Tue 21 Feb 2012 – A two-day meeting of 26 countries opposed to the inclusion of non-EU airlines into the EU Emissions Trading Scheme (EU ETS) gets underway in Moscow today to consider potential countermeasures. Action could include barring national airlines from taking part in the scheme, invoking an Article 84 legal procedure at ICAO or taking retaliatory action against European carriers or aerospace manufacturers. Two of the countries involved – China and the United States – have already made moves to ban their carriers from complying with the legislation. However, with a fragile global economy, there is recognition that a trade war is in no one’s interest and both sides would prefer to see a resolution through ICAO, where moves towards a global market-based mechanism are being accelerated. Meanwhile, not content with making airlines pay for their climate impact through the EU ETS, EU finance ministers are eyeing the industry as a contributor to the UN Green Climate Fund.
The Moscow meeting of the ‘coalition of the unwilling’ follows discussions held in New Delhi last September (see article) that resulted in a joint declaration opposing the EU legislation and the adoption of a resolution by ICAO Council members, many of whom are part of the coalition.
Although the number of states taking part is the same, Canada, the Philippines, Thailand and Turkey are not expected to attend in Moscow, being replaced by four African countries: Burkina Faso, Cameroon, Swaziland and Uganda. These four states, plus Chile, Cuba, Paraguay and Peru, do not have any airlines covered by the EU scheme. The meeting is expected to be chaired by Russia’s Transport Minister, Igor Levitin.
The three main protagonists in the dispute are China, India and the United States, although each has separate main arguments to support their case that the application of the EU ETS to their carriers is contrary to international law. For the US, the issue is sovereignty, the Chinese argue it is contrary to the wider climate UN principle of common but differentiated responsibilities (CBDR), whereas India sees the scheme as a unilateral trade protection measure. The US opposes the CBDR principle but has set aside differences to join the fight against Europe.
An Article 84 dispute procedure at ICAO is on the Moscow agenda but it is accepted that the arbitration and legal process would take a considerable time, even a few years, to conclude. The EU has long argued – and backed up by the recent ruling by the European Court of Justice – that it has fully complied with the Chicago Convention, which underpins ICAO, international customary law and CBDR.
Other options under consideration would be a ban by the 18 coalition nations on their airlines participating in the scheme, imposing levies on EU airlines to defray the ETS costs of their own carriers, halting bilateral talks on access rights for EU carriers and refusing to buy aircraft from European manufacturers like Airbus.
At a climate change meeting in New Delhi last week of the BASIC countries (Brazil, South Africa, India and China), a joint statement said the EU carbon tax violated international law and the provisions of the UNFCCC (i.e. CBDR) and ran counter to multilateral agreements. China’s chief climate negotiator Xie Zhenhua said despite his country’s approaches, the EU “continues to be stubborn”. He added: “We will unite all like-minded countries to take strong action in opposing it [the EU ETS] and protect the rights of non-EU countries.”
The EU has so far stood firm in its determination to see its legislation, which took a number of years to craft, carried out in full and in the knowledge that the options available to its opponents would equally take time to implement and also damage their own commercial interests. This was recognised in an article that appeared in the China Daily last week by a professor at the School of International Studies at Peking University.
Chen Shaofeng wrote that although the EU move posed a real threat to the growth of China’s newly emerging aviation industry and the “soaring” costs would “deal a blow to China’s airlines”, he acknowledged that “by taking advantage of the cross-border nature of aviation, the EU is not only demonstrating its leadership on the climate change issue, but also striving to forge its global reach. In contrast, this will place China in an inferior position in international negotiations on climate change.”
Through a directive issued on February 6 by the Civil Aviation Administration of China, the Chinese government has formally prohibited its airlines from taking part in the EU ETS unless they obtain prior approval – a move that puts the carriers involved in a particularly difficult position as non-compliance can potentially attract heavy financial penalties. All operators covered by the scheme have to submit their 2011 emissions reports to their respective EU states by the end of next month.
Professor Chen argues in his comment article that a legal challenge by Chinese airlines against the EU would be unlikely to succeed and initiating a trade war would harm both sides, particularly China. Even if the cost of the scheme to Chinese airlines could not be passed on to passengers, he said “this is a relatively small amount compared with the more than 3 trillion yuan ($500bn) bilateral trade between China and the EU.”
