European Parliament Plenary Session
Thu 10 July 2008 – MEPs on Tuesday unanimously voted to include aviation into the European Union’s Emission Trading Scheme (ETS) from 2012, which will affect most airlines flying in and out of Europe. Reaction has been harsh and swift from airline associations in Europe, Asia and the United States, which have called the move illegal and a tax grab. Environmental campaigners say the compromise agreement will have little impact on the sector’s growing carbon footprint.
“It’s absolutely the wrong answer to the very serious issue of the environment,” said Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA), which represents some 230 airlines. “We support emissions trading, but not this decision. Europe has taken the wrong approach, with the wrong conditions at the wrong time.”
Bisignani foresees international legal battles. “What right does Europe have to impose ETS charges on, for example, an Australian carrier flying from Asia to Europe for emissions over the Middle East?” he argues. “Article 1 of the Chicago Convention prohibits this. And it goes against Article 2 of the Kyoto Protocol. Fuelling legal battles and trade wars is no way to help the environment. Already over 130 states have vowed to oppose it.” The only successful way forward, he maintained, was a global scheme brokered through the International Civil Aviation Organization (ICAO).
This view was echoed by Andrew Herdman, Director General of the Association of Asia Pacific Airlines (AAPA). “Aviation is more than willing to play its part in contributing to wider efforts to address climate change,” he said in reaction to the European decision. “We support emissions trading, but as far as international aviation is concerned, we need a consensus on a globally harmonized solution. Consistent with Article 2 of the Kyoto Protocol, ICAO is the only forum in which all 190 states can reach such an agreement. We look to the recently formed ICAO Group on International Aviation and Climate Change (GIACC), which includes representatives from Europe, as the key to resolving the current political impasse, and urge them to make every effort to move the international debate forward.”
Nancy Young, Vice President, Environmental Affairs for the Air Transport Association of America (ATA), agrees. “GIACC is the right forum for discussion about the additional steps that international aviation should take to address greenhouse gas emissions from international flights. Certainly this true as a matter of international law but it also makes policy sense, so fair approaches to emissions reductions from airlines from different countries with different circumstances can be identified.
“We understand that there are a number of measures that GIACC is considering, including fuel efficiency targets. Unfortunately, the European Parliament’s approval of legislation to unilaterally cover the world’s airlines in its ETS – even as the GIACC process is ongoing – calls into question whether the European states will accept anything other than emissions trading, as devised in Europe, as a way forward.”
Carl Burleson, Environment Director for the Federal Aviation Administration (FAA), believes the EU ETS fails to take into account the different situations facing countries outside Europe. “The EU is becoming ‘judge and jury’ for what is acceptable action by the US or any other country to reduce emissions and clearly we don’t think that is the right approach.
“What the EU is assuming is that the ETS is the right measure. One country shouldn’t be proscribing to another country that an ETS is the only possible course. That’s nonsense. In our view, the key issue is what performance is required to address aviation emissions and other countries should have the decision on how best to get there.”
Burleson says whereas aviation emissions are growing in Europe, in the US fuel consumption by airlines, and therefore emissions, have declined. Between 1990 and 2005, he says, they grew three times faster in the EU than in the US, and between 2000 and 2006, EU aviation emissions rose by 32.8% compared to a decrease of 3.7% in the US. In addition, the impact of rising fuel prices is higher in the US than in Europe because of a weak dollar compared to the euro. With a looming reduction in airline capacity, Burleson predicts US fuel consumption and emissions by the end of 2009 should return to 1997 levels.
As part of the US representation on GIACC, Burleson says the group is trying to get an agreement on where the international aviation community needs to go in terms of goals, a framework and a plan of action, along with the flexibility to allow for a variety of measures. “There is not one single measure,” he says.
The second meeting of GIACC, which takes place next week, is a very important step, according to Burleson, but says the EU action “probably hasn’t helped the GIACC process”.
The consensus view from the airlines is that the ETS represents little more than a tax on aviation. “This is a punitive tax put in place by politicians who want to paint themselves green. Worse, it’s not even part of a coordinated European policy,” says IATA’s Bisignani. “This tax will come on top of the UK’s Air Passenger Duty and the Dutch Air Passenger Tax.”
Despite an undertaking in the directive that revenues raised by the auctioning of allowances should be used for environmental programmes, Bisignani is far from convinced this will happen. “It’s the weakest possible language. The plain fact is that the only sure beneficiaries of the 3.5 billion euro ($5.5bn) annual cost will be national government coffers.”
The legislation requires US and non-EU airlines to pay EU entities for the airlines’ emissions for the entire length of a flight to and from Europe, says the ATA, without the consent of the airlines’ home countries. “In other words,” says its President and CEO, James C. May, “Europe will charge US airlines and their customers for emissions in Chicago, Los Angeles, Miami, New York, San Francisco – indeed anywhere in the US an aircraft bound for or incoming from Europe operates. It appears as if the EU intends to keep the meter running in international airspace too.
“If this sounds like a tax grab, it is. Europe rakes in the revenue – the rest of the world pays.”
AAPA’s Andrew Herdman concurs: “One of the most offensive aspects of the scheme is that Europe is, in effect, appointing itself as tax collector-in-chief for international aviation. Like a number of other purported green taxes and levies, there is absolutely no assurance that such funds will be directed towards meeting genuine environmental objectives.”
Europe’s largest low-cost airline, Ryanair, condemned the ETS as an additional taxation and “just another vacuous and useless gesture” that would not reduce emissions. “This taxation will be pocketed by every European government and will reduce the competitiveness of Europe, at a time when no other country or trading block outside Europe is pursuing these environmentally ineffective and anti-consumer measures,” says the airline.
Its outspoken Chief Executive, Michael O’Leary, commented: “These clowns in the European Parliament seem determined to destroy the European airline industry with these discriminatory taxation penalties. When aviation accounts for less than 2% of Europe’s CO2 emissions, and when airlines like Ryanair have invested heavily in new aircraft to reduce our emissions per passenger by 50%, there is no justification for this tax theft by the European Union.”
The European Regions Airline Association (ERA) estimates the scheme will cost European airlines an estimated 90 billion euros ($141bn) over the 10 years to 2022 which, added to “astronomical” fuel prices, is “likely to severely hinder or even eliminate their ability to invest in more fuel-efficient aircraft.” The ERA believes it will lead to the failure of some airlines as well as significant job losses.
“Even if the legislation’s questionable environmental benefits are ignored, it is a mark of failure of the legislative process that this legislation has been adopted without a thorough assessment of its economic and social impact: this is not responsible law-making,” said ERA Director General, Mike Ambrose. “That this legislation has been adopted without meaningful assessment of the jobs that will be put at risk and the communities that will be denied international access is inexcusable; that neither the Parliament nor the Council seems to care is indefensible.”
If the EU’s policy makers thought the passing of legislation aimed to curb the growth in aviation emissions would at least meet with the approval of environmentalists, they were wrong. The Aviation Environment Federation (AEF) said airlines had got an “easy ride” from the compromise deal.
“We welcome the inclusion of aviation in the scheme as a first step towards the sector paying its environmental costs,” commented Tim Johnson of AEF. “But the agreement as it stands will actually have very little impact on the growth of aviation emissions. We keep hearing that the ETS will cap emissions from aviation but, in fact, they can simply buy credits from other sectors.
“Airlines pay no tax on fuel for international travel, yet the amount they consume grows every year. We will continue to press for other measures to be implemented alongside emissions trading to help tackle the full range of the sector’s environmental impacts.”
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