In spite of their opposition, airlines will profit from the European Union’s program to charge for carbon emissions by charging passengers for the costs in higher fares, according to a report released by Climate Advisers.

Connie Hedegaard

The report from Climate Advisers, a consulting group that helps companies deal with climate policies, and the Center for American Progress, coincides with a meeting in Moscow of officials from 26 countries to discuss opposition to the program.

Among the attendees are China and India, which have refused to participate in the European program, along with other opposing nations, such as the United States, that are seeking a political compromise. But Siim Kallas, the European Commission’s vice president for transport, and Connie Hedegaard, the European Union’s climate commissioner, say the EU will not suspend the program.

The European Union’s climate chief said she hopes countries opposed to its rules that charge airlines for carbon emissions take their complaints to the U.N. aviation body, where talks could help to defuse tensions over the strict measures.

Last September, opposing countries threatened to file a formal complaint at the U.N.’s International Civil Aviation Organisation (ICAO) against the EU program that came into force on Jan. 1, but have yet to take formal action to challenge the measures at that body.

Multilateral Agreement, a joke
“It’s one thing that they do not like what Europe is doing. What can they agree to in ICAO? It will be very interesting for us to see that next step,” EU Climate Commissioner said in an interview for Reuters.

Environment ministers of Brazil, South Africa, India and China issued a statement condemning the EU’s airline emissions charges, and said the bloc was jeopardizing the global fight against climate change by acting on its own rather than building a multilateral agreement.

“That is of course not a valid argument,” Hedegaard said. “Everybody knows that Europe has been fighting for a multilateral system. Everybody knows that other parties blocked that.”

Europe has worked for a decade though ICAO to craft a solution to curb airline emissions, and launched its own Emissions Trading Scheme (ETS) after it failed to win a global agreement.

Trivial fares
Under the ETS, airlines would be required to pay for 15 percent of the carbon they emit, a cost Hedegaard said would add about 1.5 euros ($2) to the cost of a trip from London to New York or about 2 euros to a trip from Beijing to Frankfurt.  Airlines that fly to Europe and do not comply with the ETS face a fine of 100 euros for each tonne of carbon dioxide emitted and for which they have not paid allowances.

In the case of persistent offenders, the EU can ban airlines from its airports – a measure that has drawn protest from airlines around the world. China has banned its carriers from taking part and the United States has urged the EU to reconsider the program, warning it would take unspecified action if it were enforced.

The European Court of Justice has dismissed claims by the US that the proposed inclusion of international airlines in the EU carbon trading scheme is illegal.

The much anticipated, but largely expected, ruling means that all flights taking-off or landing at EU airports will be included in the EU Emissions Trading Scheme (ETS) from January 1, 2012.

EU Commissioner for Climate Action said: “I am of course very satisfied to see that the Court clearly concluded that the EU Directive is fully compatible with international law. A number of American airlines decided to challenge our legislation in court and thus abide by the rule of law. So now we expect them to respect European law. We reaffirm our wish to engage constructively with everyone during the implementation of our legislation.”

US Secretary of State Hilary Clinton said if the ruling went against the US, Washington would “be compelled to take appropriate action”.

It has been suggested that the US may set-up a retaliatory scheme and use the funding to compensate US airlines.

Trade body Airlines for America (A4A) has said that it could now pursue the case in the High Court in the UK.

“Today’s court decision further isolates the EU from the rest of the world and will keep in place a unilateral scheme that is counterproductive to concerted global action on aviation and climate change,” the group said in a statement.

“Today’s decision does not mark the end of this case and Airlines for America (A4A) is reviewing options to pursue in the English High Court. At the same time, the US government and dozens of others around the world are increasing pressure on the EU to come back to the table to consider a global sectoral approach. In the meantime, A4A members will comply under protest and will continue to operate safely and efficiently to Europe when the scheme takes effect.”

The EU announced in September that 85% of airlines allowances would be awarded for free in the first year of the scheme and 82% in 2013. It is estimated to raise between €2.4 and €3 billion. (RTCC)

The European Commission has taken an important step in preparing for the full inclusion of aviation in the EU’s emissions trading system (EU ETS) from 1 January next year. The European Commission has decided on the historical aviation emissions which will be used to calculate the number of aviation allowances to be available from 2012.

Foto: Ama Tichie

Connie Hedegaard, European Commissioner for Climate Action, said: ”Emissions from aviation are growing faster than from any other sector, and all forecasts indicate they will continue to do so under business as usual conditions. Firm action is needed. By publishing the data on which allocations will be based, we prepare for the full inclusion of aviation in the emissions trading system. ”

The decision on historical aviation emissions of 219,476,343 tonnes of CO2 represents the average of the estimated annual emissions for the years 2004, 2005 and 2006 of all flights that would be covered by the EU ETS performed by aircraft operators to and from European airports. Based on this figure for average annual aviation emissions in 2004-2006, the number of aviation allowances to be created in 2012 amounts to 212,892,052 tonnes of CO2, and the number of aviation allowances to be created each year from 2013 onwards amounts to 208,502,525 tonnes of CO2.

The calculation of historic aviation emissions was based on data from Eurocontrol – the European Organisation for the Safety of Air Navigation – and actual fuel consumption information provided by aircraft operators. Additional calculations were carried out to account for fuel consumption associated with the use of the auxiliary power units (APUs) on aircraft at airports.

EU emissions from aviation have increased fast – almost doubling since 1990. It is estimated that one passenger, flying from Brussels to New York and back in economy class generates in the order of 800 kg of CO2.

To mitigate the climate impacts of aviation, the EU has decided to impose a cap on CO2 emissions from flights operating to and from EU airports. From the start of 2012, some 4,000 aircraft operators arriving and departing in the EU will be covered by the EU ETS. Like industrial installations, airlines will receive tradable allowances covering a certain level of CO2 emissions from their flights per year. Aviation represents around 10% of greenhouse gas emissions covered by the EU ETS.

The inclusion of aviation in the EU ETS is expected to have only a minor impact on ticket prices. If an airline would charge customers for the full CO2 price, with the current carbon prices, the price of an economy class return ticket from Brussels to New York would rise by some twelve euro.

Transport & Environment disagree

T&E calculates that the cost to the aviation sector will be the equivalent of a one-cent per litre tax on aviation fuel which is currently untaxed in the EU.  The effect on ticket prices, if not inflated by airlines, should be less than 1 per cent on average.

This negligible impact on fuel costs is in stark contrast to rates of tax for road transport.  The average level of road fuel tax in the EU is around 48 cents per litre.  The EU also sets minimum levels for road fuel taxes, currently 36 cents per litre for petrol and 33 cents per litre for diesel.

T&E programme manager Bill Hemmings said: “Aviation, by far the most polluting transport sector, still operates in a European-wide fuel and VAT tax haven.  Inclusion of the sector in the EU-ETS is no more than a minor first step.  And it is no excuse for prolonging the massive subsidy of fuel tax and VAT exemptions.  In times of fiscal austerity these subsidies are more irresponsible than ever.”

Later this year, as foreseen in the EU ETS Directive, the Commission will formally determine the amounts of emission allowances to be auctioned, to be distributed free of charge to aircraft operators and to be allocated to a special reserve for new entrants. The EU ETS Directive states that Member States should use all auction revenues from aviation allowances to tackle climate change, including in the transport sector, and to adapt to the effects of climate change.

See MEMO/11/139 for more details.