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Aviation chiefs step up their attacks on the EU ETS as Europe’s climate commissioner stands firm on airline inclusion

Aviation chiefs step up their attacks on the EU ETS as Europe’s climate commissioner stands firm on airline inclusion

Incoming and outgoing IATA DGs Tony Tyler and Giovanni Bisignani

Wed 8 June 2011 – Threats from China of retaliatory action over the inclusion of their airlines into the EU Emissions Trading Scheme (EU ETS) has resulted in European airlines joining their overseas competitors in demanding changes to the cap-and-trade system. Speaking at the IATA annual general meeting that took place this week in Singapore, International Airlines Group CEO Willie Walsh said it was clear that there were countries that would retaliate, whether in the form of imposing additional taxes on European airlines or restricting access to markets. He called for a ‘Plan B’ in which the scheme was restricted to intra-European traffic until a global system could be realised. The chiefs of European aircraft manufacturer Airbus and Virgin Atlantic have written a joint letter to EU Climate Action Commissioner Connie Hedegaard expressing concern over the issue. However, Hedegaard says Europe must remain firm on the threats.


During the setting up of the Aviation EU ETS, European airlines argued that to avoid competitive distortions all carriers flying into or out of Europe should be included in the scheme. Major airlines like British Airways and Virgin Atlantic have up till now supported the general principles of the European flagship system to reduce carbon emissions.  Now faced with threats from China of action against the European aviation industry, there has been a change of thinking.


Given the opposition from China and other major nations to the EU’s plans, Walsh said Brussels should now seek a compromise and apply the EU ETS to regional and domestic flights only. “There needs to be a Plan B. It is unacceptable that airlines face the prospect of retaliation because of the actions of the EU.”


According to a letter seen by the Financial Times, the letter from Airbus CEO Tom Enders and Virgin Atlantic CEO Steve Ridgway, in his capacity as Chairman of the Association of European Airlines, warns Europe faces a trade war with China and other powerful countries over the EU ETS. They tell Hedegaard that it would be “madness to risk retaliation”. China has indicated that one of the measures it could take would be to halt buying Airbus aircraft (see article).


In an interview with Reuters, Hedegaard responded: “When some parties start to threaten specific European companies, I think Europe should be very firm.


“Now is not the time to get nervous over legislation that has already been agreed. This was agreed by all 27 EU member states, by the European Parliament and by the European Commission.”


She told Reuters that it was vital to act on aviation emissions after years of rhetoric from the industry, but little action. “We can’t accept a global sector that says ‘let’s wait for another five or 10 years because we still can’t reach an agreement’,” she added. Having taken the decision to act, she said, Europe must now apply its laws evenly across all airlines using European airspace, regardless of their origin.


She also noted that the cost of emissions permits translated to around 8 euros per passenger on an international flight, a smaller amount than some airport taxes, such as New York at around $16.


Hedegaard reiterated the EU’s willingness to exempt airlines from other countries, including China, that adopt equivalent measures to reduce aviation emissions. China has recently given its airlines non-mandatory “guidance” to reduce their carbon intensity by 22% by 2020 relative to 2005 (see article). Discussions have taken place between Commission and Chinese officials over the issue but it would appear the move by the Chinese aviation authorities does not go far enough to satisfy the EU’s ‘equivalent’ requirements.


The China Air Transport Association (CATA) is also expected to join its US equivalent, the Air Transport Association of America (ATA), in taking legal action in Europe over the inclusion of member airlines in the EU ETS. The US case is due to get underway at the European Court of Justice in Luxembourg in a month’s time.


Speaking at the IATA AGM, CATA Vice President Chai Haibo called the inclusion “unreasonable and illegal” and his group “totally opposed it”. CATA estimates the EU ETS would cost Chinese airlines around 800 million yuan ($123m) in the first year, and over three times that by 2020.


Also speaking during the event, ATA President Nicholas Calio agreed, saying: “It is illegal under international law because it is extraterritorial application of EU policy on US carriers. The only way anyone can impose this jurisdiction over the seas is with the approval of the International Civil Aviation Organisation and they don’t have that.


“It is also counterproductive, because many of our carriers will be unable to invest in taking old ‘bad carbon’ aeroplanes out of service and replacing them with new good ones.”


Appearing on the CEO Forum panel during the IATA AGM open sessions, the President of Emirates airline Tim Clark said compliance with EU ETS reporting requirements had cost the carrier $250,000 so far. He warned the scheme would spawn a patchwork of similar systems and carbon taxes around the world at a time when the industry was already “crippled” by taxation. “We are now the highest taxed entity than any other on the planet,” he said. “The answer is a global system but the problem is that it’s a long and slow process. The EU has said ‘enough’s enough and we want action now’. We are just going to have to step up over the next six months and comply.”


