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World Rejects European Fine on Aviation C02 Emissions

NEW DELHI, Sep 24 2012 (IPS) - Since January 2012, aviation has been included in the European Union’s Emissions Trading Scheme (ETS) that requires aircraft operators to surrender one allowance per tonne of carbon-dioxide emitted on a flight to and from (and within) the EU. This covers passenger, cargo and non-commercial flights and applies no matter where an aircraft operator is based.

Each such airline would have to comply with a benchmark set by the EU on the basis of its average annual emissions in respect of flights to and from the EU. One of the most controversial aspects of the measure is that it calculates an airline’s emissions from the point of take off; this means that a flight from New Delhi to London, which flies within the EU only for a few hours, would have to account to the EU for its emissions from New Delhi itself. EU’s rationale in putting in place the system is to ensure that its own operators are not at a competitive disadvantage.

The economic impact of the EU-ETS for the global airline industry has been estimated to be 1.5 billion dollars annually, and 13.8 billion dollars through 2020, according to Thomson Reuters Point Carbon. The annual financial impact on major airlines from India has been estimated to be in the range of 30 to 40 million dollars.

The EU system offers airlines some allowances for free, and they are required to purchase the rest at EU auctions. If an airline exceeds the benchmark set for it, it can buy carbon credits from the market. Revenue from the auction of aviation allowances is expected to earn the EU close to 334 million dollars in 2012.

Airlines would simply pass on the enhanced costs of EU-ETS compliance to consumers, and it could indeed be argued that perhaps it is not such a bad thing for international air travellers to pay for their carbon footprint.

However, the EU’s action is essentially a statement that it would take measures on its own to police climate change, disregarding multilateral processes, which impact activity both within its own territory and outside of it.

There are potentially other forms that such unilateral action could take, for instance, through imposition of taxes or other charges on imports, or other non-tariff regulatory requirements, whose impact on goods and services from countries like India could be more severe.

EU-ETS in fact already includes a provision stating that the EU would consider measures for “carbon equalisation”, which could affect imports from countries that do not have comparable emission reduction norms, depending on the outcome of the ongoing multilateral negotiations. The main reasoning seems to be that if multilateral negotiations do not have the effect that EU desires, then EU will impose unilateral measures.

To state the obvious, any unilateralism would make a mockery of the multilateral processes. Under the United Nations Framework Convention on Climate Change (UNFCCC), any unilateral action would run contrary to the principle that only Annex I (developed) countries have quantitative legally-binding emission reduction targets, while other countries have no binding quantitative targets of any kind.

This principle – also referred to as the principle of “common but differentiated responsibilities”, is clearly violated by EU-ETS requirements, which effectively treat Annex I and non-Annex I countries in the same way.

The Kyoto Protocol to the UNFCCC required Annex I countries to pursue reduction of aviation emissions by working through the International Civil Aviation Organisation (ICAO). ICAO resolutions in 2007 and 2010 emphasised that countries should undertake market-based measures relating to aviation emissions only subject to multilateral or bilateral agreements. Such a mandate essentially means that measures such as EU-ETS can be enforced against an aircraft operator from a third country only if the EU has entered into an agreement with such a country. EU-ETS, however, ignores this principle.

As a response to EU-ETS, 23 members of the ICAO (including the U.S., Japan, Singapore, India, China and Brazil) met in February 2012 to condemn EU’s move. These countries have outlined a basket of measures which they would want to explore against the EU, which include:

– filing of an application under ICAO’s convention for resolution of the dispute;

– prohibiting their airlines/aircraft operators from participating in the EU-ETS;

– imposing additional levies/charges on EU carriers/ aircraft operators as a form of counter-measure;

– reviewing Bilateral Air Services Agreements, including Open Skies with individual EU member states;

– suspending current and future discussions and/or negotiations to enhance operating rights for EU airlines/ aircraft operators;

– exploring action under WTO agreements.

Following the above declaration, the governments of China and India have taken the position that their airlines would not comply with EU-ETS. Under the EU directive, non-complying aircraft operators face a penalty of 100 pounds per missing allowance, and also face a potential ban from operating in the EU. The extent to which the stalemate continues, and the extent to which EU will enforce its penalties or even suspend non-complying airlines from entering its airspace, remains to be seen.

As seen from the joint declaration of the countries opposing the EU’s move, the only effect of EU’s unilateral action could be a spate of unilateral measures from other countries.

Will good sense prevail to enable an amicable resolution? Otherwise, between the various unilateral measures – threatened and actual – the only casualty would be climate change. (END/COPYRIGHT IPS)

* Anuradha R.V. is a partner at Clarus Law Associates, New Delhi, and works on law and policy relating to international trade and climate change. For further analysis see Climate Policy Brief, September 2012 (http://www.southcentre.org ).

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