He said China should instead continue with political negotiations and highlight the EU’s breach of the principle of CBDR.
“According to that principle, developed countries should take major responsibility in addressing climate change and their responsibilities are compulsory, while those of developing nations are voluntary and based on their economic and social development stage. Airlines of developing countries, including China, should be different from those airlines of developed nations.”
Last week, EU Climate Commissioner Connie Hedegaard challenged those non-EU states opposing the inclusion of their aircraft operators into the EU ETS to work together in reaching a global binding agreement on reducing international aviation emissions.
She dismissed the BASIC meeting’s assertion that the unilateral action by the EU “would seriously jeopardise the international efforts to combat climate change.”
She responded: “That is of course not a valid argument. Everybody knows that Europe has been fighting for a multilateral system. Everybody knows that other parties blocked that.”
At a recent Brussels conference, the Director-General of the European Commission’s Climate Action Directorate, Jos Delbeke, said the EU was committed to constructively engaging with all states that were willing to find a global solution and welcomed the accelerated process now taking place at ICAO.
He stressed that an ICAO agreement on market-based measures had to be global, it had to contain targets and measures for member countries and deliver more emissions reductions than currently in place. Although long-term targets were welcome, he said, near-term targets were taken more seriously and the EU shared with the United States a goal of limiting global aviation emissions to 2005 levels or below by the year 2020.
In addition, whether the market-based measures involved taxes, levies or emissions trading, the system had to be non-discriminatory for all airlines. In a thinly-disguised attack on the application of CBDR to international aviation, he said: “Non-discrimination is one of the most important principles of international aviation law, and should be fully respected. Perhaps no other business sector is as international as aviation, and non-discrimination is crucial. We must avoid creating any distortive effect for airlines operating in a global competitive marketplace.”
However, Delbeke said the EU recognised the differentiated responsibilities and capabilities of various countries and that revenues from a market-based action could be channelled accordingly if agreed upon in ICAO.
The EU directive on the EU ETS allows for incoming flights to be exempted from the scheme if equivalent measures to reduce aviation emissions were put in place by third countries. Equivalence has never been clearly defined but Delbeke said measures included in ICAO Action Plans – which are due to be submitted by member states mid-year – could be taken into account.
“So, to the extent other countries might wish to see changes in the EU’s legislation, they have every interest to engage positively in progressing market-based measures in ICAO,” he said. “We would much prefer a multilateral discussion on incoming flights.”
Meanwhile, seven US NGOs – ActionAid, Earthjustice, Environmental Defense Fund, Greenpeace USA, NRDC, Oxfam America and WWF – have written to the Obama administration and US Climate Envoy Todd Stern to express concern over the United States participation in the Moscow meeting.
They ask the administration to encourage the countries involved to comply with the EU ETS while work at ICAO is intensified to achieve a global solution.
“Whilst our groups would prefer a multilateral approach to emissions reductions, the EU law is reasonable, balanced and entirely non-discriminatory,” they said.
“We wish the law had tougher emissions caps, and support the direction of a portion of the revenues raised toward climate finance to aid the world’s poorest communities. But the EU law is a start, and it would be a terrible blemish on the administration’s climate legacy for it to obstruct this law.”
The NGOs called on the US to work with the EU in crafting an effective global agreement in ICAO.
At an EU Council meeting earlier today, EU finance ministers urged ICAO and IMO member states to further increase efforts to make progress on market-based mechanisms to address emissions from global aviation and maritime transportation.
A statement said carbon pricing would send the necessary signal to efficiently achieve more emission reductions from the two sectors. The ministers have also identified the potential revenue flows from aviation and shipping that could be used to help fund the $100 billion per year by 2020 pledged to the Green Climate Fund in order to help poor countries adapt to and mitigate the effects of global warming.
The ministers have asked the Commission to prepare a ‘reflection’ paper by June on how this might be achieved. A Commission working document last year said up to $24 billion worldwide could be generated from a global pricing mechanism for aviation and shipping.
BASIC ministerial climate change meeting
China Daily article by Prof Chen Shaofeng
‘A New Flightplan’ speech by Jos Delbeke (pdf)
US NGO letter (pdf)
EU Council – Climate Finance (pdf)
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