Clark also said the carbon emissions targets the industry had set itself would be very difficult to achieve. “It’s an incredibly big ask,” he said.


Antonio Vázquez, Chairman of International Airlines Group, the holding company for British Airways and Iberia, said the timing of the introduction of the EU ETS “couldn’t have been worse” given the poor economic conditions in the Eurozone. He criticised the fact that revenues from the scheme would be taken from the industry when they could better be used to reduce future carbon emissions.


Australia’s Transport Minister, Anthony Albanese, said although his country supported carbon markets as the least-cost way of driving down emissions, Europe’s scheme for aviation would create significant distortions, and instead of being seen as a carbon reduction measure, the EU ETS and taxes such as the UK’s Air Passenger Duty undermined the support for action as they were being used as a revenue-raising mechanism.


“I don’t disagree with the motivations of the Europeans, but I think they’ve got it wrong,” he said.  


In a typically combative final ‘state of the industry’ address, outgoing IATA Director General Giovanni Bisignani said: “This year we have a special place of dishonour for the European Union and its parliament,” he told delegates. “They are ignoring international law with plans to include international aviation in the EU ETS. Uncoordinated and punitive regional measures distort markets and undermine global efforts to reduce emissions.


“The EU ETS is a $1.5 billion cash grab that will do nothing to reduce emissions. Enough to Europe’s short-sighted actions! It’s time to be serious about climate change and honest in developing global solutions.”


Bisignani now makes way for Tony Tyler, former Chief Executive of Cathay Pacific Airways, although he will remain behind the IATA scenes as Director General Emeritus. While a less confrontational figure than Bisignani, Tyler is expected to keep up the attack on the EU ETS in the remaining six months before the scheme is due to swing into action. Next year's IATA AGM is due to be held in China.




Financial Times article: Airbus chief warns on emissions policy

Reuters article: EU must be “firm” in aviation CO2 dispute with China

The Guardian article: Willie Walsh: “keep emissions trading scheme to European airlines only

Bloomberg article: Chinese airline group “totally opposes” EU’s emissions plan

Daily Telegraph (UK) article and video: US airlines to seek legal action over green levy

YouTube video: IATA’s Giovanni Bisignani’s attack on EU ETS

IATA AGM 2011 – Videos of presentations, interviews and CEO Forum session




Update Wed 8 June 2011:


Commenting at a press conference in Brussels today on China’s threat and airline pressure over the EU ETS, the European Commission President, José Manuel Barroso, said:

“The inclusion of aviation into the EU ETS is not a proposal, it is now in European law. It was approved unanimously by EU member states and the directive was adopted with a very strong backing by the European Parliament. So we are not thinking at all about changing our legislation. The directive has already entered into force and following the preparatory phase, it will be fully implemented from 1 January 2012.


“Now, we are always ready to discuss in good spirit and openness with all our partners their concerns but we certainly don’t have the intention to revise a very important directive that has a goal to lower emissions to protect our planet. We just have one planet – not one for the east, one for the west, one for the north or one for the south. It’s our global responsibility to protect it.


“So the goal of the directive is to reduce emissions, not to create any kind of burden on any specific economic sector. So it’s very important to understand why the directive is there. In fact, what should happen is that all the world should unite in [implementing] some kind of directive like this one. We need global action to protect the future of our planet.”


Video of comments on the Commission’s website (starts approx 14mins 30secs)




Update Fri 10 June 2011:


The Association of Asia Pacific Airlines (AAPA) entered the fray today in attacking the Europe over the EU ETS and pointing out the threat of retaliatory trade measures by “some foreign governments”.


“The last thing we need is a trade war,” commented AAPA Director General Andrew Herdman. “Tit-for-tat measures would only add to the burden on the airline industry and the travelling public, without achieving any environmental benefit.”


A statement from AAPA said the EU had responded to foreign criticism “of their self-appointed role as the world’s tax collector-in-chief” by offering to consider partial exemptions from the EU ETS if other governments introduce ‘equivalent measures’.


 “There has been no indication as to how such equivalence might be determined, or indeed the processes involved. In any case, there is a danger that the potential proliferation of a variety of national measures would only add further complexity, without being environmentally effective,” noted Herdman.


“The EU has over-reached and underestimated the political price it will have to pay if it insists on pressing ahead with this scheme in its current form. It needs to fundamentally rethink its whole approach. Simply put, the EU should modify its plans for the EU ETS by limiting its application to only cover flights within Europe. This might at least mollify international opinion and hopefully avoid the inevitable damage which would result from continued legal challenges and retaliatory trade measures.”


