Air China is one of a group of Asian airlines considering legal action against the European ETS.
The European Union is determined to introduce an Emissions Trading Scheme (ETS) for airlines on 1 January 2012, despite growing opposition. Not satisfied with raking in enormous sums through passenger fees, such as the UK’s Airport Passenger Duty which amounts to some $5.5bn per year and similar charges in Germany amounting to $1.6bn, the EU intends to burden aviation with even more financial weight, as Tom Ballantyne reports from Sydney.
The European scheme already covers power companies, oil refineries, steel works and other heavy industries. The aviation side, starting from January and covering flights to and from Europe, will require carriers to purchase permits for 15 percent of the carbon emissions they produce during the flight. The remaining 85 percent will be free.
The carbon credits cost about €16 ($26.55) per tonne if they fail to meet the new emissions cap, set at 97 percent of the average annual emissions between 2004 and 2006. The EU will not only tighten the emissions cap but also wants to charge carbon credits for the entire journey, rather than emissions only within the European airspace.
The aviation industry uses about 230bn litres of fuel every year. IATA has pegged the yearly carbon dioxide emissions from commercial aircraft at 649m tonnes, estimated to rise to 900m tonnes by 2020.
The level of protest against the EU ETS, calling for either postponement or its complete abandonment, is significant. An increasing number of governments, including China, the US, Australia, Canada, the United Arab Emirates and India, have been indicating, firmly, to the European Union that the scheme violates international law, is illegal and at the very least should be postponed.
The most serious threat comes from Washington where a congressional house committee on transport and infrastructure is looking at a bill, the European Union Emission Trading Scheme (ETS) Prohibition Act of 2011, that would make it illegal for US airlines to participate in the programme. If enacted, the bill, which has bipartisan support, would force US carriers to stop flying to the EU and result in retaliatory expulsions by the US against European airlines.
In effect, such legislation would place US carriers in an impossible situation — if they fly to the EU and refuse to pay for their emissions they will be breaking European law. If they do pay for their emissions they will be breaking US law!
Recently airlines from China, the world’s fastest growing aviation market, also suggested legal action against the ETS. Air China and the China Air Transport Association (CATA), which represents the country’s leading carriers, said they would file a lawsuit in a European court no later than September.
The decision to sue was made even after the EU offered to exempt flights from China to Europe, although outward bound European flights would still be subject to the measure. CATA said it did not want to negotiate on something that was wrong in principle.
Last August CATA asked 20 international airlines to sign a joint declaration to denounce the scheme. Among those who signed were China Eastern Airlines, China Southern Airlines, Cathay Pacific Airways, All Nippon Airways, Taiwan’s EVA Air and Singapore Airlines.
A group of American carriers, backed by the US Air Transport Association (ATA), has already started legal action against the plans at the EU Court of Justice, with a decision expected before the end of this year.
The International Air Transport Association (IATA) is leading the campaign to have the scheme dropped or postponed. In support are groups including the Association of Asia Pacific Airlines (AAPA), the US ATA and the European Regional Airlines Association (ERA).
IATA is calling for the EU to abandon the measure entirely, in favour of an international solution. It says the International Civil Aviation Organisation (ICAO) is the relevant body to present a globally operable scheme. IATA points out that airlines have already reduced their emissions by 80 percent per passenger through more fuel-efficient engines.
IATA has estimated the ETS scheme will add $1.7bn to airline industry costs for the first year of operation, in a business that has average margins of 0.7 percent. Asia-Pacific carriers will be particularly hard hit because their services to Europe are far lengthier than, say, international flights from the Gulf region or from the USA.
China has said this scheme will cost its airlines $149m in the first year, a figure expected to triple by 2020. Cathay Pacific’s head of Environmental Affairs, Mark Watson, described the scheme as “bizarre”, penalising direct flights and encouraging airlines to impose stopovers at hubs outside Europe, lengthening the flight distance and creating more emissions.
The estimated bill for US airlines will be more than $3.64bn from 2012 through to 2020. Dubai-based Emirates Airline said it had conducted a study which suggested its cost would be as much as $1.21bn in the first decade of the scheme.
“It’s a cash grab,” says Steve Lott, spokesman for US ATA. “The EU has made no promises that the money is going to be spent on improving the environment or improving the efficiency of the aviation system.”
For its part the EU has said the move is an important step, a “building block” towards cleaning the environment.
Andrew Herdman, AAPA director general, says, “The EU needs to urgently re-engage with the international community to find constructive solutions and avoid further escalation of the dispute.”
The Australian government recently announced a carbon tax on domestic flights, a move many believe will be replicated in other counties. Qantas CEO Alan Joyce said the local tax will add $A3.50 to fares per sector. The airline will not absorb the additional cost but pass it on to the passengers.
- Report by John King, photograph by Boeing