European greenhouse-gas limits on the industry prior to a worldwide agreement also include Brazil, Russia, China, Cuba and Saudi Arabia, according to an EU document on the talks obtained last month by Bloomberg News. They argue the EU carbon curbs violate the Chicago Convention, which governs international aviation. The EU Court of Justice rejected such views in 2011, ruling that the region’s program doesn’t violate the principle of territoriality or the sovereignty of third states.

‘Hot Air’

Effective market-based measures combined with the aviation industry’s goal of carbon-neutral growth are needed to reduce the global-warming impact from airlines, according to a study by the Manchester Metropolitan University.

“Even the modest goal of carbon-neutral growth by 2020 will be impossible to achieve without a market-based measure as effective as the EU ETS, which Europe has been pressured to weaken,” Tim Johnson, director at the Aviation Environment Federation, said in an e-mailed statement. “The international aviation community says it is serious about combating the harm its industry does to the climate -- now it must act to show these words are more than just hot air.”

To help broker a compromise in ICAO, the U.S. is working on changes to the draft text, said two people familiar with the matter who asked not to be identified, citing policy.

U.S. Position

“The U.S. position is somewhat close to us on key elements,” Sukul said without elaborating. “They are still forming it and consulting other member states. That’ll take some time.”

A failure by the UN agency to reach a deal risks trade conflicts between Europe and other regions, EU Climate Commissioner Connie Hedegaard said last week. The bloc’s freeze of emissions-trading obligation for international flights, enacted to facilitate global talks, will automatically expire next year. That would mean the system returns to its original design, where aviation discharges were limited at the entire length of routes to and from the region’s airports.

“It’s up to the EU if they want a trade war,” Sukul said. “If they start it, there will be one. There’s already been retaliation of ideas. If they think ICAO can be bulldozed, do you think ICAO states can keep quiet?”

Any legislation to limit the scope of the EU emissions program or to extend the suspension on foreign flights would require consent by the bloc’s governments and the European Parliament. The assembly is unlikely to approve any new concessions if ICAO weakens the draft deal, Peter Liese, a German deputy to the EU Parliament, said Sept. 24.

“If the European Parliament wants to restart the clock, they will still have major countries not complying,” Sukul said.

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