AAPA represents 17 airlines in the region, although not those from China, which has its own trade association CATA.


Earlier in the week, speaking at the IATA AGM, IATA’s Aviation and Environment Director, Paul Steele, said the EU ETS would cost airlines collectively in excess of one billion dollars in the first year alone. He said the application of the scheme to airlines outside Europe was a “real issue” as it affected the sovereignty of non-EU countries.


“Emissions trading can be a very useful tool – and, indeed, it’s part of the aviation industry’s strategy – but it has to be done as part of a package that includes technology and operational improvements. Where the Europeans have got it wrong is in terms of trying to impose a scheme that would work very well within Europe but have tried to impose it outside the EU and that’s why it’s running into a lot of opposition right now.”


Following our comments attributed to Willie Walsh and Antonio Vázquez of International Airlines Group (IAG) during the IATA AGM, an IAG spokesperson told GreenAir Online: “We have always supported carbon trading as the most effective tool to address aviation’s impact on climate change and are well place to participate in the EU ETS in January 2012.


“We have had reservations from the beginning about applying the EU ETS to flights from countries outside the EU.  We believe that constructive dialogue with other countries towards a global solution is the best course of action.  A workable EU scheme could provide a model for the rest of the world to follow.


“The EU needs to investigate its options in the event of successful legal action by non-EU countries and be prepared for any retaliatory action.”

Copyright © 2018 GreenAir Communications

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Member Opinions:
By: jeffg on 6/10/11

Willie Walsh, the BA/Iberia group CEO, Antonio Vasquez, Iberia's CEO, and Christoph Franz of Lufthansa have all commented on Chinese airlines and China's threat to retaliate if charged a few euros per passenger when aviation's inclusion in the European ETS comes into force - this all sounds remarkably like the joint delivery of a blackmail note.

China's air passengers flying into Europe will be Government officials and businessmen plus a growing number of affluent middle class tourists - even the Peoples Republic has a bourgeoisie nowadays! With a likely charge of around €20 or less per passenger return trip under the ETS - and Europe's airlines flying to China facing the same pollution price tag for the same journey - the impact on demand is frankly non-existent despite the millions of Yuan total currently being bandied about. It's the cost per passenger that counts. This is tiny, tiny, tiny and will be passed on fully to passengers, the embodiment of the "polluter pays" principle.

Walsh, along with every other airline CEO, is simply attempting to undermine the ETS at each and every opportunity. Global scheme? Don't make me laugh - just rearrange these words into a well-known phrase or saying: ball, grass kick, long! If Mr Walsh was serious about a global ETS then he should be lobbying for the European scheme as the model. Europe only? Squeals of "why us" from all of Europe's airlines a racing certainty there.

And don't forget most of BA/Iberia's and Iberia's emissions are from long haul flights - they'd be the ones they wants exempted - funny that. Purely coincidence, no doubt.

Europe's Climate Action Commissioner, Connie Hedegaard, is right to stand up to the Airbus CEO, Tom Enders,too as he makes similar claims - he should surely be convincing the Chinese to buy Airbus jets - and Ms. Hedegaard has our total support and admiration.

And if any reader has any doubts at all regrading Europe's unbreakable stance on aviation's guaranteed inclusion in the ETS then viewing the European Commission President José Manuel Barroso's passionate statement in the video link above will convince.

If an increasing number of the Chinese population can afford the cost of a return trip to Europe they can also afford the cost of carbon. As can the Russians. And America’s frequent flyers. And all of BA/Iberia's passengers. It's that simple.

Jeffrey Gazzard
Board Member
Aviation Environment Federation

By: E10 on 6/13/11
again I have to admit that I agree more with my dear aviation envi "opponent" Jeff then I can do with my united aviation sector airline colleagues on this issue; this is already the second time in over 10 years that happens, freaky ;)

let us face some bare facts:

1. discussions on aviation & climate change impacts and measures have been going on for >20 years, but until early 2000s most of the political and media Envi issues were at (also important) local issues of aviation, such as noise and local air quality around airports [in these domains Jeff became one of my favourite "opponenents", even though we did not agree very much I must admit..]

2. after the IPCC report of 1999, which even got some very high level prices 10 years later, all actors agreed that aviation's CC contribution was [only] around ~2% of man-made C02, that other effects existed but were not proven by robust science and that "do nothing" for aviation was not an option, because then really aviation would become (one of) the biggest climate poluters with the expected economic growth and resulting demand; so the focus shifted to reduction and compensation measures, in that order [so far, everyone is still united I hope, these are facts]

3. then the opinions and "need for speed" of the various actors started to change dramatically, and tensions started to grow [ what we see now hapopening is in my humble opinion just an eruption of those tensions, no new info though];
ICAO asked for and got the lead to work and suggest a global solution for aviation & CC measures [ICAO has no legislative powers, that are the >180 member states]; in over 10 year, a lot of studies were finished, al lot of people met in very exotic places all over the world etc etc], but everyone [exept ICAO itself] agrees that this ICAO completly failed [they did not learn a thing from the equivelent noise Ch2 phase out /hutkit debate and trade wars of 1990 until early 2000s; that issue was only resolved by phasing out those aircraft on economic (fuel price) reasons fortunatly)

4. from 2004 onwards, finally the real discussions started at least in Europe, with the acceptance that doing nothing was not an option, and the very very likely threat that individual countries [also ICAO members by the way..] would put in place "patchwork" solutions for this border-crossing CC issue like: fuel or ticket-taxation, additional governmental passengers charges, emission charges related to landing & take-off, national emission trading shemes etc etc [all have been "tested" in multiple EU countries since then btw, at high cost and disturbing the level playing field, so that airline argument is a very true one!];

5. 2004 was also the year I got involved myself, first representing Schiphol only as the local aviation ENVI manager, then for a few years representing al 440 European airports as the responsible manager from ACI EUROPE [see http://www.aci-europe.org/ click on "documentation" and then "environment"]

as you will see there, our first ACI EUROPE collective public position dates from Jan 2005, and demands [at high level] the introduction of a EU ETS for aviation, but in phased approach (first intra EU only) to test flaws and procedures, show Europe is willing to clean up its own act first, and to avoid the [potential] retalliation which we see now..

6. as insiders at EU level know, it was not easy at all to agree as airports on such a forward looking, strategic position [we come from more different countries then the EU's 27..], and to further develop this [see subsequent, more detailed versions] but most of all to hold of the airlines and their tradebodies like AEA, ERA and IATA, who were "furious" to us airport people; I did learn al lot on cultural differences between the various countries though, and also who has the real power in aviation land..

also, keeping this position at world airport level, with other regions which saw less "urgency" proved to be quite a challenge;

I am very happy to state that we (it was a multi peron exercise, but my full-time challenge for some years) managed to stay focussed, aimed on our goals and since our arguments were both very good and robust, never ever had to change or water down our position...

We also got a lot of "credits" and support from unexpected organisations, such as DG Envi of the Commission [not known for its support to aviation / airports...] and others, which ofcourse helped "other" airport issues also, so the strategic/political angle payed off.

7. The EC legislative proposal, which was finally released in December 2006, and not to our surprise, closely matched the positions we had been voicing publicly and the detailed positions we suggested to the EC during the two years before. We drank a good bottle of champagne at our Brussels office that December...

8. During 2007 & 2008, the very lengthy and interesting "co-decision" procedure between EU Parliamnent and the EU Council of Member States was finalised. Even though lengthy and burocratic, it is [if you know were to be and were to look] a quite transparant and absolutely democratic way of public decision making on important issues, such as these;

In my opinion, these are the real years when the European and other airlines lost this whole debate; due to their very blunt approach and thinking, they managed to give the green elements in the Parliament the arguments needed to "punish" aviation for its immature behaviour, and the good and balanced original proposal of the EC was transformed in its final form, which was finally adopted in a closed doors a "concilliation" procedure, which has some mediaeval aspects and is less transparant and democratic.. [this resulted in a non-equivalent approach to other industry inclusion of aviation into the EU ETS, with a quite expensive 15% auction level and revenues taken outside of aviation (R&D); however, again, this was mainly the result of bad lobbying from AEA, ERA, IATA etc, not needed and not intended by the EC in the first place...]

9. After publication of the directive in the Official Journal during fall 2008, the whole issue was final and became EU law, which has to be implemented and cannot be revoked very easily; even though the airlines lobby for that know, their regulatory experts know better..
all key players went on, focussing on new ventures, and other people (both at the EU level and within industry) started their implementation activities.

10. In 2009/2010, ICAO proved useless again in putting together the much needed worldwide solution, which could have avoided the unneccesary implications of this EU level action, which will be continued [maybe at high costs, who knows..]

Well, let's see how this EU thriller will evolve in its final stage next month and on.
The show is not over yet, but please take above historical facts in account when making up your own opinion, do not let the strong words off all interested parties baffle you

At least that was my choice, and am still behind it..

Etienne van Zuijlen
Aviation Professional, working @airports

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